Universal Healthcare: Don’t Let a Crisis Go to Waste

We are currently in the midst of dealing with the Covid-19 pandemic.  The social and economic costs have been enormous.  So much so that state and local governments seem to be relaxing measures against the spread of the virus a bit quicker than they should because the cost of those measures is higher than they can bear.  The future is unclear; things could get better quickly, they could get worse quickly, or they could go on indefinitely at the same level.  This seems an appropriate time to consider lessons learned from the crisis and what could be done to emerge from it a better nation; one that is more capable of caring for its population when the next crisis occurs.

Our current healthcare system should be up for serious consideration of an upgrade.  At present, most employed people receive medical insurance from their employer.  If such coverage is not available, then they are on their own to either purchase insurance or, if they have low income, depend on Medicaid.  Unfortunately, Medicaid, while supported by federal funding, is really a state program and each state provides its own eligibility requirements and compensation levels. If one is over the age of 65, Medicare coverage is available to those who have participated in the Social Security Program (almost everyone these days).  This is a true federal program administered efficiently and uniformly across the nation.  The Affordable Care Act (ACA, Obamacare) was put in place to force insurers to provide more complete coverage of necessary treatments and to extend insurance coverage to many more people.  The ACA extends the range of Medicaid to higher income people at the bottom of the spectrum and provides monetary assistance to subsidize healthcare insurance for middle income people.  The program accomplished what it set out to do although Republican legislators were against it from the beginning and have tried to destroy it ever since.  Their main objection seems to be that it was passed by a black Democratic president.  In addition, it was a popular government program that improved the life of the voters, something to which Republicans seem unalterably opposed.  While the ACA helped, it was not very successful in controlling the continual rise in healthcare costs.

This complex system is extremely expensive while at the same time providing poorer health outcomes than the systems in place in other developed nations.  The stakeholders who control healthcare: doctors, hospitals, drug companies and device manufacturers, all have taken care to maximize their profits to the extent possible.  Those profits are sufficient to purchase the allegiance of legislators across the nation.  The stakeholders left out of this process are the patients.

One of the consequences of the pandemic is that tens of millions of people have lost not only their jobs and income, but also their health insurance.  Employer-provided insurance no longer looks quite as advantageous as it once did.  Everyone is currently suffering.  Much of the activity is taking place in emergency rooms and intensive care units.  These are expensive efforts that are likely receiving little in the way of reimbursement.  Most health service providers derive their income from non-emergency activities, many of which are optional, or at least deferable.  Those income streams have declined significantly as people postpone hospital and doctor visits.

Changing this system to make it more efficient and more effective is a big deal.  It would require something drastic to force stakeholders to accept modifications since any progress is likely to mean someone’s profits must take a tumble.  Is the pandemic and its uncertain future capable of creating the momentum necessary for change?  One should certainly hope so.

Progressive Democrats have been pushing for a universal system providing adequate coverage for all.  A major argument against this has been that people are happy with their current employer-provided plans and would not tolerate exchanging them for something else.  The cost of the universal coverage is also considered to be too high, although studies indicate that considerable savings in the nation’s healthcare costs would be achieved.  An analysis of a 2017 version of Bernie Sanders’ Medicare-for-All Plan produced these conclusions.

“Working from the relevant research literature, we estimate that, through implementation of Medicare for All, overall costs of providing full health care coverage to all U.S. residents could fall by about 19 percent in the first year of full operations relative to spending levels under the existing system. The most significant source of cost saving under Medicare for All will be a series of structural changes. These will be in the areas of: 1) administration (9.0 per­cent savings in total system costs); 2) pharmaceutical pricing (5.9 percent savings in system costs); and 3) establishing uniform Medicare rates for hospitals, physicians, and clinics (2.8 percent savings in system costs). We therefore estimate that these three areas of structural change under Medicare for All can achieve, overall, about 17.7 percent in total system cost savings relative to the existing U.S. health care system.”

The addition of service for uninsured and underinsured people is an added cost that brings the net savings down to about 10%.  As the study summary indicates, most advanced countries provide coverage-for-all that produces superior health outcomes than our system at about 40% less cost.  Given that, one should assume that even greater savings can eventually be sought

Other initiatives come and go but they mainly involve incremental changes to the current system.  About two years ago Amazon, Berkshire-Hathaway, and JPMorgan Chase, three respected, big-time employers, decided to form a collaboration to address the intolerable rise in healthcare spending.  They recruited a well-known and respected surgeon/professor/author, Atul Gawande to lead the effort.  Cynthia Koons provided a report on the status of that activity, The Amazon-Berkshire-JPMorgan Health Venture Fails to Disrupt, for Bloomberg Businessweek.

