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Healthy Engagement

by Jennifer E. Walsh and Stuart C. Strother

Leading up to President Barack Obama’s historic signing of the bill last spring, American health care reform, always a hot topic in political circles, launched a wave of high-energy debates that swept across not only party lines, but also caught the attention of passionate citizens from all walks of life.

From seasoned politicians to college students, from soccer moms to soccer kids, from city slickers to townies, fervent discussions dominated the country’s conversations. At APU, faculty from all disciplines engaged students in meaningful dialogue inside and outside the classroom. The Department of Social Work, for example, hosted a seminar entitled “Health Care Reform: Where Are We Now?” And in this edition of APU Life, two professors offer their analyses of the issue and process: Jennifer E. Walsh, Ph.D., from a political science perspective, and Stuart C. Strother, Ph.D., from a business perspective. The following articles represent the informed academic opinions of these respected scholars and seek to celebrate America’s participation in the political process, promoting interaction and involvement. Every voice matters. What do you think about this issue and other critical concerns facing the United States?

Why Debating Health Care Reform Is Good for Our Health

by Jennifer E. Walsh, Ph.D. When President Obama took office last year, he made health care reform his highest domestic priority. However, numerous obstacles made enactment difficult: substantial disagreements erupted in the House and Senate over coverage and control, record-breaking budget deficits raised serious concerns about cost, and steadfast public opposition magnified the potential political consequences of supporting the law. Although these concerns almost derailed its passage, Obama persuaded a narrow majority of Democratic lawmakers to enact the greatest expansion of social welfare policy since Lyndon Johnson signed Medicare into law more than four decades ago. The partisan wrangling that accompanied this measure made many wary of the process. However, this type of political strife does not signal a broken system. Instead, the intense deliberation and resulting compromise indicate that our constitutional system still works well. Given the issue’s complexity, it was expected that many factions such as big business, the insurance industry, medical providers, consumer groups, and unions would speak up to preserve and advance their own interests. Indeed, our constitutional framers knew this would occur. This is why they established a system wherein public views would be “passed through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country, and whose patriotism and love of justice will be least likely to sacrifice it to temporary or partial considerations.”1 Our framers also knew that government reflects human nature. As historians and lay theologians, they recognized that in our sinful state, tyranny and corruption would prevail unless effectively constrained. After all, James Madison observed, “If men were angels, no government would be necessary [and] if angels were to govern men, neither external nor internal controls on government” would be required.2 Knowing that our leaders would be far from angelic, the framers created a system wherein the ambition of one institution would rival the ambition of the other. This is exactly what occurred when congressional members debated at length with one another and the president over the scope and content of the health care law. Despite the evidence that our system remains strong, there are still lessons we can learn from this latest political battle. First, the congressional arm-twisting and deal-making used to secure a majority vote on the health care bill reminds us that our elected leaders sometimes fail to act as enlightened statesmen who seek only the public good. Such a spectacle also reminds us that for some leaders, advancing the president’s agenda to secure a partisan victory outweighs the importance of preserving congressional independence. To prevent this from becoming commonplace, voters must hold their leaders accountable for their decisions. Indeed, the debate over this latest bill has prompted many to become politically active for the first time. This increased participation will undoubtedly spill over into heightened interest in this November’s midterm elections and increased public lobbying on other important policy issues. Second, the extent of this new law also confirms that if left unchecked, federal power will continue to expand. Although the framers tried to prevent this from occurring by limiting the scope of federal authority and reserving the remaining power to the states and to the people, the successful expansion of federal power from the New Deal to the current age makes our federalist system more tenuous. To guard against obsolescence, state leaders must resist the siren song of federal funds and defend their right to exist as distinct political entities. Already this may be occurring. Within hours of its passage, 12 states initiated lawsuits challenging the constitutionality of the new health care law, and at least three dozen states announced they would consider legislative or constitutional action to block enforcement of the new measure. Finally, the year-long debate over health care reform affirms that robust deliberation by “we the people” remains a critical part of our democratic system. Careful consideration about what is necessary for the public good and how to best preserve our liberty is essential if we are to remain a free society. This is especially important whenever the government offers new benefits in exchange for our compliance. French philosopher Alexis de Tocqueville noted that the comforts that come from the government are among the most pernicious, for they foster a people who are childlike in their dependence on government leaders. Gradually, he warns, the government “makes the exercise of free choice less useful and rarer, restricts the activity of free will within a narrower compass, and little by little, robs each citizen of the proper use of his faculties.”3 In the end, “each nation is no more than a flock of timid and hardworking animals with the government as its shepherd.”4 For those who follow only the Good Shepherd, perhaps the most important lesson from the health care debate is this: we need to remain vigilant if we are to remain free.

Jennifer E. Walsh, Ph.D., is a professor in the Department of Political Science. jwalsh@apu.edu

1Publius, Federalist 10.

2Publius, Federalist 51.

3Alexis de Tocqueville, Democracy in America, edited by J.P. Mayer and translated by George Lawrence (Garden City, NY: Doubleday and Company, Anchor Books, 1969), p. 692.

4Ibid.

