USA vs. USA: HEALTH REFORM’S UNDERLYING DIVISION

The recent debates on health care reform in Congress and in town hall meetings have exposed a dramatic fissure in America. On one side are many who see the benefits of health care and health insurance becoming accessible to the uninsured, as well as lowering costs for everyone. On the other side are insured people who are concerned that any changes to the system will adversely affect the health care and health insurance that they already have. The proponents are highly focused on its long-term benefits, and are willing to do what is needed to ensure sustainability of the system. The opponents are highly adverse to short-term changes, even though the status quo will put everyone at risk (families, businesses, government, providers) from increasingly steep cost increases (both for health insurance and health care), and make the entire system vulnerable.

The Roots of Division

This divide illuminates a classic philosophical tension in American culture that has deep roots and even transcends politics, going to the heart of the American psyche. Each of the two dominant viewpoints has key characteristics. One group seeks linkages to, and success for, the larger community, and is amenable to reform to achieve it. The other group gives priority to the individual (and family unit), and is oriented toward the status quo, with the notion that, on their own, people earn prosperity over time. The current divide is similar to the 1820s’ battle between elitism and populism, the 1890s’ conflicts between “laissez-faire” proponents and muckrakers, the 1910s’ and 1920s’ disagreements between isolationists and those who favored global engagement, the 1930s’ success of “New Deal” concepts, the 1980s’ “trickle-down economics”, and the 1990s’ and 2000s’ debates between big and small government. A notable recent example was in the 1990s, when Hillary Clinton’s book “It Takes A Village” was countered by Republicans at the national convention who claimed that “it takes a family”.

The Cultural Division on Health Care Reform

In the context of health reform, rather than the division being crudely defined as a dialectic between Democrats and Republicans, it is actually the underlying philosophies that are at issue. Health reform is a microcosm of the centuries-long debates on the community versus the individual, and reform versus the status quo. Advocates of comprehensive reform recognize that all payors and providers are inter-dependent, as evidenced by the uncompensated costs of health care pushing up costs for the insured and government programs, which again affect the insured down the line (e.g., lower reimbursement rates in government programs, to achieve cost savings, then result in higher health care costs for the insured). Those who oppose major health reform focus on their own coverage and care, believing that free market principles allow their needs to be fulfilled in isolation from the needs and payment mechanisms of others.

These two views are intertwined. Individuals’ satisfaction with their choices and costs require cohesive policies and structures that enable each person to access reliable and affordable health insurance; and the viability of the American community requires that policies and structures allow for all individuals and families to choose and afford services that meet their quality-of-life needs.

Health reform is a natural arena for this conflict in philosophies to play out. The intrinsic nature of insurance is based on the pooling of the resources of the many to pay for the needs of the few. The underlying principle is that people pay into a collective repository --- even though they may not need services --- in anticipation of that repository paying their own expenses somewhere down the line when needed. For most Americans, the central repository has been the private-sector insurance companies, whereas for senior citizens and persons with disabilities, the primary central repository has been the Federal government (via Medicare). Medicare itself is based on everyone paying into a collective fund while they are able to do so, and then becoming beneficiaries of that fund years later. So, in essence, whether health insurance is provided by private insurers or by the Federal government, the principles of communal pooling of funds are at the core.

Flashpoint: The Federal Option

The debate over the “Federal option” thus comes down to a question of how to pool and administer the collective risk. Insurance companies oppose it because it may draw away the premiums from some lower-risk, and therefore lower cost, sectors of society. Insurers appreciate Medicare, because older Americans are the most costly group to ensure, as they need the most health care services and pharmaceuticals. It is fine with them if the Federal government picks up the tab for them. Similarly, insurers do not mind Medicaid, because most recipients would not be able to afford health insurance on their own. But insurers want to maintain their flow of premiums from healthier groups. Insurance companies have mobilized many to oppose health reform, and especially the Federal option, because it is in their interests to do so. It is not because insurance companies would not be able to compete with the Federal option, but rather, that they would miss out on some of the premiums from people who are not expensive to insure.

It has been argued that private insurers, who need to generate profits, could not compete with an option that does not need to generate profits. But that argument is self-defeating. If profits account for disparity between the two, then insurers’ profits are unjustifiably high, and the amounts being paid for health services are irresponsibly low. For an insurer that structures their operations for profits at a reasonable level -- which can be achieved through smart investments of premium dollars before they are needed to pay for care -- competition would not be a problem, since they provide good value for premiums paid. But for insurers that manipulate coverage and care decisions to ensure high profits, competition will, indeed, be difficult. Why should anyone defend the right of private insurers to generate windfall profits at the expense of the families that they insure? These insurers have been escalating costs, and have caused great hardship for many Americans. They should not be rewarded. If the bad actors lose market share, the responsible insurers will benefit, along with the American people.

