The Union's Health Care State

If we’re lucky, President Bush’s state of the union address tonight will do for health care what last year’s speech did for Social Security.

Recall that a year ago, pundits bought his spinmeisters’ claims that the president’s election victory – “I earned capital in the campaign, political capital, and now I intend to spend it” – signaled a national endorsement of the Cato Institute wet dream: betting our guaranteed retirement system on a roll-the-dice strategy of individual accounts.

The president spent much of the year peddling this plan. And the American people – beset by disappearing corporate pensions, stagnant 401(k) accounts and personal savings hovering somewhere between minuscule and non-existent – heard what he said, digested its meaning, and rejected it wholesale. By year’s end, that idea of turning a guaranteed Social Security check into variable personal accounts had about as much value as Enron stock.

The president’s campaign did have one virtue, however. It began the process of educating another generation about the concept of social insurance, and why there are some things in life many people can’t prepare for on their own.

Since our presidential bubble boy doesn’t learn from his mistakes, tonight’s speech should tee-up health insurance as the next great battleground for educating Americans about those things that we must do together. I’m mildly optimistic that six months from now, after a sufficient number of Bush speeches extolling the virtues of individual health care savings accounts, Americans will finally begin listening to proposals for “Medicare for all,” which is the only solution to the national health care mess.

Medicare for all? What’s that, you ask? It’s the politically savvy way of calling for national health insurance. After all, Canada, England, France, Germany, Italy, Scandinavia, Holland, the Netherlands, Iceland, Japan, South Korea, Australia, New Zealand and just about any other country you’d care to name except Chile and China – now there’s great company – must know something. Their national plans spend anywhere from five to ten percentage points of GDP less than Americans on health care, and most of them live longer, too.

The first step will be educating Americans about what ails the current system, which has nothing to do with reckless consumers cut off from the financial pain of their choices opting for wasteful procedures and expensive tests. Individual health accounts would cure this non-problem by giving consumers the right to decide about first-dollar care – paid for by accounts filled with pre-tax dollars – while using the same tax-exempt accounts to buy catastrophic insurance plans for when they really get sick. Poor people who don’t pay taxes would get special tax credits to allow them to buy into the system.

Princeton University health care economist Uwe Reinhardt circulated a short gem of a paper over the weekend dissecting this nonsense. He starts by pointing out that this amounts to one more huge tax subsidy for the already well-off. Since most basic care and family plans cost about the same as long as your family is healthy, those in the highest tax brackets would get the biggest subsidies.

Meanwhile, the move toward individual accounts would be accompanied by wholesale dumping of existing employer plans – just as employers dumped their traditional pension plans in favor of 401(k)s. However, as families enter the insurance market, they’d find out that not everyone is equal. What insurance company willingly takes on the diabetics, the mentally challenged and cancer patients? The first question Reinhardt wants journalists to ask the president and his men is who will regulate this expanded market for individually purchased health insurance?

There’s good reason for Reinhardt is address his comments to journalists. There’s no shortage of health care experts in the scribbling profession who understand why individualized accounts won’t work. But, unfortunately, they don’t get to cover the main story when it’s the president making the pitch. That task falls to political reporters, most of whom, when it comes to economics, not to mention the convoluted field of health care economics, haven’t got a clue.

Health care, like the need to insure against unforeseen calamities like unemployment and disability, is a social good. You don’t know when you’re going to get sick. And once you get sick, you may stay that way for a long time. As Brookings economist Henry Aaron pointed out in Monday’s Los Angeles Times, people who spend over $4,000 a year for health care – i.e., the really sick – account for 80 percent of the nation’s $2 trillion health care tab. Is there any way individual health savings accounts can pay for that? Only social insurance can pick up the tab.

We’re approaching a teachable moment in health care. The business community is deeply split, with those paying the tab willing to take on those who collect it and profit from it.

There’s much more to be said on how to make a national health insurance plan affordable for the American people as a whole. But that discussion will come later, after it has assumed its proper place on the national agenda. Tonight, President Bush will kick off his misguided campaign for individual health care savings accounts. If the past is prologue, he will begin the process of teaching Americans that a single payer, national health insurance plan is the only way to go.

Posted by gooznews at January 30, 2006 10:54 PM