The healthcare reform debate is, all too often, confusing. The subject is multifaceted and is generally not presented in a logical, orderly fashion.
One reason is because, when we approach an issue as large as healthcare reform, we tend to focus on the segments about which we have strong personal feelings. Emotions come into play, often vigorously, making objective discussion difficult or impossible.
Often, the basis for these strongly held beliefs is rooted in misunderstanding of a principle, a definition, or how things work in the real world. Such understanding is fundamental to a logical debate.
In the current healthcare reform discussions, a single word -- "socialism" -- seems to have triggered the most emotional responses. It is used almost pejoratively, as if it is the worst thing that could possibly happen in America.
Socialism is most commonly invoked when the healthcare reform discussion turns to whether or not we should have a government funded public insurance option.
Simple definitions can help here. In capitalism, individuals own the means of production of goods and services. In socialism, the government owns them.
Curiously, socialism is rarely used to describe Medicare, Medicaid, and the various other government sponsored plans that account for roughly half of the healthcare dollars spent in this country and that are bona fide examples of socialist services.
It should be clear to any objective observer that the U.S. is not a purely capitalist country. We have many government run services -- the military, highways, public education, the Postal Service, Social Security, and Medicare to name a few.
Thus, the U.S. exhibits elements of both capitalism and socialism -- a so-called mixed economy.
As has become abundantly clear through the recent financial crisis and subsequent government sponsored rescue of the financial system, government spending shortened what otherwise would have been an extended economic downturn -- when the private sector could not or would not do so.
So, a little government (read "socialism") mixed in with our capitalism can be a good thing.
Students of economics embrace "capitalism" because it has proven unparalleled in raising living standards for vast numbers of people and for fostering innovation.
But, the conventional wisdom about capitalism is rooted in flawed logic that assumes free markets are inherently self-correcting. They are not. A capitalist system does not guarantee a good outcome.
What are the prospects for "market forces" to reshape our current healthcare system in a fashion that decreases cost and increases quality?
For a market to work its magic, transparency about costs (which allows comparison shopping by patients) and information about quality (public reporting of quality measures in a standardized format) need to be widely available so that value can be assessed and delivered.
Clearly, these elements are not present in our current system and are not likely to be present for some time.
Further, our current payment structures give patients little incentive to engage in "comparison shopping" or for providers to be efficient in delivering services. Indeed, providers are rewarded on the basis of quantity rather than quality or value of the services they provide.
The U.S. occupies the 37th place in the World Health Organization's ranking of healthcare quality in industrialized nations. This, coupled with the fact that we pay almost twice as much as other countries for that level of care, suggests that our "capitalistic" healthcare system could use some "socialistic" guidance.
Who will provide guidance toward better outcomes in healthcare?
Historically, the government (in the form of the Centers for Medicare and Medicaid Services) has led the way to cost and quality reform through various demonstration projects and programs involving "Value Based Purchasing." Private insurers have followed the government's lead.
The premise of health insurance is that a risk pool with a large number of people reduces the cost of protecting any one individual from the consequences of a serious health problem. The larger the pool, the broader the risk is spread, and the lower the cost.
A federally provided public insurance option covering all Americans would spread the risk as broadly as possible. In fact, many Medicare services are administered currently by Blue Shield and other private insurance companies.
Combining a single large insurance pool with private administration is a nice mixed economic insurance solution.
Certainly this is not as crazy a scheme as the status quo.
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