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Opinion Column

Solving the Political Paradox of Health Care Reform

After decades of effort, the enactment of universal health insurance coverage is actually in sight. Its absence has cost us-as individuals and as a nation-a fortune, as the recent report from President Barack Obama’s Council of Economic Advisers reminds us. Affordable health care coverage for everyone is critical to long-run fiscal stability and to the economic and health well-being of the American people.

But achieving universal coverage-and the cost containment and improved quality of care that reform will deliver-poses a political paradox and a huge hurdle: If the purpose of health reform is to spend less on health care, how can we possibly spend more to achieve it?

There’s no question that we spend more than we have to on health care, with a third of annual spending, or roughly $700 billion, going toward services not known to improve health. And there’s no question that we have to spend less. Industry leaders confirm Harvard economist’s David Cutler’s proposition that the nation could save $2 trillion over 10 years–if the health care sector managed to rack up the kind of productivity gains achieved by other industries. The federal government would reap $600 billion of those savings.

Health reform legislation, however, cannot simply assume these savings will occur. Congress must include specific policies to ensure that they are realized. These include compelling insurers to compete on efficiency and quality through insurance exchanges and a public plan, and Medicare payment changes that replace fee-for-service, which promotes procedures rather than real service, with a performance approach that rewards services that improve health. These changes, like those in the past, likely would be adopted by private insurers.

Investing in comparative effectiveness research will help identify which services are most beneficial, while health information technology, the infrastructure for payment reform, will hold providers accountable for improving care.

Health care providers and insurers have demonstrated in the past how readily they respond to new incentives. Remember the rapid reduction of hospital lengths-of-stay in the 1980s and the HMO evolution of the 1990s? To get a rapid response, health reform legislation must create both the pressure, through payment reductions, and the tools, through new incentives and infrastructure, to move the system rapidly in a new direction.

Improved efficiency won’t come quickly. It will take some time. And it won’t come at all if the rewards for bad behavior persist. Insurance and payment reforms can only be effective if everybody has health insurance.

With millions uninsured, bad behavior will inevitably trump good.

Health insurers will continue to earn more from “cherry picking” healthy enrollees than from promoting efficient delivery of care. Doctors will continue to see patients too late to prevent them from getting really sick, and as a result will end up ordering expensive treatments. And uninsured, chronically ill patients will continue to experience preventable and costly admissions to hospitals-because their conditions won’t be properly managed.

In short, real reform is impossible as long as our health insurance system is more a sieve than a safety net. That’s why investing in universal coverage “up front” is essential to saving down the road.

In a health care system as expensive as ours, we can’t get everybody covered unless we help people whose incomes currently put health insurance out of reach. That means we need to spend on subsidies at the same time we aggressively pursue the payment reforms that will make our system efficient and affordable in the long run. These subsidies are essential to achieving health reform. We can’t contain costs without universal coverage, and we can’t sustain universal coverage unless we contain costs.

Nor can we restore economic prosperity if fear of illness and its costs make people reluctant to change jobs, build small businesses, or invest in their children’s education or other family needs. This is the fiscal case for universal coverage. And it’s almost as strong as the moral case. The costliness of our health care system is not the fault of the 50 million people who today lack health insurance.

The increased cost of subsidizing universal coverage is no greater than the increase in health care spending that comes from inefficiency almost every single year. We can no longer hold the uninsured hostage to our unwillingness to commit ourselves to changing the health care system for all of us. On fiscal and moral grounds, it’s time to do the right thing.

Judy Feder is professor of public policy, Georgetown University, and senior fellow, Center for American Progress.

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