Our Kludged Health Care System – Why Covid-19 makes it even harder to fix, and why we have to

ObamaCare is a kludge. The Economist called Obamacare America’s kludgiest kludgeocracy, and lay the blame on the political reality that Obamacare had to be layered over an existing system that was hugely inefficient but had the support of powerful special interests.

the greatest single source of complexity in Obamacare is the need to be backwards-compatible with America’s established health-insurance system, both to safeguard the interests of existing insurance companies and to ensure that people who already have health insurance will not see any change. A universal health-insurance system built from scratch wouldn’t have had separate Obamacare, Medicaid, and Medicare systems, it wouldn’t have separated the tax breaks for employer-provided insurance from the subsidies for individual insurance, and so on; it would never have been this complex.

The cost of this kludgy solution is huge. Health care expenses take a larger and larger portion of GDP, with some estimates saying that health care spending will grow to 20% by 2026, crowding out other economic activity, including badly needed infrastructure, education, and basic research investments, and damaging our overall economy.

The United States spends about twice as much on healthcare as any other industrialized nation. Healthcare spending accounted for 18% of the nation’s GDP in 2016, about $3.3 trillion, and businesses and households accounted for about half of that spending. Medicare and Medicaid already account for about 25% of federal government spending, and those numbers are expected to rise as baby boomers continue to age.

For all this expenditure, the results are dismal. The U.S. ranks 26th out of the 35 OECD nations in terms of infant mortality and life expectancy. After reaching a peak of 18.3% in 2010, the percentage of the population without health insurance steadily declined until 2018, when thanks to the Republican assault on Obamacare, the trend reversed

The Covid-19 crisis exposes one of the major weaknesses of our current system relying so heavily on “Employer Sponsored Insurance” (ESI) – that if you lose your job, you will lose your health insurance as well, often at a time when you really need it. The Urban Institute, working with the Robert Wood Johnson Foundation, estimates that as many 40 million Americans could lose their insurance as the unemployment rate heads to 20% or even higher. A significant number of the newly uninsured will be able to get coverage through Medicaid, especially in those states which accepted the expansion and many will be able to purchase insurance through the private market. Even so, they estimate that at least 7 million people will wind up uninsured.

The prospect of so many people without insurance has made the idea of Medicare For All (MFA) pretty popular. A new morning consult poll shows that 55% of Americans now support MFA including a majority of independent voters. You might think tbat with numbers like this, you would think that Democrats would be pushing MFA hard at every level. Unfortunately, as Eric Levitz points out in New York Magazine, you would be sadly mistaken.

The very things that make our medical system substantively indefensible also make it damn near politically untouchable. That the health-care sector lays claim to nearly one-fifth of the U.S. economy is absurd. And yet, the more bloated the industry becomes, the more voters owe their livelihoods to the maintenance of that bloat — and the more resources the industry has to finance ad blitzes and lobbying campaigns defending its exorbitant share of growth. Employer-provided insurance condemns much of the American working class to medical insecurity. But for that reason, workers who have access to relatively robust employer-provided coverage tend to guard it jealously (however lackluster their benefits may be by international standards).

Employer Sponsored Plans are costly are costly and inefficient. They encourage providers to push increasingly expensive treatments and siphon off a huge amount to profit the insurance companies, while leaving millions uninsured, and badly under funding rural hospitals. In short, our current system costs more but delivers less. And the response that now looks most likely? Bail out the insurance companies.

Big businesses and powerful Democrats are aligning around a proposal to bail out employer health plans in the wake of staggering losses to the insurance industry, as some worry that a surge in uninsured Americans could give new life to a stalled push for “Medicare for All.”

The business and labor interests, who have strong economic motives to keep the current system of employer-based care, are rallying behind a Democratic effort to subsidize temporary extensions of newly unemployed Americans’ workplace health plans in Congress’ next coronavirus rescue package.

This is madness. We are going to end up subsidizing an inefficient and ineffective system, when better options exist. Ultimately, we need to replace the current system with some kind of universal health care system. Biden is not going to get us there in the short term, and we will probably need to go through a “public option” plan first. At the same time, we need to a congress that will pull Biden to the left, and continue the pressure for a better, more inclusive solution.

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