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David Brodwin's blog

Try Something New on Health Care

President Donald Trump is caught between a rock and a hard place in his drive to "repeal and replace" Obamacare.

The French health care system is fascinating to consider. Any time someone says "look at the French solution," someone else yells "Socialism!" But the French system actually is, in some respects, more market-centric than our own, and it delivers good results for a lot less money. In the French system, doctors work mostly as private practitioners as they do in the U.S. (except at places like the Veterans Administration and HMOs like Kaiser). Patients are free to choose any doctor they want, which is not so much true in the U.S. anymore, as many plans restrict patients to in-network doctors. And market incentives lead to a greater number of talented young people (per capita) becoming doctors. In the U.S. the capacity of medical schools is artificially restricted; in essence it's a cartel. In all these ways, the French system is more market-oriented than ours: It trains more doctors, and the greater supply of doctors helps keep costs down. Consumers have abundant choice at low prices. Yet in other ways the French system is more regulated. The French government negotiates drug prices at a national level. The government sets the reimbursement rate for most procedures, much as it does in our Medicare system. And the first tier of health insurance is provided by the government rather than private sector, although many people purchase supplemental coverage in the private sector. I'm not arguing that the French system is necessarily best. But it does show us that there are many ways to configure a health care system if we allow ourselves to think creatively and don't commit ourselves to protecting all the special interests that benefit from things as they are. Perhaps the impasse over "repeal and replace" will leave us ready to consider other options. It's the only way to get more and pay less.

The rock is Congress and the populist part of the Republican base. Representatives and senators have heard from thousands of angry constituents. It turns out that voters actually like a lot of what Obamacare offers, and they don't want to lose it. Voters don't want to be excluded from coverage for having pre-existing conditions; they want to keep their kids on the family policy until they are 26; and they want protections from policies that are booby-trapped with limitations, exclusions, caps and hidden fees. Many Republican legislators fear being punished at the polls if they support a full repeal – just as Democratic representatives were thrashed in 2010 for supporting Obama's unpopular climate change agenda.

The hard place is the top 1 percent part of the Republican base, and the organizations that represent them. These include the Freedom Caucus of conservative Republicans in the House and Americans for Prosperity, the primary political advocacy group of the Koch Brothers. They want to see Obamacare ripped out of American soil entirely, root and branch, and the earth plowed with salt so it can never grow back. Their motivation is mainly to roll back the taxes that were imposed to pay for Obamacare, particularly the 3.8 percent surcharge on investment income, which affects mostly the wealthy.

This situation requires Nobel-prize worthy negotiating skill. It might not be harder than getting the Israelis and Palestinians to agree about Jerusalem, but it's close. Trump's proposed solution asks both flanks of his party to accept partial victory and tolerate considerable disappointment. So far it's not working; Trump's health care solution is losing support from both groups. In particular, congressmen worried about revenge of the voters hesitate to take a politically unpopular vote in the House if they think that the libertarian-corporatist wing of the party will kill the bill anyways.

Perhaps it's time to try something new.

Obamacare is hard to improve because our underlying health care system is just so expensive. Our health care costs about 18 percent of gross domestic product. This is nearly twice the cost of care in many other developed countries, where people live roughly as long and as well as we do, and infant mortality is roughly as low. Obamacare did a lot to expand and extend coverage but very little to reduce costs because Obama's team lacked enough political power to impose structural change on the system.

As a result, there just is no good way to "repeal and replace" or "repair" or "fix" Obamacare. Unless we make significant changes in the structure of the system, we can't keep the good parts of Obamacare without keeping the taxes and mandates that pay for it. And we can't reduce tax costs and mandates without making health care a lot more expensive and less available. That's the bind in which Trump has found himself.

But there are alternatives. They go under a variety of names: single-payer, Medicare for all, national health insurance and more. Some of these involve more regulation and some involve more use of market forces. And some use both regulation and market forces in creative ways.

The French health care system is fascinating to consider. Any time someone says "look at the French solution," someone else yells "Socialism!" But the French system actually is, in some respects, more market-centric than our own, and it delivers good results for a lot less money.

