Dividing up health care by income class
By Uwe E. Reinhardt
FEDERAL BUDGETS can be viewed as memorand ums in which the president and the majority of the Congress tell God about the moral tradeoffs they have made on behalf of the nation. From that perspective, last year's memo was illuminating for health policy.
When President Bush and the new Congress began their terms in January 2001, they faced a projected 10-year federal surplus of $3.1 trillion (excluding a projected Social Security surplus of $2.5 trillion). Even before Sept. 11, by August 2001, that surplus had melted to merely $847 billion, primarily as a result of the huge tax cut enacted in the preceding months. By January 2002, the budget had deteriorated further to a projected 10-year deficit of $742 billion.
Evidently, then, last year's memo to God read in part: ''Thank you, Lord, for gracing us with a 10-year projected surplus of $3.1 trillion. If it's a choice of spending that surplus on (A) providing health insurance to the 40 million or so hard-working Americans now without it or (B) providing tax relief to the nation's overtaxed well-to-do, we'll take the tax cut. Respectfully yours, George W. Bush and the majority of the US Congress.''
As an ex-Christian with only a vague memory of the New Testament, I have no idea how well that memo may sit with the good Lord. As an economist trained in the Theory of Revealed Preference, however, I can infer clearly the preferences of the nation's politically dominant elite. If that elite could not find it in its heart and mind to extend health insurance to uninsured Americans when the nation was awash in budget surpluses, it is unlikely to do so as the government once again faces red ink as far as the eye can see.
After chatting about the problem but leaving it unresolved for more than half a century, the political elite last year gave the clearest signal yet that upwards from 30 million to 40 million uninsured will remain a permanent feature of our health system, deep into the current century.
As in the past, the uninsured will continue to forgo the timely, early medical interventions that well-insured Americans take for granted. In case of serious illness, however, most of them probably will be able to scrounge up critical needed care from kindly doctors and hospitals, albeit in the undignified posture of health-care beggars. In the process, they will severely stress the finances and the morale of these kindly providers of care.
Many other uninsured will be hounded by medical bills and slide into personal bankruptcy. In research by Harvard law professor Elizabeth Warren, medical bills were found to be the second most frequently cited reason for family bankruptcy in the United States, behind loss of employment.
The next tier up in our health system will be HMOs catering to Medicaid beneficiaries. In principle, they should be able to offer patients better coordinated care than the traditional Medicaid program could, but only as long as the federal and state governments pay premiums high enough to cover the cost of well-managed modern health care. It remains to be seen how well the legislators will own up to that contract in the tight budgetary climate ahead.
For Americans receiving insurance as part of the labor contract there will be a wide array of private insurance products, ranging all the way from tightly managed HMOs for low-wage workers to more open-ended Preferred Provider arrangements for middle-income families to the completely open-ended, no-holds-barred health care that moneyed elite has always taken for granted.
Many of the private insurance products, however, are currently being changed to shift larger fractions of health care costs into the patients' own budgets, providing quite explicitly for rationing health care by price and ability to pay.
Sitting on the sideline will be the Medicare program for the elderly, whose spotty benefit package always has explicitly called for the rationing of important components of health care (e.g., prescription drugs) by price and ability to pay. The program may be absorbed one day into the income-tiered private health insurance products, although that prospect remains uncertain.
This income-tiered health system will remain an inexhaustible source of confusion and rancor, primarily as a result of a built in dissonance over the distributive ethic for health care. The American public still expects physicians and hospitals to deliver health care on a strictly egalitarian basis. Woe to the physicians or hospitals thought to dabble in boutique medicine for the well-to-do or to deny the uninsured health care.
On the other hand, the nation's policy-making elite clearly signals through the payment system it put in place that the health-care experience of Americans can be let to vary by income class. For example, when federal and state legislators are willing to offer pediatricians, say, $75 per visit with their own children, but pay pediatricians seeing children of poor inner-city family fees that may not even cover practice costs - or simply leave such children uninsured - do they sincerely expect the delivery of health care to all Americans on an egalitarian basis?
One sympathizes with health professionals who must practice within this sea of dissonance. It makes ours the messiest and, in some ways, the most dishonest health system anywhere in the world.
As last year's federal budget memo to the good Lord makes clear, however, the providers of health care must learn to live with this dissonance as one more chronic condition they confront. It is as good as it will get in our latitudes.
Uwe E. Reinhardt is the James Madison professor of political economy at Princeton University.
(c) 2002 Boston Globe