Re-forming the Business of Health Care

by Stuart C. Strother, Ph.D. The health care reform debate has little to do with medicines and medical procedures and a lot more to do with restructuring the business of health care. Why reform health care in the first place? People are living longer—life expectancy in the U.S. increased eight years (from 70 to 78) over the past four decades. Health care stands as one of the most innovative growth industries in the U.S. The 2.5 million health care jobs created over the past decade make up a full third of all new jobs in the U.S. Compared to other sectors of the economy, health care is doing quite well, so why the urgency to change an already robust industry? Reformers point out two main problems with the current health care scheme: lack of coverage and high costs. Regarding coverage, recent Census data actually shows only 15 percent of Americans are uninsured (see Figure 1 below), a modest one percent increase over the past decade. Who are the uninsured? Some are truly uninsured. But this group also includes millions of non-citizens ineligible for taxpayer-funded health care, millions of healthy citizens who would be enrolled in government health care if they go to a hospital, people in-between jobs, and a few healthy rich folks who choose not to buy insurance. The data reveals a mismatch between crisis rhetoric and reality.
Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements. For information on confidentiality protection, sampling error, nonsampling error, and definitions, see www.census.gov/apsd/techdoc/cps/cpsmar09.pdf/. Footnotes can be found at www.census.gov/hhes/www/hlthins/histori/footnotes.html/.
*Year-over-year percentages exceed 100 percent, reflecting mid-year changes in health insurance status.
The claim about rising costs, however, certainly holds true. Figure 2 (below) shows per capita spending on health care jumped from $2,752 in 1990 to $7,681 in 2008, nearly a 200 percent increase. To address these problems, reformers are implementing greater government intervention to provide universal coverage for all Americans. This admirable goal, however, will have costly implications for consumers, businesses, physicians, and insurance companies.
Source: Organization for Economic Co-operation and Development. OECD Health Data 2006, from the OECD Internet subscription database updated October 10, 2006. Copyright OECD 2006, www.oecd.org/health/ healthdata/. Found on Kaiser website: www.kff.org/insurance/snapshot/chcm010307oth.cfm/.
Figure 1 illustrates that 67 percent of Americans already procure health insurance from private companies, most directly from employers. Government covers 29 percent in inflexible, inefficient programs with high overhead, presenting an unfair burden on taxpayers. With universal coverage, the uninsured join those government plans. Who will pay for this? Either today’s taxpayers will pay, government health care benefits will be cut, or, more likely, we will lump the costs into our ballooning national debt for the next generation to worry about. I believe eliminating the market distortions of the third-party-payer system demonstrates a more sensible approach to make health care more affordable and accessible to individuals. Consumers rarely know the actual cost of medicines and medical procedures because the insurer or the government pays the bill. Patients only know deductibles and whether the treatment is covered by insurance. This lack of pricing information causes over-consumption of health care, just as a child pays little attention to prices on a restaurant menu when parents pay. If consumers knew true prices of medical procedures, we would shop around and give our business to doctors, hospitals, and pharmacies that give us more bang for our buck. Empirical data demonstrates in case after case that as competition enters a market, price-sensitive consumers force producers to lower prices and improve product quality. We have no reason to believe the market for health products would be any different. Current health care reform proposals do little to increase competition, so we shouldn’t expect any cost savings. For private businesses, health care reform will likely be disastrous. The “play-or-pay” scheme, requiring businesses to provide insurance or pay a fine, is untenable. Employers who currently don’t offer insurance to their employees are likely operating on such thin profit margins that providing insurance would bankrupt them. Rational expectations theory predicts companies will respond by not hiring or by splitting normal 40-hour jobs into two 20-hour, part-time jobs to avoid paying benefits altogether. How will reform affect health care providers? The U.S. has the best-trained physicians in the world. Our incentive scheme, however, is broken. Doctors receive payment for procedures performed, rather than the success of those procedures, like paying a salesperson on the number of cold calls rather than actual sales. Instead of bureaucrats taking greater control over health care, we should restructure the incentive system to reward health outcomes, not health procedures. Insurance companies were especially villainized in the current debate, mostly for denying coverage, especially to those with pre-existing conditions. Reformers have forgotten the basic design of insurance as a product. A group of people makes regular small premium payments into a pool. When one member suffers a costly emergency, the collected monies pay that member’s expenses. The sum of the premium payments equals the expected emergency costs. Insurance companies are merely administrators of this voluntary arrangement. When required to admit members with known pre-existing conditions, the company will only stay in business by charging existing members more. Expect costs to further rise. Empirical data proves, time and time again, the failure of government to manage an economy—including health care. Government has little ability to produce anything, only the ability to transfer assets from one group to another. Health care reform is expected to raise costs for consumers and businesses, not to actually improve quality of care. Instead of more government intervention in health care, I champion a return to truly free markets and support increased freedoms for consumers, business, and health care providers.

Stuart C. Strother, Ph.D., is a professor of economics and business in the School of Business and Management. sstrother@apu.edu

"If men were angels, no government would be necessary [and] if angels were to govern men, neither external nor internal controls on government [would be necessary]." –James Madison

Originally published in the Summer '10 issue of APU Life. Download the full issue (PDF).