BLOG STARTUPS, VENTURE AND THE TECH BUSINESS

September 26 2012
by Todd Hixon

The Bottom Line On The Supreme Court Health Care Decision

[First posted @ blogs.forbes.com/toddhixon on June 20, 2012.]

If you live long enough, anything can happen. Here’s an example that proves this rule: I find myself agreeing (in part) with Robert Raich*.

In his opinion segment of the Marketplace radio show last week (link, starting @ 10 min, 10 sec), Raich argued that 1) most likely the Supreme Court, when it rules this month, will strike down the “individual” health insurance mandate provisions of the 2010 Affordable Care Act, and leave most of the rest of the Act in place and 2) that will push the U.S. towards a tax-funded, single-payer health care system.

Raich observes that much of the remainder of the affordable care act is popular. U.S. voters are particularly pleased with the provisions that extend coverage, some of which have already taken effect, especially the ban on coverage exclusion based on pre-existing conditions, which takes effect in January, 2014. He argues that it will be hard to dial these benefits back, so the government will have to find a way to fund them. The obvious answer is taxes: there is no constitutional question about the federal government’s power to tax. The legal dispute is whether forcing individuals to buy insurance is an over-reaching interpretation of the federal government’s power to “regulate interstate commerce”, like “forcing individuals to buy broccoli” (more).

And Raich argues this would be a good thing: a single-payer approach would be an efficient and straightforward way to fund an inclusive health care system in the U.S. And, it would redistribute income by making health care (18% of the economy) available to all on affordable terms, with the cost paid via the progressive federal tax system.

I think Raich is right that you can’t un-ring the bell on inclusive health care. Once it has been promised, even enacted into law, it will be very hard to take it back. And the data do show that the private system of health care administration and funding is a significant contributor to the high cost of U.S. health care.

But, U.S. health care is grossly inefficient. It delivers results no better than other OECD countries at about twice the cost. The main drivers of this are: high prices almost everywhere, over-utilization of advanced care, regulatory balkanization leading to monopolistic pricing by powerful providers in regional markets, and slow change in its business processes. I’ve written about this in various prior posts**.

The federal government already exercises great control over the health care system: it pays for about 40% of U.S. health care on-budget and over 50% including tax subsidies. It runs some of the largest health care providers: the military and veterans’ systems. And, CMS, part of the Department of Health and Human Services, determines reimbursement rates for Medicare and Medicaid, which are the economic template for the entire U.S. industry.

Yet the feds have not been able to “bend the cost curve” significantly. It’s a big leap of faith to believe that putting the whole problem in the hands of the feds will lead to the best answer. I would agree that in some areas the big federal stick is needed, particularly negotiating with the most powerful economic interests.

But, in other places, markets and entrepreneurs can do a better job. Telecom was until 20 years ago a quasi-governmental thing: a massive regulated monopoly. And it was very expensive, and still is expensive in parts of the world where the old model continues. Entrepreneurs, new technologies, markets, and a supportive government took the monopoly apart. Now the value received by consumers has increased by factors of 100 and the service for which we once paid the most, long distance, is mostly a free add-on feature. There is opportunity for disruption in parts of the health care system, too.

Government services and regulated monopolies have their place, but they are not (in the main) what gives the U.S. the most flexible, innovative, and wealthy large economy in the world. Let’s give our technology and business entrepreneurs, markets, medical professionals, and scientists, and business leaders the scope to bring about the kinds of creative disruption in health care that they have delivered so effectively in other key parts of the economy.

 

*Robert Raich is Professor of Public Policy at U.C. Berkeley. He was U.S. Secretary of Labor during the Clinton administration. I believe he would not object to characterization as a “hard-core liberal”. He has contributed a bi-weekly opinion essay to Marketplace for several years. And he is a very bright and articulate advocate.

**These conclusions are developed in prior blog posts: 1234, 5, 6789101112.

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