Does such a system, in which universal care is achieved via private insurers, have any fundamental advantages over single-payer? In economic terms, no. In fact it’s best viewed as an attempt to simulate a single-payer system through regulation and subsidies, and the simulation will be imperfect. I once compared such plans to Rube Goldberg devices, which achieve simple goals in a complicated way. In particular, enforcing community rating and mandates requires substantial government bureaucracy. Ironically, running health care through private insurers requires more intrusive government than a simple government program would.
There are, nonetheless, political advantages to a community-rating-subsidies-and-mandates system. First and foremost, it requires much less additional revenue than single-payer, because most of the cost of insurance continues to be paid in the form of premiums from employers and individuals. All you need is enough revenue to subsidize low-income families. Reasonable estimates suggest that the revenue needed to institute a hybrid universal care system is considerably less than the revenue lost due to the Bush tax cuts, which are scheduled to expire at the end of 2010. So this kind of universal health care plan could be implemented without the need to pass a tax increase. All a Democratic president and Congress would have to do is let some of the Bush tax cuts expire, and devote the revenue gained to health care.
At the same time such a plan would allow people satisfied with their private insurance to keep it. The insurance industry would try to block reform by attacking community rating—in fact, community rating was the target of one of the “Harry and Louise” ads in 1993—but it wouldn’t be able to accuse the government of forcing people into managed care.
Although private insurance–based universal health care looks more doable than single-payer, it would forgo some of single-payer’s advantages. Administrative costs, in particular, would be higher, there would still be a multiplicity of insurers and a fight over who pays what. Is there any way to fix these problems?
That’s where the fourth element comes in. The Edwards and Obama plans allow people to stick with private insurance, but they also allow people to buy into a Medicare-type government insurance plan, at a price that reflects the actual cost to the government. Allowing a buy-in to Medicare creates competition between public and private plans. The evidence suggests that the government plans, which would have lower overhead costs because they wouldn’t devote large sums to marketing, would win that competition. When Medicare began requiring that Medicare Advantage plans—taxpayer-supported private plans for seniors—compete with traditional Medicare on an actuarially fair basis, the private plans withered away. (They began expanding again after the 2003 Medicare Modernization Act introduced large subsidies to private plans, averaging about a thousand dollars per recipient each year. But that’s another story.) If the government plans consistently out-competed private insurers, the system would evolve over time into single-payer, as private insurers lost market share. This would, however, represent choice on the part of the public, not a government edict forcing people into government programs.
If a plan along these lines is enacted, the result will be a U.S. health care system that isn’t quite like anyone else’s but somewhat resembles the German system, in which health insurance is provided by competing but heavily regulated “sickness funds.” The German system, like the French system, costs far less than ours while providing universal coverage and high-quality care. It also performs better than the U.S. system on every dimension of health care access: It’s easier to see a doctor on short notice, waits in emergency rooms are shorter, and even elective surgery involves fewer delays than it does here.[18]
There are many, many details to work out, but the important thing is that universal health care looks very doable, from an economic, fiscal, and even political point of view.
The principal reason to reform American health care is simply that it would improve the quality of life for most Americans. Under our current system tens of millions lack adequate health care, millions more have had their lives destroyed by the financial burden of medical costs, and many more who haven’t yet gone without insurance or been bankrupted by health costs live in fear that they may be next. And it’s all unnecessary: Every other wealthy country has universal coverage. Reducing the risks Americans face would be worth it even if it had a substantial cost—but in this case there would be no cost at all. Universal health care would be cheaper and better than our current fragmented system.
There is, however, another important reason for health care reform. It’s the same reason movement conservatives were so anxious to kill Clinton’s plan. That plan’s success, said Kristol, “would signal the rebirth of centralized welfare-state policy”—by which he really meant that universal health care would give new life to the New Deal idea that society should help its less fortunate members. Indeed it would—and that’s a big argument in its favor.
Universal health care could, in short, be to a new New Deal what Social Security was to the original—both a crucially important program in its own right, and a reaffirmation of the principle that we are our brothers’ keepers. Getting universal care should be the key domestic priority for modern liberals. Once they succeed there, they can turn to the broader, more difficult task of reining in American inequality.
12 CONFRONTING INEQUALITY
The America I grew up in was a relatively equal middle-class society. Over the past generation, however, the country has returned to Gilded Age levels of inequality. In this chapter I’ll outline policies that can help reverse these changes. As I did in discussing health care, however, I’ll begin with the question of values. Why should we care about high and rising inequality?
One reason to care about inequality is the straightforward matter of living standards. As I documented at length in chapter 7, the lion’s share of economic growth in America over the past thirty years has gone to a small, wealthy minority, to such an extent that it’s unclear whether the typical family has benefited at all from technological progress and the rising productivity it brings. The lack of clear economic progress for lower-and middle-income families is in itself an important reason to seek a more equal distribution of income.
Beyond that, however, is the damage extreme inequality does to our society and our democracy. Ever since America’s founding, our idea of ourselves has been that of a nation without sharp class distinctions—not a leveled society of perfect equality, but one in which the gap between the economic elite and the typical citizen isn’t an unbridgeable chasm. That’s why Thomas Jefferson wrote, “The small landholders are the most precious part of a state.”[1] Translated into modern terms as an assertion that a broad middle class is the most precious part of a state, Jefferson’s statement remains as true as ever. High inequality, which has turned us into a nation with a much-weakened middle class, has a corrosive effect on social relations and politics, one that has become ever more apparent as America has moved deeper into a new Gilded Age.
One of the best arguments I’ve ever seen for the social costs of inequality came from a movement conservative trying to argue the opposite. In 1997 Irving Kristol, one of the original neoconservative intellectuals, published an article in the Wall Street Journal called “Income Inequality Without Class Conflict.” Kristol argued that we shouldn’t worry about income inequality, because whatever the numbers may say, class distinctions are, in reality, all but gone. Today, he asserted,
18.
Commonwealth Fund,
1.
Thomas Jefferson, Letter to James Madison, Oct. 28, 1785, http://press-pubs.uchicago.edu/ founders/documents/ v1ch15s32.html.