In the French system, doctors work mostly as private practitioners as they do in the U.S. (except at places like the Veterans Administration and HMOs like Kaiser). Patients are free to choose any doctor they want, which is not so much true in the U.S. anymore, as many plans restrict patients to in-network doctors. And market incentives lead to a greater number of talented young people (per capita) becoming doctors. In the U.S. the capacity of medical schools is artificially restricted; in essence it's a cartel. In all these ways, the French system is more market-oriented than ours: It trains more doctors, and the greater supply of doctors helps keep costs down. Consumers have abundant choice at low prices.

Yet in other ways the French system is more regulated. The French government negotiates drug prices at a national level. The government sets the reimbursement rate for most procedures, much as it does in our Medicare system. And the first tier of health insurance is provided by the government rather than private sector, although many people purchase supplemental coverage in the private sector.

I'm not arguing that the French system is necessarily best. But it does show us that there are many ways to configure a health care system if we allow ourselves to think creatively and don't commit ourselves to protecting all the special interests that benefit from things as they are. Perhaps the impasse over "repeal and replace" will leave us ready to consider other options. It's the only way to get more and pay less.

David Brodwin is a co-founder and board member of American Sustainable Business Council. This blog is adapted from a column recently published in U.S. News & World Report March 16, 2017.

The Midnight Regulations Massacre

Recently, Congress took action to unwind a broad range of regulations enacted in the waning days the Obama administration. The so-called Midnight Rules Relief Act lets Congress stop, with a single vote, all the executive branch actions that were enacted in the last 60 days of an outgoing administration. Under prior law, Congress would have to consider each regulation individually on its merits.

Many cheered, thinking that gutting regulations will inevitably boost corporate profits and create jobs (as if profit-boosting and job-creating go hand-in-hand, but that's another story). Stock prices have soared, fueled by expectations that the coming wave of deregulation will bring higher profits.

But be careful what you wish for.

In many ways regulations actually protect and create jobs, helping the economy grow. And blind deregulation kills jobs and stunts growth. Here's are seven ways that regulations help:

  1. Sometimes regulations create jobs directly. In the electric power industry, regulations promote the use of wind and solar over coal. Dollar for dollar, wind and solar employ more than twice as many workers as coal and oil.
  2. Sometimes regulations protect one company or industry from killing the others. Around Lake Erie, unregulated agricultural runoff creates toxic algae blooms that got bad enough to make Toledo's water undrinkable. Restaurants had to close. Homes and offices had to rely on bottled water. Then, in Flint, Michigan, lead-tainted water inflicted irreversible brain damage on thousands of children.
  3. Nationwide, failure to regulate for-profit colleges has put millions of Americans deep into debt for job training that turned out to be useless. These people now lack skills they need to participate in the economy, and they can't afford to fix the problem. Their lost earnings will impair the economy for decades.
  4. Sometimes an industry needs regulation to prevent it from destroying itself in a race-to-the-bottom. Fishing is one of these. Without catch limits, most of our fishing areas would be barren by now, and our fisherman would be unemployed.
  5. Sometimes regulations sound the wake-up call to an industry that needs to meet a rising challenge from foreign competition. The U.S. auto industry grew so complacent in the 1960s about reliability, fuel efficiency and safety standards that Japanese manufacturers could take tremendous market share. Government regulations involving seat belts, air bags, fuel standards, emissions and so-called lemons prodded the industry to get better, faster.
  6. Sometimes we need regulations to prevent industries from dumping their costs on the taxpayer, hurting the economy in other ways. For example, when companies misclassify employees as contractors they're forcing the taxpayers to absorb extra costs for health insurance, unemployment insurance and more. These costs don't just vanish; they cut into consumer spending power. And since our economy depends on consumer spending for most its growth, when consumers can't spend, economic growth slows, profits fall and jobs disappear.
  7. Finally, some regulations are needed to prevent destructive practices that endanger the economy as a whole. The mortgage banking crisis that clobbered the economy in 2008-09 grew directly out of the repeal of Glass-Steagall – and our failure to develop a sound way to regulate derivatives exposure.|

Of course, not all regulations are good, or well-crafted or sensibly enforced. There are bad ones, and we need to fix these. But to repeal all regulations without considering each on its merits will do catastrophic damage to the economy.

David Brodwin is a co-founder and board member of American Sustainable Business Council. This blog is adapted from a column recently published in U.S. News & World Report January 30, 2017.

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