MY TURN:  Repairing Obamacare won’t fix our health care mess  

Print Friendly, PDF & Email

By Lynn Bailey, special to Statehouse Report  |  The most recent sign we weren’t going to fix our health care system was the flame out in the U.S. Senate to repeal the Affordable Care Act (ACA) in July.  After seven-plus years of chanting “Repeal Obamacare,” Congress just couldn’t do it.  The reason is simple: health insurance is the WRONG way for a complex modern economy to finance and manage health care services for people!  It is a 70+ year-old business model which is no longer sustainable.

The United States is the only modern economically-developed nation using an employer-based private insurance system with a parallel public health insurance scheme to finance health care.  Other developed nations have long recognized health as a public service sector requiring a robust public-financing mechanism. Some nations do use insurance but it is not like America’s.  It is a highly-regulated and standardized-use health insurance to provided mostly supplemental health services.  This allows wealthier folks to jump the health service queue and/or use the private health system.  They don’t finance their country’s health with just insurance.

Some historical context


Health insurance began in the early decades of the 20th century as either a pre-paid plan (the BlueCross/BlueShield model) or mutual benefits plans through a variety of social/civic organizations.  Plans covered the support of the family upon the catastrophic loss of the bread winner because of illness or injury.  Let’s face it, there really wasn’t much early 20th century health care could do.  No antibiotics meant many hospital patients simply died.

Our employer-based health insurance model is an historical accident of World War II.  WWII’s wage and price controls limited employers’ abilities to recruit and retain employees.  Income tax laws allowed wages to be supplemented with retirement and health benefits. Benefits were tax-deductible business expenses.  This legacy continues today, as an indirect tax subsidy.

For 70+ years, Americans financed our health care with private insurance,  adding public insurance in 1965 for the elderly Medicare and poor with Medicaid.  To attract hospitals and physicians to participate in Medicare and Medicare, providers were promised, “they would be paid just like private BlueCross and BlueShield.”  Public policy poured concrete around how our health was structured and reimbursed around the model of private health insurance! Over time, changes were made but the basic health insurance model remained with Medicare providing a price floor.

What resulted from this health insurance financial model?  American’s have the world’s most expensive health care, on average spending over $10,000 for every man, woman and child with, at best, mediocre quality.  It gave us a profit-driven health care system. For-profit private health care is an American (and a Southern) invention.

Every aspect of our health care system exists to make a profit.  Not-for-profit health care providers behave like their for-profit siblings.  This applies to health insurers, hospitals, pharmaceutical manufacturers, medical equipment suppliers, physicians, nursing homes, medical transport, not to mention the myriads of lobbyists, consultants and health administrators and information management companies.

Policymakers and citizens never had a robust discussion about what citizens wanted from their health care system.  Most citizens simply want easy access, affordable, high-quality care delivered by kind people who care about us getting better.  This never actually got translated into a coherent public policy.  It was simply assumed.

There was a critical social contract assumed with our not-for-profit hospitals.  Originally created as charitable community institutions, these hospitals agreed to provide care to all patients who showed up regardless of ability to pay.  This was O.K. for a long time.  Hospitals quietly did their civic duty caring for the uninsured indigent (who weren’t poor enough for Medicaid!) because the private health insurance model provided the funds to do so.  Community hospitals more than held up their end of this bargain but as the number of for-profit hospitals grew it was harder and harder.

The Patient Protection Affordable Care Act (a.k.a. Obamacare), hoping to attract some Republican colleagues, stole its basic construct from the Heritage Foundation (pre-former U.S. Sen. Jim DeMint) in the form of the Massachusetts Reform Model (a.k.a. Romneycare), which was modeled on expanding health by expanding access to affordable individual health insurance.  A bargain was struck between the key stakeholders:  insurance plans, pharmaceutical manufactures, information managers, hospitals and physicians and the ACA was powered through, without a single Republican House or Senate vote.  It saved private health insurance.  Also by the late 20th century, most of Medicare and Medicaid was actually managed by contracts with major private health insurance plans.  Oh yes, remember, those are private for-profit companies.

So where are we now? 

It is clear to me, the U.S. can no longer sustain the financing model we have worshipped for 70+ years —  a delivery system financed by a private health insurance. What happened to make this private insurance model unstainable?  Well, for the most part, our health system was a raging success and people lived longer and better.

Insurance was originally designed to pool the risk of a few infrequent but catastrophic losses.  Health care today has become so much more.  Seventy years ago before the miracle of modern medicine and its expensive technology and staffing, if you were injured or ill, it was for a brief period of time and you most likely died.

Today, we simply live longer, mostly because of higher personal incomes, better education, improved nutrition, public health actions like water and sewer systems, and. We now routinely survive infectious diseases, heart attacks, even auto accidents and gunshot wounds and deal with chronic illnesses such as diabetes, hepatitis, strokes and dementia.  Now even cancer is manageable because of the biologics routinely used to treat cancer.  This is all predictable, routine  AND expensive.  Our health insurance model simply can’t sustain the for-profit health care system.

Don’t assume I am proposing a single-payer system because I’m not.  Expansion of Medicare to all isn’t sustainable either. (That’s another column, however.)  Surely as smart Americans we can devise an affordable, accessible, rational health system with health insurance to supplement (or be contracted  to manage information) which assures us a viable modern health care business model.

My first step is to have a serious robust public discussion of what it is we want and are willing and able to devise an acceptable method to finance.  We’ve wasted seven years so it is time to stop playing around and be serious grown-ups about health care.

Lynn Bailey is a health care economist based in Columbia. She tweets @sceconomist


Leave a Reply

Your email address will not be published. Required fields are marked *