Paul Starr, Professor of Sociology and Public Affairs at Princeton and author of the Pulitzer Prize-winning book The Social Transformation of American Medicine, has now provided us with a thorough analysis of the history of health care reform in America. As he says at the close of Remedy and Reaction, “For a century, the United States has been fighting over that issue and instead of subsiding, the disagreements have intensified and at times shaken the political arena.”
His major conclusion is that the continued controversy is the result of what he calls the “Health Policy Trap.” In essence this trap follows from the gradual legislative enactment of a costly and extraordinarily complicated system that protects enough of the public to make the system resistant to change. As Starr says: “The key elements of the trap are a system of employer-provided insurance that conceals its true costs from those who benefit from it; targeted government programs that protect groups such as the elderly and veterans, who are well organized and enjoy wide public sympathy and believe that, unlike other claimants, they have earned their benefits; and a financing system that has expanded and enriched the health care industry, creating powerful interests averse to change.”
In the first section of the book, Starr explores the historical attempts at health care reform beginning in the early 1900s with the Progressive Party platform endorsing universal health insurance based upon the European models. These were thought of not as a special interest of the poor but as a general interest of an enlightened society.
In one of the many historical paradoxes and twists of political fate, these ideas were initially championed by the AMA and skeptically viewed by the unions, who felt that they and not the federal government should provide the benefit. For much of the next century, a series of legislative proposals for some form of universal health insurance were made by both Democrats (Roosevelt, Truman) and by Republicans (Nixon), but each was thwarted by the advocates of the health policy trap, economic conditions, war-related politics, and competing national priorities.
In the 1950s, the failure of the Truman effort began the process of fragmentation of the governmental approach. Post-World War II, employer-based health insurance began to emerge as a way of providing employee benefits in spite of wage and price controls then in place. In 1953 President Eisenhower made blanket tax exclusions for all employer contributions and created medical expense deductions. The result was to make employee-based health care benefits a pass-through cost to employers and one that was heavily subsidized by the federal government's tax-free policy.
The second major contribution to the health policy trap was during the Johnson administration with the creation of Medicare, which provided a compulsory hospital insurance program (Part A); a voluntary physician payment program (Part B), and Medicaid, a state-run program for the poor. No cost containment mechanisms were built into the system. It was these two major initiatives that created the health policy trap which we have since struggled to successfully manage.
Not surprisingly, these initiatives created strong segments of the public who benefitted from and defended the initiatives and resulted in the relentless growth of health care costs, which have continued to consume increasingly larger portions of our gross national product. So popular have these initiatives become that efforts to consider methods to improve the system and include more of the uninsured such as universal national health insurance, catastrophic health insurance, managed care, and managed competition have fallen by the wayside.
Starr, who was Senior Health-care Advisor in the Clinton White House, provides an insider's analysis of the goals as well as an explanation of the failures of the Clinton proposal for “Managed Competition within a Budget.” He points out that some but not all of the concepts found their way into the Obama proposals that followed.
Starr makes the case that each of the previous attempts at major health care legislation required compromise positions to deal with the Northern Republican moderates and the Southern Democrat conservatives. However, the progressive polarization of the two parties made compromise less necessary so long as one party controlled the Presidency and both houses of the legislature, as was the case in the first two years of the Obama Presidency.
Building on a model that had been put in place in Massachusetts by-then Governor Romney, the proposed legislation finally included an individual mandate, an expanded employer mandate, and an expansion of Medicaid, with premiums subsidized on a sliding scale by federal funding. The resulting legislation covers about 97 percent of the population but includes few concrete steps to control health care costs. Starr describes the successful “sausage making” process with considerable depth, clarity, and insight.
Well, if the goal of successful legislation was to disengage the country from the health policy trap, how well have we succeeded? Not well it would seem.
Left intact is the popular Medicare benefit with no measurable cost containment included in the legislation. The employer-based health insurance system remains in place with the true costs of health care coverage still largely hidden from employees. The federal subsidies for employer-based insurance remain through tax-free costs to employers and tax-free benefits to employees. However, the so-called “Cadillac plans” will be taxed but not until 2020.
The expanded coverage has been accomplished roughly equally by subsidized individual health insurance and by expansion of Medicaid. Because Medicaid is managed by the states, which by law must balance their budgets, initial additional costs will be entirely covered by federal funds. Whether this level of federal support will continue to be possible is problematic. This has led to some angst among state Governors. As the Governor of Indiana recently quipped, “It's like someone giving you a baby elephant and agreeing to pay for the hay for the first five years.”
Finally, a variety of interesting proposals for cost containment have been included in the new legislation such as electronic medical records, insurance exchanges, reduction in administrative costs, online insurance options, and state review of insurance rate increases above 10 percent. Whether these will be effective or even if Congress will stick to them is unknown.
Given the cost increases likely for the 40 million people newly covered, the proposals will need to be innovative indeed. Hopefully, the Affordable Care Act will be successful in improving our access to health care, controlling costs, and improving quality, but it will not address Paul Starr's Health Policy Trap.
Starr writes with a comprehensive understanding of the history, politics, economics, and challenges of “our peculiar American struggle over health care reform.” Reading his work will give you a rich appreciation of the origins and the complexity of our American health care system.
YALE UNIVERSITY PRESS, 2011, 336 PAGES, ISBN: 0300171099
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