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The health care policy trap: Lessons for Canada from health care reform in the United States

Paul Starr, Remedy and Reaction: The Peculiar American Struggle over Health Care Reform. New Haven and London: Yale University Press, 2011. 324 pages.

Reviewed by Greg Marchildon

Paul Starr is a professor of sociology and public affairs at Princeton University. In 1982, he published The Social Transformation of American Medicine, a masterful two-century history of the American medical profession and the health care system. The book went on to win a Pulitzer Prize. In 1990, along with Robert Kuttner, he founded The American Prospect, a magazine that has attempted to fight the powerful neoconservative tide in the United States by presenting proactive and workable “liberal” policy alternatives. Three years later, Starr left the ivory tower for a short time to become a senior adviser to Bill and Hillary Clinton in their ill-fated health reform effort.

Remedy and Reaction, Starr’s most recent book, is the best analysis so far of the tortuous evolution of health reform in the United States. He focuses almost all his attention on the last two decades, from the failed Clinton reform in the 1990s to the 2008 nomination and election debates that led to Barack Obama’s Affordable Care Act of 2010. From the beginning, Starr has maintained that medically necessary health care is a critical aspect of what he calls “human development and security” and should be a right of citizenship. Pointing out the “peculiarity” of the American case, he argues that the inability to accept health care as a right and achieve universality makes the United States an anomaly among wealthier industrialized countries.

More significantly, he concludes that his country is also internally inconsistent. Strangely enough, Americans long ago accepted that access to education was a right. They also agreed that providing the elderly and disabled with economic security was a universal right. Yet when it comes to basic health care, the debate continues to be polarized because of the number of Americans who continue to see access to medically necessary care as something that should be earned privately. Figuring out why citizens who assume that there is nothing wrong with treating education and old age pension security as a collective right reject the same principle for health care is the central question of this book.

Indeed, until the Clinton effort in the 1990s, there was no real attempt to achieve universality: “Franklin Roosevelt put off proposing national health insurance because he wasn’t willing to take the political risk it entailed; Harry Truman endorsed the principle but never submitted legislation, knowing it was certain to be defeated.” Lyndon Johnson, accepting private employment insurance as the foundation of the American health system, patched that system with two targeted programs. Seeking to fill in two of its largest cracks, Johnson sponsored Medicare and Medicaid in 1965.

A federal social security program, Medicare provided health insurance to Americans aged 65 and older who made a minimal contribution through social security during their working lives. A combined federal-state program ensuring access to the most basic health services, Medicaid was for the very poor – those without jobs or the occasional low-paid job without health benefits. The unintended consequence of these programs was to create a “policy trap” – Starr’s phrase – at both state and federal levels that would make it almost impossible for health care to become a universal right in any individual state, much less the country as a whole.

First of all, both programs reinforced the centrality of employment-based insurance with its opaque funding divided between employers and employees, and related tax expenditure subsidies provided through governments. The end result was a lack of transparency concerning the actual value for money of private health insurance as well as the extent to which public revenues are used to subsidize private health insurance, often for Americans who least need government subsidies.

Medicare in particular created a new set of stakeholders who believed that they earned the right to Medicare coverage (though many only paid a fraction of the actual cost) and should not be obliged to pay for anyone else. After Medicare had become an established part of the policy landscape, middle- and higher-income retirees with Medicare coverage became as fearful as corporate executives and union members with private health benefits about the possibility of having to give up some of their gold-plated coverage to pay for a more basic universal coverage plan.

In this narrative, it would be convenient but misleading to draw a straight line from Johnson to Clinton. Separating the two was the counterrevolution triggered by Ronald Reagan and a growing scepticism about the positive role of government (particularly the federal government) or even the notion of a public (as opposed to private) interest. At the same time, Reagan’s trickle-down philosophy and tax breaks for the wealthy exacerbated the gap between rich and poor, making America a far more unequal and polarized society. As a result, by the late 1980s access to basic health care had become an even more salient problem than it had been in the 1960s, and the public began to demand redress.

This spurred individual states to attempt to introduce universal health care schemes, some on a Canadian-style single-payer model. All failed, including the one state – Vermont – in which there seemed to be a broad consensus that a single-payer system was the best way to go. This failure was due in large part to the lack of support from key interests that personally benefited from the policy status quo even if Americans collectively were paying much more than citizens of countries with universal and comprehensive health coverage for a fragmented system of partial coverage with some of the poorest health outcomes in the OECD.

