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Beyond Obamacare: The Seven Percent Solution

Summary:
Social Justice, Libertarianism ObamaCare is dead, long live — what?  The House Republican plan achieved the rare feat of displeasing fellow conservatives almost as much as Democrats before dying stillborn.   Does it follow, as numerous commentators have intoned, that ObamaCare ought to be retained?  No, for it too is multiply flawed and has been rejected by citizens in most polls.  So what is to be done? This isn’t a wonkish question about design but rather a plea for radical rethinking.  America makes three demands on its healthcare system that, unfortunately, are jointly incompatible.  First, no one should be deprived of healthcare.  ObamaCare made universality a core component, but even

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Social Justice, Libertarianism

ObamaCare is dead, long live — what?  The House Republican plan achieved the rare feat of displeasing fellow conservatives almost as much as Democrats before dying stillborn.   Does it follow, as numerous commentators have intoned, that ObamaCare ought to be retained?  No, for it too is multiply flawed and has been rejected by citizens in most polls.  So what is to be done?

This isn’t a wonkish question about design but rather a plea for radical rethinking.  America makes three demands on its healthcare system that, unfortunately, are jointly incompatible.  First, no one should be deprived of healthcare.  ObamaCare made universality a core component, but even before its passage America offered an ungainly mix of private insurance, Medicare, Medicaid, other governmental programs, charity clinics and, if all else fails, guaranteed access at the emergency room door.  Second, high quality care must be provided to all regardless of financial means.  As a society we insist that the poor be guaranteed access to minimally adequate necessities such as housing and food.  We are not much troubled by the fact that the wealthy do markedly better.  However, medical treatment for the poor is to be substantially identical to that afforded the affluent.  Once in the clinic or hospital, all patients must get the best. Third, it’s acknowledged that resources are not infinite and that therefore economizing on health care expenditures is necessary, as indicated by the (somewhat fanciful) name “Affordable Care Act”.

Any two of these can be straightforwardly achieved.  Withhold health care services from those unable to pay and costs will be kept down.  Or provide only a minimal standard of care to those who cannot afford better and, again, costs will be contained.  Finally, if we adopt a cost-be-damned attitude, high quality health care can be extended to all, at least until the economic machine starts to break down, as eventually it will.  Despite the asseveration of the singer Meat Loaf that “two out of three ain’t bad,” it’s not likely that the public will accept any of these compromises.  Therefore, we need to ask: how can this roadblock be eliminated?

It can’t.  That’s what ‘inconsistent’ means.  As another spinner of songs announced, “you can’t always get what you want.”  The most that can be done is to sequester one of the conflicting elements.  That is what this proposal offers.

I propose that the federal government establish a national health care budget in the amount of seven percent of GDP (based on the preceding year’s economic statistics), the sum to be expended in accord with the priorities of a governmental agency – let’s call it the National Health Commission (NHC) –  whose sole task is to decide which services will be covered and which excluded.  All individuals lawfully within the country’s borders will be eligible for care on terms of strict equality.  What the NHC may not do is access or direct any funds beyond the seven percent.  Therefore it will have to make hard decisions, some of which no doubt will be excruciating.  The program so designed will satisfy the criteria of universality and economic stringency.  But because it isn’t entirely open-ended it will not always provide state of the art services.

Beyond the realm of the NHC people will be at liberty to make whatever health care arrangements they prefer.  For many the desired amount will be none.  The quantity and quality of health services that a well-functioning NHC can provide will be good enough.  Others will choose to direct some amount of their resources to securing additional health care goods, either via direct purchase of services or some type of insurance.  The role of the government will be restricted to ordinary protection against force or fraud.  It will neither require nor forbid any arrangements beyond those it itself affords.  Specifically, it will not subsidize any non-NHC services either directly or through favored tax treatment such as currently is extended to employer-provided health insurance.  To oversimplify just a bit, the government will bear 100% responsibility for NHC and 0% for the remainder.  The private realm will satisfy the criterion of making available the very highest quality services as defined by available technology, and it will be strongly responsive to economic considerations because providers will need to convince individual consumers that what they have on offer is worth purchasing.  What it will not do, of course, is achieve universality.

Why seven percent?  That amount actually is close to the proportion of GDP devoted to health care by the governments of Canada and the United Kingdom, both devotees of single payer delivery systems offering very high standards of care.  Indeed, the greater wealth of the United States will allow the government to spend on healthcare a greater sum per capita than does either of these countries.

Of course the seven percent stipulation is somewhat arbitrary.  Because I am a libertarian I would prefer a ceiling of five  percent, the remainder to be consigned to private arrangements.  Those of a Bernie Sanders persuasion would be more comfortable with the governmental share set at ten percent.  I believe that to be excessive but nonetheless an improvement over the ObamaCare scenario or, indeed, American healthcare delivery prior to Obama.  More crucial than the precise level of governmental responsibility is setting a budget that forces decision-makers to confront difficult choices, knowing that every service funded comes at the cost of some potentially worthwhile service forgone.  They will have to think hard about how to set priorities and will be incentivized to drive hard bargains with would-be providers.  The slack that is everywhere in current procedures will be driven down to a minimum.

The other minimum is the role of government in the private realm.  It will not subsidize or forbid any particular arrangements, nor will it distort the tax system.  What private insurance covers or does not cover will simply be excluded as a legitimate concern of the state.  Individual mandates will be a thing of the past, as will restrictions on interstate medical commerce.  The upshot is that both consumers and providers will be keenly responsive to questions of quality and cost, precisely the opposite of current practices.

I am under no illusion that this change will be painless or not encounter opposition.  For example, although transitioning from Medicaid will not bruise many vested interests, Medicare will require special handling as the country moves from universality only for the old to universal access for the whole population.

Some will loudly complain that it is wrong to leave everything above the 7 percent threshold to the mercies of the market.  I agree.  Healthcare traditionally has been the beneficiary of extensive contributions from charities and nonprofits.  Under this proposal incentives for giving will actually be enhanced because there will be less crowding-out by governmental programs.  However, we should reject the implication that markets in healthcare are unseemly or unnecessary.  Rather, they are a necessary element in a system that honors universality, high quality and efficiency.  Perhaps after current efforts to reform health care fail, as predictably they will, the seven percent solution will be given its chance.

Loren Lomasky is Cory Professor of Political Philosophy, Policy & Law at the University of Virginia.

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