For the people who will vote in the Democratic primaries next year, the Iraq War will rightly be the central issue. On this topic, it is worth noting that we already have a president who can’t admit that he made a mistake. But, after Iraq, health care will almost certainly stand out as the most important issue.
John Edwards moved the health-care debate forward last week when he outlined a plan that could provide universal coverage at an affordable price. The key points are fairly straightforward. The plan would require that employers either directly provide insurance for their workers or pay a fee to help cover their insurance. The plan would also set up regional insurance markets that would be open to everyone not covered by an employer-based plan. These markets would include a government-run plan modeled on Medicare.
The first part, a requirement that employers either buy insurance for their workers or pay a fee, provides the financing for universal coverage. The money from the fees could be used to supplement Medicaid and the State Child Health Insurance Program (SCHIP) in order to make insurance affordable for low- and moderate-income workers and their families.
The second part, the regional insurance pools, would be the key to controlling costs. These pools would offer insurance to all at a single price, not discriminating based on pre-existing health conditions. This means that everyone could be covered.
The regional insurance pools would also provide the uninsured and employers the option of buying into a government-run, Medicare-type plan. This is important. The current system of competing private insurers is incredibly inefficient. Insurers make money by trying to make sure that they do not cover people who will get sick. They also make money by trying to avoid paying claims. They also have large costs associated with sales and marketing, plus high salaries paid to top executives and dividends paid to shareholders. As a result, the administrative costs of private insurers are more than 16 percent of what they pay out in claims. By contrast, Medicare’s administrative costs are just two percent of what it pays out.
In addition to the savings from a more efficient system, Medicare is also far better able to control costs than private insurers. Because of its size, it can effectively dictate prices to providers on a take-it-or-leave-it basis. (Almost all providers take it.) Cost control is absolutely essential. Current projections imply that average health-care costs for a family of four will exceed $50,000 a year (in 2007 dollars) in two decades. If health-care costs actually follow this projected path, there is no way that most families will be able to afford insurance, and there is no way that the government will be able to provide large enough subsidies to make up the gap. Basically, anyone who is not serious about controlling health-care costs is not serious about providing universal coverage. It’s that simple.
Finally, it is also important to note that the Edwards plan would be a great boon for small business. Currently, small businesses (most of whom provide insurance to their workers), must deal with a set of confusing rules on deductibles, co-pays, and caps to determine which policy is best for their workers. They also run the risk that their insurer can jack up their premiums by double-digit amounts, at any time. Under Edwards’s plan, small businesses could buy into the Medicare-type system and never worry again about any extraordinary price increases or radical changes in coverage. For small-business owners who would rather than spend their time running their business than dealing with the fine print of insurance policies, this would be a huge gift.
The Edwards plan should only be the beginning of the debate over health care in this election cycle. Other candidates will presumably put forward their own proposals. (Representative Dennis Kucinich has already endorsed a universal Medicare plan.)
While no one expects a finely detailed plan, it is reasonable to ask that the candidates produce some meat on this issue, rather than just a vague commitment to universal health-care coverage. The last time a Democratic president was elected based on such a vague commitment, he produced a hopelessly complex plan that proved to be such a political disaster that it knocked health-care reform off the agenda for a dozen years. We can’t afford to see a repeat of this disaster.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues. You can find it at the American Prospect’s web site.