Too Broke to Fix

If we want a health care system that works, we need to start some radical experimenting.
July 2001
By Jonathan Walters  |  Senior Editor
A Senior Editor of Governing, Jonathan has been covering state and local public policy and administration for more than 30 years.

It's not often that I agree with the Heartland Institute, a Chicago- based think tank that takes great delight in positioning itself 180 degrees off whatever the current "progressive" thinking is on any given subject. But when it comes to the high cost of health care, Heartland and I agree on a key culprit: federal and state regulatory oversight.

In fact, after gamely struggling over the years to understand such sweeping federal health insurance packages as the Employee Retirement Income Security Act (ERISA, passed in 1974) and the Health Insurance Portability and Accountability Act (HIPAA, 1996), I can only marvel at what a mess we've made of health care policy in this country.

Needless to say, legions of lawyers and accountants have been kept very busy trying to figure out what each law means, and what states, insurers, doctors, hospitals and patients need to do to comply. The two laws have led to non-stop battles over everything from the federal preemption of state regulatory power to the privacy of personal medical records.

And still there are more than 40 million Americans without health insurance, and costs continue to rise.

In fact, it seems that the more that the federal government tries to regulate this whole business--presumably in the name of ensuring decent, affordable health care for most (if not all) Americans--the more the law of unintended consequences takes hold. There are good reasons for that. On the one hand, the provisions of ERISA and HIPAA were heavily shaped by the private health care industry, and what any industry wants is profit, not well-armed consumers. Thus, for example, ERISA all but invites the federal government to preempt any state that gets too rigorous in its oversight of HMOs.

On the other hand, the regulatory laws bend themselves out of shape trying to protect against the bad apples in the system: insurers, health care providers and patients who might try to abuse it for profit. HIPAA requires that detailed records be kept of every person diagnosed and treated, and every prescription written and pill dispensed. Because this is information that can easily be shared among doctors, hospitals, druggists, HMOs and insurance companies without a patient's permission, and even leaked out to marketers in the health care product and services business, there has been a huge privacy- protection backlash.

What can be done about all this? Trying to fix ERISA and HIPAA won't work. They're in such bad shape that opening them up for amendment will only lead to a bigger mess. Federally driven regulatory oversight just isn't the answer.

What is the answer? Accepting that we're probably never going to arrive at a perfect system, it's time to cut states loose to experiment with new health care delivery systems.

So what might states try? How about a small-scale experiment in universal, single-payer coverage? Over the past few years, in a series of well-reasoned articles, Dr. Del Ames, professor emeritus of neuroscience at Harvard Medical School, has been making this very suggestion.

Ames' prescription for trying out a more sensible, less regulation- addled approach to health care coverage is this: Choose one laboratory of democracy--a relatively small one, like his home state of Vermont-- and create a network of government-funded public hospitals and clinics that would provide no-frills medical and health care services for everyone. Immunizations and appendectomies would be covered. High- risk, low-percentage procedures and boutique care wouldn't be. Anyone who wanted fancy coverage could buy it, either out of pocket or through private insurance, if they chose to carry it.

The one good thing such a system would do for certain is get employers out of the business of funding health insurance--unless they wanted to pay for Cadillac coverage as a worker-recruitment incentive. Taking employers out of the equation would immediately eliminate the need for a huge regulatory super-structure to protect consumers, health care providers, HMOs and insurance companies from each other. And that would save a bundle of money.

What are the chances that this will actually happen? Probably not very good. At least not anytime soon. But we are living in a world where something is going to have to give. Continually escalating health care costs are putting an increasingly heavy strain on public, personal and business budgets. A rapidly aging population that insists on access to decent health care is only going to ratchet up the strain.

And that is the argument for giving serious thought to a hybrid suggestion from a conservative Midwest think tank and a medical professor with a nose for practical policy: Pick a state, tear down the heavy regulatory structure currently devoted to health care oversight and spend that money providing basic health coverage for everybody. It's worth a shot. In fact, it's probably worth a lot of shots, free ones, for starters, aimed at immunizing every kid in the state.