Obamacare is better than it looks.

Gossip, speculation, and scuttlebutt about politics.
June 19 2007 6:40 PM

Obamacare: Better Than It Looks

The health care primary, Part 1.

(Continued from Page 1)

How universal? Not entirely. Only children would be required to have health-care coverage. Obama doesn't specify how this would be achieved. I tend to be wary of health reform schemes that "require" people to purchase health insurance. What exactly are you going to do to me if I don't?

How socialistic?The best (and least-discussed) part of Obamacare is a public health-insurance program with comprehensive benefits (similar to those available to members of Congress) and strict limits on premiums, co-payments and deductibles. No one could be refused coverage because of pre-existing conditions, and subsidies would be offered to lower-income participants. (If they were very low-income, they'd receive Medicaid instead, unless they were over 65, in which case they'd receive Medicare.) The bad news about Obamacare's (shhh!) socialized-medicine component is that it would be offered only to the self-employed, to employees of small businesses, and to people whose employers didn't give them health insurance. But this last group is growing larger every day, and the mere existence of a public health-insurance program would likely cause businesses to drop out of their private health-insurance plans in droves. That would be fine by me, provided the public health-insurance plan were a decent one. Eventually, all the other parts of Obama's plan might well wither away, leaving only this one. Some people would be alarmed by that thought. I find it the most attractive (not to mention elegant) possible outcome. The least attractive outcome would be for the insurers participating in Obama's National Health Insurance Exchange to persuade the government to make its new public health-insurance program (a potential competitor) so chintzy that no one would want to participate in it.

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How disciplined: The best way to impose discipline on the medical system would be to eliminate fee-for-service payments to doctors and replace them with straight-up salaries. No politician within a mile of the political mainstream is willing to suggest this. But in his new book, A Second Opinion, Arnold Relman, former editor of the New England Journal of Medicine, makes a powerful case that this must be done. Relman points out that the people responding to market forces in the current commercialized medical environment aren't patients, who usually lack the knowledge to make informed choices, but doctors, who maximize their income by maximizing the number of procedures they perform. Relman cites as an example a company (unnamed, alas) that sells or leases an expensive gizmo that doctors use to treat back pain. The doctor pays for the gizmo by paying a fee to the manufacturer each time he uses it on a patient; he later recoups the fee (and a sizable profit) through the patient's medical insurance. The company will even provide an assistant to perform the procedure, freeing up the doctor to see other patients. The gizmo is approved by the Food and Drug Administration, but it "has not yet been systematically compared with the many other techniques for the treatment of back pain." The main attraction, then, for a doctor to install the gizmo in his office is financial rather than clinical. According to Relman, this is made plain in the gizmo's marketing brochures, which "emphasize the financial benefits to physicians at least as much as the alleged (but still unproven) benefits to patients."

In her forthcoming book, Overtreated: Why Too Much Medicine Is Making Us Sicker and Poorer, journalist Shannon Brownlee argues that the maximization of medical procedures takes a toll not only on economic efficiency (Relman's ripped-off patient with back pain and his ripped-off insurer) but also on patients' health. Hospitalizations and medical procedures, after all, entail some measure of physical risk. The potential threat to health is an even more urgent reason to compensate doctors by salary rather than by payments for individual medical procedures.

Obama's plan wouldn't make doctors salarymen. It would, however, let Medicare negotiate drug prices, and it would accelerate the move toward electronic medical records. (See "Cost.") These are two worthwhile measures that would save some money and improve patient care.

Impact on employers: Implementing Obamacare would cost employers an unspecified amount of money. That's because the government would require those employers it judges too stingy in providing health care for workers to contribute a percentage of payroll to the new public health insurance plan (see "How socialistic?"). On the other hand, Obama would limit (to an unspecified amount) the liability of small businesses for catastrophic care expenses. Since the most serious illnesses account for about half of all health-care costs, then either this provision would cost the government a lot of money, or the "unspecified amount" would be set so high that it wouldn't do employers much good. If the public insurance part of Obama's plan caused businesses to give up providing health care to their employees, then Obamacare would be great for employers.

Longevity: By "longevity" I mean not how long a given patient lives, but rather how long the entity that pays for the patient's care will continue to do so. In Best Care Anywhere: Why VA Health Care Is Better Than Yours, journalist Phillip Longman demonstrates that one reason the VA is able to provide cheaper and better patient care than its private-sector counterparts is that it is invested not in a particular medical procedure but rather in the patient himself. Gains from preventive care improve the VA's own bottom line because they keep in good health patients who will remain in the VA system for the rest of their lives. (Full disclosure: I wrote the introduction to Longman's book, which expands on a Washington Monthly article by Longman that I praised in this space.)

The public-insurance part of Obama's plan promotes longevity because it is "portable," i.e., you can remain in the plan if you change jobs.

Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.

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