Various reviewers have been pretty dismissive of several aspects of Daschle’s proposal, but it has some obvious attractions. The underlying assumption is that a redesign of our existing system would gore too many oxen, and that the answer is to build a competing and better regulated structure around FEHBP—the one traditional insurance program that the federal government does control—in the expectation that the new system will succeed as the old erodes. It’s all a little like what Japanese and Korean automakers have achieved at the expense of Detroit by building new plants in the South.

One can question Daschle’s proposal to give regulatory power in the new structure to a federal health board, but it’s hard to come up with a better one. Yes, there would be attempts to lobby the new Fannie Med (thank you, Matthew Holt), and yes, over time changes in board membership could result in big changes in policy. On the other hand, whatever free marketers may think, we do need regulations and someone has to set them, and so far the politicians haven’t done too great a job.

So, if Daschle’s sense of political feasibility is correct, is the Critical proposal likely to solve our critical problems? We have two huge ones: number one, our total health care spending of close to 17 percent of GDP, and, number two, the lack of affordability that has resulted in 46 million uninsured. (There are other big problems of quality and access and the Medicare deficit, too, but let’s just focus on these two.)

So far as our number two big problem is concerned, there’s little doubt that Daschle’s proposed imposition of play-or-pay, provision of tax credit premium subsidies, and expansion of Medicaid and SCHIP, would make health care more affordable for many. Unfortunately, as fiscal conservatives will instantly point out, pouring enormous amounts of public money into the health care system will make our number one big problem (as well as the deficit) even worse. The major strength of Daschle’s proposal, to leave the present system essentially intact while adding a competitive “something better,” turns out also to be its biggest weakness.

There are other weaknesses, too. First, the downside of minimal meddling with the present system is that all its problems (like administrative burden, cost-shifting, medical ineffectiveness, and so on) will be perpetuated for a long time to come. Daschle’s hope that the new federally-regulated system will put “tremendous pressure on everybody else to follow suit” seems wildly optimistic. The theory hasn’t worked in Detroit yet, and it’s unlikely to work in health care.

In addition, for small employers not to fight the proposal, their play-or-pay “pay” levies must be low, thereby encouraging those currently offering coverage to ditch it, with the result that the employer contribution to the federal pool will be far less than expected. In fact, this may result in other dominoes toppling, as medium-sized employers demand the same deal, and so on—a death spiral caused by pandering to the intransigent.

Finally, at least in terms of this brief critique, inclusion in the new federal system of a Medicare option—plus expansions of Medicaid and SCHIP—is likely to kill the proposal stone dead. Given the current federal programs’ cost-shifting effects (highlighted in a recent Milliman actuarial report), insurers can be expected to fight tooth and nail against something that depends on provider payment rates that they are likely to have to subsidize.

Other current proposals, like those from Max Baucus, and from Hillary Clinton’s presidential campaign, have some of the same problems as Critical. They are all thoughtful and well-intentioned but, in ducking the risk of alienating the present system’s key players, fall into the trap of trying to buy coverage expansion with too little regard for total costs. The Ron Wyden-Bob Bennett bill avoids expansion of Medicare and Medicaid (in fact, it shrinks the latter), but comes with all the risks associated with major system change (especially eliminating the tax exclusion of health care benefits), and with its own weaknesses (do we really need fifty-plus new state agencies to manage enrollment?).

With President-Elect Obama talking of years of trillion dollar deficits, and with Bernie Madoff not available to juggle the numbers, it’s going to be extraordinarily difficult to create a health care reform proposal that doesn’t look like it’s going to break the bank and does reform.

For those who haven’t given up hope after reading this, there is a little encouragement in the number of proposals, and in the number of commonalities among them. Baucus’ plan is artfully vague on some key points, and so lends itself to modification; the Wyden-Bennett bill has attracted cross-aisle support—essentially for reaching the magic sixty votes; Daschle’s Critical proposal has the virtue of building on a health insurance plan that actually works fairly well. Now, if only we could take the strong points of each without including the weaknesses…before it’s too late.

The Federal Board seems to have been fairly well thought out. Given the Obama transition team approach to seeking as much public input as possible (unprecedented, in fact), I have hope that we will have the vigorous debate we sorely need.

I, too, have to comment on another “drive-by” by the author, in addition to the Woolhandler one. If the Cato report cited is an example of “dismantling” WHO’s report, I think Cato needs to spend even more money on thinkers for the tank than it already does.

Cheers,

Woolhandler’s approach to identifying administrative costs in the U.S. and the Canadian health systems differed substantially from that employed by McKinsey. Woolhandler’s group added estimates of administrative costs in hospitals, physician practices, long term care settings, pharmaceutical companies and employers to the administrative cost of insurance borne by insurers which McKinsey measured. Once this is accounted for, the amounts identified in each study as administrative waste actually appear quite comparable.

The point about what “evidence-based” really means, given the fluid nature of “evidence” in health care. The future government would do well to improve transmission of current evidence from the NIH to community physicians, so that “evidence” is disseminated in real time, rather than the current methods, where it might be a few years before any “evidence” reaches clinical practice.

Taking politics out of politics is not such a bad idea after all. Mr. Daschle, I am afraid, has rather stale ideas wrapped in a new cover. It would be encouraging for him to consider the views of those who might be opposed to his thoughts, but are willing to work with him in order to produce “real” reform to the health care system.

How about H.R. 353? That bill encourages mass use of imaging to look for prostate cancer in aging men. It’s another bi-partisan affair that brings members of the black caucus together with Rep. Issa (R-CA) and Burton (R-IN), two of the most conservative members of Congress.

Goldsmith has highlighted the need for evidence to inform any insurance program, whether government or privately-run. But who is really the stumbling block to getting to evidence-based medicine: Congress, or the special interests who lobby them to jump on specific technology bandwagons despite the lack of evidence?