Arguments mount for a national healthcare system

Some reformers say a government-run system has become an 'economic necessity.'

By , columnist

As advocates of healthcare reform see it, change in the United States healthcare system has become an economic necessity – not just socially desirable or politically popular.

"It has to happen," says Regina Herzlinger, an expert at the Harvard Business School in Cambridge, Mass. That's because the business community pays for 55 percent of the nation's total health costs, the government just 45 percent. And many businesses want to get rid of their health costs.

"Bringing costs under control is the only way to … allow our companies to effectively compete around the world," states Sen. John McCain, the leading Republican presidential candidate, on his website.

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Those costs have exploded. Healthcare expenditures in the US rose 6.7 percent in 2006 to $2.1 trillion, or 16.1 percent of the nation's total output of goods and services, government economists reported last month. (Last week, the government predicted the nation's healthcare expenditures will reach $4 trillion by 2017.) Most other rich industrial nations, with universal care, spend only 11 to 12 percent of their gross domestic product on healthcare. Canada spends even less, a bit more than 9 percent of GDP, on a single-payer government insurance system for all its people.

US health costs have doubled in the past decade. Yet nearly 48 million Americans have no health insurance. By some health measures, the expensive US health system produces poorer "outcomes" in health than do the cheaper systems in other nations.

In the current campaign season, Senator McCain calls for dozens of reforms to bring down costs and make expenditures more effective in health results. And he states, "we can and must provide access to healthcare for all our citizens." His proposals, though, don't fully embrace the uninsured.

Shannon Brownlee, a senior fellow at the centrist New America Foundation, charges that McCain is "so wedded to the free market that he fails to recognize that there has been market failure" in the healthcare industry.

Democratic presidential candidates Sens. Hillary Rodham Clinton and Barack Obama are more ambitious in their proposed reforms than McCain. They both promise, if elected, to provide guaranteed, affordable care for all Americans.

Both of their proposals have taken key elements from a plan of Jacob Hacker, a political scientist at Yale University in New Haven, Conn. Professor Hacker's template, outlined in an Economic Policy Institute briefing paper, notes: "America's $2.2 trillion-a-year medical complex is enormously wasteful, ill-targeted, inefficient, and unfair. The best medical care is extremely good, but the Rube Goldberg system through which that care is financed is extremely bad – and falling apart." He calls the runaway costs a "grave threat" to the security of family finances and to corporate America's bottom line.

The Hacker plan combines the current employer-based system with a new federally administered insurance pool similar to Medicare, the popular program for older Americans. This new pool would be funded by premiums and copays charged to individuals and employers who sign up, as well as government subsidies. Individuals would automatically be enrolled, either at work or when they seek care. Premiums would be capped, with subsidies for lower-income families.

Employers would have to offer health coverage at least as good as this plan, or, alternatively, pay 6 percent of payroll into the national pool to cover their employees.

The tax deductions currently given employers on healthcare costs would be eliminated in favor of a new standard income-tax deduction for individuals with health insurance.

Hacker was delighted last month when an analysis of his plan by the Lewis Group, a nonpartisan consulting group, held that his proposal would cover 99.6 percent of all Americans without raising total national health spending. Indeed, it would save more than $1 trillion over 10 years, the report held.

None of the leading presidential candidates call for a single-payer system, as in Canada. That may be in part political expediency, considering what is possible. Republicans sometimes call Democrat health plans "socialized medicine."

But a survey by the Harvard School of Public Health finds that the public is not so scared of that term anymore. Asked if socialized medicine would be better than the present system, 45 percent said "better." Another 4 percent said "about the same" and 12 percent "who knows." Only 39 percent ticked off "worse."

Hacker doubts if Americans would go "in one fell swoop" for a single-payer system where individuals choose their own doctors, but government pays the bill.

One reason could be what Sara Robinson, a North Vancouver analyst, calls the many "myths" about Canada's system. One myth is that it is less efficient. Rather, she argues, shareholder profit, inflated CEO salaries, and top-heavy administration in the US system siphon off 20 to 24 percent of healthcare spending.

Canada, says Ms. Brownlee, author of a new book, "Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer," spends about 16 percent of every dollar on administrative costs.

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