Targeted Tweaks vs. Complete Reform of the U.S. Healthcare System

For years now, we’ve heard that the American healthcare system is on the verge of crisis or, in fact, is already in crisis. All the recent solutions from HMOs to PPOs to market-based systems seem to create as many problems as they solve. And the ranks of the uninsured continue to rise.

Now General Motors appears ready to shift a significant portion of its healthcare burden onto its employees. This move could lead to a strike. And a strike at GM might just be the impetus to get Washington to address the problem, according to Ronald Brownstein in his column today.

Assessing the current proposals floating around Washington, Brownstein points out a few ideas he thinks could work to lower costs:

Last week, the odd couple of Senate Majority Leader Bill Frist (R-Tenn.) and Sen. Hillary Rodham Clinton (D-N.Y.) introduced legislation that they estimated could cut total medical spending by as much as 10% by providing incentives for hospitals and other providers to computerize medical records that now pass through too many hands and generate too many errors.

Next, Washington could shoulder more of the cost for the handful of catastrophic cases that inflate premiums for everyone else. As Rick Wagoner, the GM chairman and chief executive, noted last winter, 1% of patients generate 30% of the spending on healthcare.

The best domestic policy idea that Sen. John F. Kerry (D-Mass.) produced in his 2004 presidential campaign directly addressed that problem. Kerry proposed that Washington assume 75% of the cost for any patient whose annual health expense reaches $50,000. One leading analyst estimated that change alone could reduce health insurance premiums by 10%…

What else? Allowing Medicare to bargain directly for prescription drugs would establish benchmarks that could lower the massive pharmaceutical costs now inflating healthcare spending. (GM alone spends about $1.5 billion annually on prescriptions.) More creative efforts to encourage fitness would reduce the incidence of expensive illnesses, such as diabetes, linked to a widening (sorry) obesity problem.

Finally, covering more of the nearly 45 million uninsured Americans would shrink the huge bill for uncompensated care (recently estimated at $43 billion annually) that the insured pay through higher premiums.

Each proposal has its merits and each deserves serious debate. But is fiddling with the current system the right answer? No matter how often you change the hubcaps on a square wheel, the thing still ain’t gonna roll. Reducing healthcare costs is an admirable goal, but would reforming the entire system be more successful in the long term?

GM is struggling to pay for its employee’s healthcare. Wal-Mart is blamed for avoiding paying healthcare altogether. And countless small businesses can offer poor or no healthcare because of costs. Perhaps it is time to remove employers from their central role in funding the U.S. healthcare system.

Businesses pass those costs along to consumers through increased product prices and take them right out of employee wages through decreased salaries. And workers whose healthcare is tied to a specific job lack the freedom to stay mobile in an increasingly fluid economy. Leaving aside that it’s fundamentally unfair that your quality of healthcare can vary drastically based on where you find employment, the current system is weighing down the economy through countless hidden costs and decreased worker mobility.

I’m not suggesting we move to a government-run system. In fact, I would hope we avoid such a solution as I am not a fan of solving problems through huge government bureaucracies. But we should consider fundamentally altering our system. The employer-supported model is simply not working and I’m unconvinced that any amount of tweaking will significantly improve it.