Despite these failures on the state level, when Bill Clinton was elected President in 1992 momentum toward major health system reform seemed to be growing. As a “new” Democrat, Clinton drew a distinction between his administration and “tax and spend” Democrats of the past including Roosevelt and Johnson. Inheriting a huge public deficit due to the previous decade of Republican tax cuts and high military spending, he resolved to fix the country’s finances, and saw health reform through the lens of reducing public health care expenditures. His health package – Starr makes it clear that it was his plan far more than Hillary Clinton’s – was based on the continuing primacy of private insurance and regulation rather than direct state intervention.

Despite his own role at the time, Starr is dispassionate and direct about the failures of the Clinton effort in the early 1990s. He attributes these failures not to the administration’s inability to explain the complex plan to Americans, nor to the sustained and well-financed opposition of hostile stakeholders such as the health insurance industry with its infamous Harry and Louise ads. Rather, the Clinton effort failed because of a shift by the Republicans. He points at Bill Kristol, a key Republican strategist, and Newt Gingrich, who together were responsible for convincing the majority of Capitol Hill Republicans to embrace a scorched-earth strategy of refusing to negotiate meaningfully on health care legislation.

Although this same strategy also came within a whisker of defeating President Obama’s Affordable Care Act in 2010, the difference this time was that Obama managed to mollify some of the most important interests, in particular Big Pharma and the hospital industry. But his administration could only do so by compromising on cost containment and by watering down what was already “minimally invasive” health reform. What Starr means by this memorable phrase is that the program design, based on individual rather than employer mandates, is phased in over several years to avoid disrupting the health insurers, the hospitals and the pharmaceutical companies. At the same time, it will only increase coverage from 83 to 94 per cent – still well below universal coverage. And access to basic health care is still not a legislated right in the United States, although the basis on which (most) lower-income Americans can purchase health insurance has improved.

Obama paid a very high political price for what seems an anemic victory. More important, the weaknesses of the Affordable Care Act may lead to a loss of support among the very constituencies that originally supported the change. While the act can only help the insurance and medical industries – more access means higher utilization and the means to pay the bills – it may be bad for business if the cost of insurance continues to grow exponentially. It will also be bad for all American taxpayers if they have to pay for the federal government’s inability, and state governments’ lack of incentive, to bend the cost curve. Finally, I am sure the progressives who held their noses and fought in favour of the act will also be disappointed if the reform does not lead to universality, defined in the simplest of terms as 100 per cent coverage.

According to Starr, Clinton’s health policy brains trust was highly influenced by a natural experiment. Before Canada’s introduction of universal medical care insurance in the late 1960s, both countries were on the same trajectory in terms of health care costs. More than two decades later, while American health costs soared above those in every other wealthy industrialized country, Canadian health spending had moved to the centre of the pack of rich countries even while providing universal coverage. The policy lesson from my perspective is that single-payer systems are considerably less expensive than multipayer insurance systems. Why? Because they eliminate all the administrative costs associated with assessing and monitoring risk and the administrative overhead associated with repaying patients and providers.

However, we Canadians should not assume we are above the interest group politics that bedevilled U.S. attempts to achieve universal health insurance. We have been unable to engage major reform on the financing side since we introduced universal hospital and medical (i.e. physician) coverage, in part because we are caught in our own policy trap. The most powerful stakeholders in our system include regional health authorities, hospitals (at least those that remain independent), physicians and nurses. The latter groups benefit from the privileged treatment of hospitals and consistently goad the federal, provincial and territorial governments to devote ever more resources to the existing core “medicare” budgets. They do not goad governments to address the holes in our system.

Although forced out of the hospital and physician business, insurance companies have found a lucrative niche in ensuring dental and prescription drug coverage in particular. Middle- and upper-income Canadians are amply taken care of by premium employment-based insurance coverage. As a consequence, we have among the poorest dental care access in the OECD yet almost no constituency urging politicians to address the problem.

In a microcosm of the American health system as a whole, our federal, provincial and territorial drug plans attempt to fill in the holes left by multipayer employment-based insurance systems. Yet the current fragmented and expensive system – Canada has among the highest-cost prescription drugs in the world – remains in place because it benefits pharmaceutical companies. As for the rest of us, we take no heed of the actual cost, buried in tax expenditures and employer contributions. Until Canadians address these deficiencies in our own system, we have no reason to be smug in looking at health care politics in the United States.

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About the Author

Greg Marchildon
Greg Marchildon is Professor and Canada Research Chair in Public Policy and Economic History at the University of Regina.




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