“When Amazon, Berkshire Hathaway, and JPMorgan Chase announced the formation of Haven Healthcare in January 2018 to stem the rise of employer health-care spending, the world expected big results. The mere prospect of Jeff Bezos, Warren Buffett, and Jamie Dimon joining forces so worried investors that the shares of established health insurers and pharmacy benefits managers tumbled on the news.”

“A little more than two years later, those concerns feel like a distant memory. Rather than disrupting health care, Haven finds itself in disarray, with its top two executives departing in the past year and the venture giving few clues as to how it’s going to slow the upward march of health costs in America.”

Of particular interest is the departure of the effort’s leader.

“On May 13, Chief Executive Officer Atul Gawande, a surgeon, Harvard professor, and high-profile expert in the field, resigned abruptly after less than two years in the role to instead become the venture’s chairman and devote his time to efforts related to the Covid-19 pandemic.”

Curiously, Gawande published an article in the March 23, 2020 issue of The New Yorker, Why Americans Are Dying from Despair, essentially saying having healthcare insurance provided by employers was incredibly stupid.  Was this a recent change of opinion?  A reading of his article suggests it might have been.  It seems a viewpoint inconsistent with the goals of Haven Healthcare.

Gawande’s article was focused on discussion of the work of Anne Case and Angus Deaton as presented in their book Deaths of Despair and the Future of Capitalism.  Their work illustrates the highly unusual increase in mortality centered on poorly-educated whites. Several causes for this trend can be identified, including drug and alcohol abuse.  Of interest here is the role healthcare can play in generating “deaths of despair” by diminishing employment opportunities.  Gawande explains.

“The focus of Case and Deaton’s indictment is on the fact that America’s health-care system is peculiarly reliant on employer-provided insurance.”

“As they show, the premiums that employers pay amount to a perverse tax on hiring lower-skilled workers. According to the Kaiser Family Foundation, in 2019 the average family policy cost twenty-one thousand dollars, of which employers typically paid seventy per cent. ‘For a well-paid employee earning a salary of $150,000, the average family policy adds less than 10 percent to the cost of employing the worker,’ Case and Deaton write. ‘For a low-wage worker on half the median wage, it is 60 percent.’ Even as workers’ wages have stagnated or declined, then, the cost to their employers has risen sharply. One recent study shows that, between 1970 and 2016, the earnings that laborers received fell twenty-one per cent. But their total compensation, taken to include the cost of their benefits (in particular, health care), rose sixty-eight per cent. Increases in health-care costs have devoured take-home pay for those below the median income. At the same time, the system practically begs employers to reduce the number of less skilled workers they hire, by outsourcing or automating their positions.”

“In Case and Deaton’s analysis, this makes American health care itself a prime cause of our rising death rates.”

Is it any wonder that Gawande has moved on?  He arrives at this conclusion.

“Instead of preserving a system that discourages employers from hiring, retaining, and developing workers without bachelor’s degrees, we need to make health-care payments proportional to wages—as with tax-based systems like Medicare. Democrats are split over whether our health care should involve a single payer or multiple insurers. But that’s not the crucial issue. In other advanced economies, people pay for health care through wage-based taxes. In some countries, such as Germany and Switzerland, the money pays for non-government insurance; elsewhere, the money pays for Medicare-like government insurance. Both strategies work. Neither undermines the employment prospects of the working class.”

Why are Democrats not taking these facts and running with them?  Why do they let themselves get put on the defensive all the time?  Will they emerge from their funk and push for the necessary healthcare response (initiated gradually, of course)?  Biden seems interested in a lowering of the age for Medicare eligibility to 60.  That would be a good start.

Gawande provides his final thought.

“Because economic policy is inseparable from health-care policy, the unfairness of the health system is inseparable from the unfairness of the economy—an unfairness measured not only in dollars but in deaths. The blighted prospects of the less educated are a public-health crisis, and, as the number of victims mounts, it will be harder to ignore.”