Viewpoint
The New American Compromise
By Ian Morrison
We can cover the uninsured, but can we contain costs?
In the 1980s and 1990s, an American compromise called managed competition was the dominant force behind health reform. Born from the ideas of Alain Enthoven at Stanford University, the theory laid out a path where consumers picked plans when they were well and lived with the consequences of their decision when they were sick. Integrated delivery systems organized in an HMO model competed for business on the basis of cost and quality, and consumers had real incentives to select low-cost plans; otherwise, they paid hundreds of dollars a month for more expensive (and usually broader choice) alternatives.
Managed competition was the basis for health reform initiatives in California in the 1980s and was really the intellectual foundation for all health reform efforts in the 1990s, including the ill-fated Clinton health plan. Managed competition worked best in a framework of universal coverage. Everyone was to be in a plan, and plan sponsors (such as employers or government) as well as individual consumers would have a marketplace of choices at the plan level or at the integrated delivery system level. Kaiser-like entities would then compete on a value basis within a framework of universal coverage. I always liked the idea because it reconciled issues of cost, quality and access, and I felt it was a genuinely American compromise between top-down control and consumer choice.
Shared Sacrifice
There is a “new American compromise” being forged. Emerging from the Mitt Romney and Arnold Schwarzenegger political aberrations (popular Republican governors in strongly Democratic states), the new American compromise makes universal coverage the primary goal. It is to be achieved through shared sacrifice in payment by business, government, individual households and even, in some cases, payment by special groups like smokers, doctors and hospitals.
The new compromise is forged from a belief that health care is both a right and an obligation: You have a right to expect access to health care, but you have an obligation to pay your share of the tab. The compromise is a form of what I have called strategic incrementalism. Incrementalism means going from one bad idea to another bad idea, whereas strategic incrementalism takes steady steps toward a broader vision. The new compromise builds on existing public and private health insurance programs, letting you keep what you have if you like it, requiring some payment for coverage if you have none and limiting the behavior of health insurers in the marketplace.
The Massachusetts plan, Schwarzenegger’s California proposal and the plan of Barack Obama, the presumptive Democratic presidential candidate, are close variants of this new compromise. John McCain, the presumptive Republican candidate, has shown little interest in embracing universal coverage through shared sacrifice, preferring instead a combination of tax credits and deregulation of insurance markets to stimulate competition. [Note: This piece was written and went to press before the Democratic and Republican conventions.]
Still, while neither has embraced the new compromise in his campaign, the candidates will be forced to talk about health care as the general election heats up. Why? According to whichever voter poll you like, through at least the end of June, health care ranked from the third to the fifth in voters’ priorities, just behind the economy and jobs, the Iraq war, and the cost of gas and energy.
A Real Debate
You could argue that the stars seem aligned for a victory for health reform, based on the new compromise, that leads to universal coverage, first in some landmark states like Massachusetts and California and then, perhaps, emulated through national policy. (I have always argued that Americans will not buy a car they haven’t driven. So they will want to see the new compromise working before they sign off on it.) But it is plausible to expect a real debate on health reform that may actually lead to political change and legislation.
There are a few things to watch: First, God is in the details. While the new compromise has been embraced by politicians on either side, there can be large and important differences in the details such as which groups of the newly covered are added and at what rate and to what maximum level. Is universal coverage the goal or is it simply significant coverage expansion? (“Universal coverage for some” was how a colleague put it.) Similarly, while there is unanimity among Democrats about rolling back tax cuts for the rich to pay for health reform (and other things), unsurprisingly, this view is not held by Republicans. Perhaps the most meaningful detail over which the candidates disagree is the degree to which the health insurance industry should be regulated (or deregulated). Democrats are much more likely to tighten the rules on issuance, underwriting, and availability and funding of public-versus-private choices.
Political victory does not always mean legislation. It is one thing to speechify, to campaign and to win an election with health care reform as a plank in your platform. It is quite another to get laws passed and enacted that make massive change in one-sixth of the U.S. economy. Every lobbyist and his or her dog is itching to get into the middle of this next round of change making.
Affordability is my big concern. Although we may succeed in getting everyone an insurance card, reaching that laudable goal may be ignoring the need to transform a delivery system to make it better, faster and cheaper than the system we have now. Giving people a card doesn’t solve the fundamental cost problem, and there seems little in the candidates’ proposals that will do much about cost problems. We will have more people covered and we will pay significantly more to achieve it. Without adequate cost controls we may be digging our children an even bigger fiscal black hole than the one they are already facing.
Health reform should happen—it could happen. But if it addresses only coverage expansion and ignores the issues of affordability, quality and sustainability, we will have missed an opportunity to transform health care to deliver much higher performance for decades to come.
Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. This Viewpoint was adapted from his article in the March 4 issue of H&HN Online.
This article 1st appeared in the September 2008 issue of Trustee Magazine.
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