Fact Or Fiction: The Role Of Government In Health Care
September 1st, 2009
 by
John Iglehart
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The traditional summer break that provides members of Congress a respite from their official duties instead, in some areas, turned into a raucous, sometimes angry series of town hall meetings focused on the ambitious health care reform proposals of Democrats. The meetings have given reform opponents and advocates an opportunity to voice their opinions, although some of their exchanges have shed more heat than light on the issues, placing legislators in uncomfortable positions. Nevertheless, their impact has reverberated throughout the country because of extensive media coverage transmitted by television, newspapers, and countless bloggers. Much of the dialogue — which has often been contentious — has focused on whether the Democratic plans would transform health care into a government-controlled enterprise and, if so, what its implications might be.
To focus attention on the role of government should a reform plan become law — as well as the potential impact of slowing Medicare spending growth and proposed new Medicare reimbursements for advance-care planning — Health Affairs sponsored a briefing on August 20 at the National Press Club, titled “Fact vs. Fiction: Key Issues in Health Reform.” The first panel — health economist Len Nichols of the New America Foundation and Gail Wilensky of Project HOPE — addressed the question: “What exactly is the federal government’s role in U.S. health care and health financing currently, and how might this change under health reform?” Nichols, a Democrat, was an active participant in the reform pursuits of the administration of Bill Clinton; Wilensky, a Republican, served in key health policy posts for President George H.W. Bush.
Nichols pointed out that the government already plays a wide variety of important roles in health care and that the public supports these activities, including investing in biomedical research;¬ regulating public health issues such as smoking; delivering care directly to military veterans and Native Americans; and financing care delivered by private physicians for selected populations, including the elderly, disabled, and mothers and children in low-income families. The government also promotes competitive markets through antitrust enforcement and determines whether new pharmaceutical products and medical devices are safe enough to be allowed on the market.
Since 1960, national health expenditures have increased from 5% of the gross domestic product (GDP) to 16% in 2007, while out-of-pocket spending by patients has dropped from 47% of total expenditures to 12%. Nichols remarked: “We have substituted collective dollars for private out-of-pocket spending, representing the biggest change in federal [financing] policy,” and reflecting the general support of the population for financing care for those who cannot afford to pay for necessary care themselves.
Now, as Nichols explained, the debate centers on whether government should act again to extend coverage to those individuals without insurance (some 50 million). Such an increment is much larger than any previous step government has taken to expand coverage, and its scope is clearly giving some citizens and legislators pause. About two-thirds of people who are uninsured live in families with incomes that are less than twice the federal poverty level ($44,100 for a family of four in 2009). But several Democratic proposals call for extending coverage to families whose incomes are 300% or 400% of poverty, primarily because health insurance premiums cost so much today.
Wilensky emphasized that the concerns being registered by people attending town hall meetings derive not only from the cost and scope of the Democratic reform plans but from earlier steps the Obama administration has taken to right the economy, spare the domestic automobile industry, stem the loss of jobs, and promote other activities that have extended the reach of government. “Concerns over the health care overhaul have taken on a level of greater importance” because of all of these other actions, she said.
Wilensky said the increase in federal power, should a reform measure become law, would come in part at the expense of states. “While we do not know its exact dimensions,” she stated, “there will be a significant shift in responsibilities to the federal government,” including increased spending and greater regulation of the private insurance industry, which has largely been the province of state government. Many states fear that if Congress expands Medicaid, ultimately their budgets will be called on to pay a considerable share of these new costs.
In a question-and-answer period that followed, Susan Dentzer, editor-in-chief of Health Affairs and moderator of the briefing, asked Nichols: “You say the biggest single change undertaken in policy has been the pooling of dollars through government to pay for care of the elderly and the poor, and Congress is now talking about adding to that pool of dollars. Is that a huge change or change at the margin?”
Nichols responded: “The government spends about $600 billion a year [through Medicare and Medicaid] taking care of the poor and elderly. A fully phased-in reform plan [that would provide insurance to most Americans] would cost an additional $150 billion a year, or $1.6 trillion over ten years. To think about it as a fraction of the gross [domestic] product, it would be 0.8% of GDP over a decade. This is probably affordable for a rich nation, but the question is, are we willing to increase taxes, change how health insurance is currently subsidized, or reduce the growth of Medicare and Medicaid? We would have to do all of those things to bend the cost curve, and all of these items would certainly amount to a significant change.”
Wilensky added: “The expansion of coverage is not only [to benefit] the poor and elderly. Those are the areas where the government has traditionally intervened in subsidizing health care. The current proposals also provide [and directly subsidize] health insurance to people who live in families with incomes that are 300% or 400% of the federal poverty level.” This is a new role for the Federal government and is what makes reform so expensive. At a later point, she said: “The increased spending and expansion of government, which is needed to expand coverage, is not as worrisome to me as the lack of focus on delivery system reform as well as some of the proposed changes that are unnecessarily disruptive. I would put the public plan in that category.”
Nichols added that he agrees there’s relatively little in the proposals that would force the delivery system reforms we need, but it’s hard to explicitly “bend the curve” when one side in the debate is willing to slander all attempts to rein in excess spending as “rationing.” This rhetorical war accentuates the value and the sad absence of bi-partisan support, the presence of which would make it easier to refute such outlandish claims. According to Nichols, this is precisely why the Republican leadership is loathe to cooperate right now, at least until the Democrats make a major concession, like give up on the public option. Stay tuned.
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