It is an illusion for any individual or family to believe that the cost of their health insurance or health care is isolated from other cost and coverage factors. This is the case for all risk pools, managed by insurers or by the government. Family premiums escalate according to the cost, underwriting, risk-spreading, and administrative expense decisions of their insurer. The premiums which are set by each insurer are also affected by the health care marketplace, and are thus impacted by the uninsured, other insurers, Medicare, Medicaid, and other payors. Whether or not they realize it, the ability of individuals, families, and businesses to maintain the level of coverage that they desire, and maintain some semblance of restraint on premium increases, is dependent upon competition and an overall system that affordably covers and serves everyone. Currently, neither exist. Anyone who thinks that they are insulated from the effects of the overall system needs only to be diagnosed with a serious illness or condition to learn otherwise.

If no one ever got sick, then everyone’s costs would be low. But, since people do get sick, insurers have a choice of paying for those costs in either of three ways: (a) to deny coverage or treatment; (b) to spread the costs via premiums among those who they insure; and (c) to minimize profits and administrative expenses to pay for those costs. All too often, private insurers opt for the first two choices, and skip the third. A Federal option would spread the costs via premiums, because it would not deny coverage or treatment, profits would be irrelevant, and administrative expenses would be kept low. Thus, when insurers complain that they would not be able to compete with a Federal option, they are really saying that they are not prepared to responsibly manage risk and costs as well as the Federal government would. However, private insurers who provide good value for premiums paid would attract more people, and in so doing, expand their pool of insured people amongst whom to spread their risk and costs.

How Does This Impact the Current Debate on Reform?

Lawmakers should recognize the underlying philosophies of both the proponents and opponents of reform, as well as how their views relate to the Federal option.

The first imperative is to raise awareness of the basic nature of health insurance: that it involves a communal sharing and spreading of the risk and costs, whether by private insurers, the government, or anyone else. The illusion of families and businesses being isolated and insulated from the overall health system must be dispelled. Much of the current opposition is based on this misunderstanding.

Second, it is not enough to explain that people will be able to keep their insurance despite reform. This approach perpetuates a misconception by suggesting that their health insurance is stable and reliable. It is not. It is vital to speak directly to the opponents by explaining that they are currently at risk of being denied coverage and treatment. It is also imperative to explain that, without reform, their premiums will escalate dramatically, pricing many of them out of the market and into the ranks of the uninsured. Since opponents are more likely to focus on their own status quo rather than the long-term needs of the broader American community, reform must be explained as essential for their sake, rather than for the uninsured or people already victimized by the system. Individual liberty to choose affordable, reliable health coverage is in jeopardy.

Third, the Federal option should be discussed as just an alternative pool for families, individuals, small businesses, and high-risk people. This would place the focus on those who would be served, rather than those who would be serving them. It would merely aggregate a pool of people, just like insurance companies do. Whereas the “Federal option” conjures images of a “big government” program, an alternative pool emphasizes that it is basically just another source of insurance. Since opponents of reform tend to focus on the rights and choices of individuals / families, an alternative pool that is designed to meet their needs would appeal directly to them. For those who are uninsured or facing very high premiums (especially if they are covered through the “individual market”, rather than the “group market”), they could join the alternative pool. If a small business cannot afford premiums charged by traditional insurers, they could more likely afford the alternative pool. The main distinction would be that it would not pursue profits. Although some opponents might object to any coverage that did not provide profits to a company, most people would not object to getting a bigger bang for their premium buck. The alternative pool could also offer a low-premium catastrophic care plan, to provide individuals, families, and small businesses with a less expensive “safety net” just in case of a major health need.

Fourth, since it is likely that any bill that reaches the President’s desk will include some compromises (e.g., narrowing the Federal option’s scope, enrollment eligibility, etc.), reform should be promoted to proponents in terms of the many gaps that it will fill. Since reform proponents are more likely to focus on the overall American community, the tightening of the overall fabric of the system should be embraced. Even without becoming airtight, the new system would prevent denials of coverage and care, greatly expand the pool of people who can afford coverage, increase competition, and decrease uncompensated care. These advances would lower costs for all payors of health insurance and health care services, including families, businesses, and the Federal government.

Conclusion

The heated debate on health care reform is an extension of a philosophical division about the role of government in our lives that can be traced back to the early days of our nation. Recognition of these views is vital to successful reform. By directly addressing these underlying principles, reform can appeal to many of their adherents, and concerns that have been raised can be alleviated.