Simple Answers, Not Easy Solutions

Resident Fellow
Thomas P. Miller
Thomas P. Miller reviews Healthcare, Guaranteed: A Simple, Secure Solution for America, by Ezekiel J. Emanuel.

When it comes to crafting master plans for comprehensive reform of the U.S. health care system, even the most thoughtful observers of health policy and politics seem prone to two competing cognitive disorders: they begin to think they know more than others, and then they forget what they have learned when it conflicts with the imperative for a simple, but sweeping, manifesto. In this latest plan to save America from its health care crisis, bioethicist and breast oncologist Ezekiel Emanuel provides a number of nuanced findings and provocative thoughts, but the remaining whole adds up to less than the sum of its parts.

Emanuel's Guaranteed Healthcare Access Plan (GHAP) promises universal private health insurance coverage--guaranteed by the federal government, insulated from politics, and strongly incentivized to deliver coordinated care. Although the plan recycles many of the 1990s' presumptions of managed competition, it adds some newer bells and whistles. This time around, Emanuel bets heavily on a National Health Board, with twelve regional subsidiaries, to provide the Goldilocks dosage of health care administration and regulation: not too much and not too little, but just right. His assurances that such a board, with sweeping responsibilities, could be insulated from politics as usual at a different shopping mall ring hollow. Conjuring up allusions to the Federal Reserve Board model of independence overlooks the latter's more limited charter (at least until this year's steroid injection of first-responder duties), as well as its steep learning curve (see the Great Depression during the Fed's adolescence).

The underlying theory of health cost containment in Healthcare Guaranteed appears to be that we first need to load everyone into the same leaky boat of basic coverage and then hope that someone later figures out how to row it back to the shoreline of fiscal balance with acceptable health care quality.

Emanuel fills some of the gaps in GHAP with regional Centers for Patient Safety and Dispute Resolution, an Institute for Technology and Outcomes Assessment, and regional Insurance Exchanges. His heavy reliance on comparative effectiveness research is more faith-based than derived from its current track record. It neglects the more important questions of comparative efficiency and effectiveness in practice. It also remains too centered on insurers and health plans in overaggregated bundles, while overlooking the wider range of input factors beyond the health care system per se that strongly influence and shape one's life cycle of health.

Emanuel hopes to hit the trifecta of health care financing that is equitable, sustainable, and sensitive to costs by relying on a separate value-added tax (VAT) as the sole, dedicated source of funding for GHAP's universal coverage promise to the nonelderly (and, eventually, the elderly, as Medicare is phased out). However, the less-visible VAT would be added on to the current income tax system, instead of fully replacing it. "Dedicated" tax revenue that flows into the federal treasury is fungible and easily redirected toward other political pursuits (see Social Security Trust Fund). And lack of more revenue does not necessarily limit promises to spend more money.

The underlying theory of health cost containment in Healthcare Guaranteed appears to be that we first need to load everyone into the same leaky boat of basic coverage and then hope that someone later figures out how to row it back to the shoreline of fiscal balance with acceptable health care quality. Pointing to a needed solution isn't the same as ensuring its successful execution. The future roles of insurers and employer plan sponsors--as subcontractors in a GHAP-designed world--remain particularly confusing and limited.

Unfortunately, a number of too-facile budget calculations, economic assumptions, and factoid citations in this book don't stand up to closer scrutiny. In trying to make the macro budget numbers of his GHAP plan add up, Emanuel overcounts the total budget dollars currently spent by Medicaid on similar coverage for the nonelderly (he fails to remove subsidies for dual eligibles and for disabled Medicaid recipients). He also doesn't adjust the comparable premiums for current Federal Employees Health Benefits coverage to account for the cost sharing federal workers would not face under standard GHAP benefits. Emanuel says that the average cost of health benefits for employers is 8.5 percent of payroll; it's actually more than 10 percent. He also assumes that employee wages will increase by the same amount that their former job-based insurance premiums decrease, without adding the offsetting cost of higher federal VAT taxes to that single-entry accounting ledger.

Emanuel's arguments suffer from the burden of trying to fight a health policy war on two or more fronts. Although he disdains incremental policy approaches almost as much as he denounces fee-for-service medicine and employer-based insurance, his larger battle is against the competing advocates of a single-payer plan and an individual mandate for universal coverage, respectively. He brushes aside individual mandates as not challenging the status quo for health care delivery, encouraging many employers to drop their current coverage, relying on wide-ranging income-related subsidies, increasing costs so much that they force government officials either to scrimp on care or to impose higher taxes, and eventually eroding overall coverage. Single-payer plans fare even worse under Emanuel's often withering but extremely effective criticism. Their inherent defects include ideological opposition to necessary administrative costs--complemented by reliance on deceptive cost savings, politicized decision making that would operate "at a snail's pace," fealty to the same failing fee-for-service delivery system, and inevitable gaming by the wealthy of their purported limits on access to care.

Emanuel's critique of single-payer and individual-mandate health care is so good that one wonders how he manages to compartmentalize, if not forget, his basic insights when he looks at alternative reform approaches. He pivots almost 180 degrees from his previous view of private insurers and administrative costs, seeing the former as providing the very organizations that could be capable of building the infrastructure and information systems needed to coordinate care. He concludes that extensive monitoring of his envisioned health care system would be impossible within the single-payer structure of 3-4 percent administrative cost limits. Indeed, he predicts that a single-payer plan would require five times the amount of administrative expenses currently needed to support Medicare! While donning his political scientist hat, Emanuel cites Machiavelli's warning that the resistance of prospective losers to reform will be stronger than the support of prospective winners. He appears to miss the modern lessons of public-choice economics that point to the more telling disparity between concentrated political benefits (vigorously defended by well-organized beneficiaries) and diffuse costs (ignored by much larger numbers of taxpayers). He also fails to consider the deeper implications behind his frustrated observations that the elderly do not demand Medicare reform, often oppose change, "do not appreciate the reality that fragmentation and fee-for-service undermine quality," and often don't think about the fact that this system may bankrupt the government in the future. Nevertheless, there is something faintly Reaganesque in this well-written and sometimes insightful book. As the original Great Communicator once said when he was governor of California, "There are simple answers; they just are not easy ones."

Thomas P. Miller is a resident fellow at AEI.

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