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The 2020 Public Services Trust Blog

Wednesday, June 24, 2009

Obama, Healthcare & the Hard Choices facing Progressives

By Henry Kippin

Today’s Wall Street Journal carries an opinion piece by Robert Reich on the progress (or otherwise) of Obama’s health care reform plan through Congress.   Ive been meaning to write about this for a while, and this mornings article prompted me into action…. 

 

Obama is effectively trying to re-model a system by inserting a public player into an already (mis)functioning market.  The problem is essentially two-pronged: first, lots of Americans (Reuters estimates 47 million) do not have access to health insurance; and second, the cost of the existing private insurance system is both expensive and variable.  A lengthy article in the New Yorker recently set out the issues at stake here. 

 

So Obama’s intention is to establish a public insurance plan.  This would compete with private providers, providing a new cost and quality bar for private competitors.  The American public would theoretically then be able to purchase their medical insurance from a truly competitive (and thus better value-for-money) marketplace. 

 

This sounds like a good plan.  As Reich suggests, it is driven by tinkering with the incentives that underpin the private insurance market.  Currently, these are quite self-serving, resulting in a steady increase in costs for the consumer.  Reich contests that “those opposed to public opinion should ask how private plans can ever compete (with the public option).  The answer is they can and they should.  It’s the only way we have a prayer of taming health-care costs.” 

 

There are other benefits to establishing a public player within a mixed market like this (as I argued in a New Statesman piece a couple of months back).  As well as potentially reducing entry costs to health insurance, access to the information that a public provider will generate can help re-configure a market around new measures of quality and outcomes. 

 

The obvious question hanging over all of this is cost.  How will a public plan be paid for?  And where will the burden fall in terms of potential tax rises?

 

According to Reich, “no one wants to raise taxes or even be accused of thinking about the subject. But honest politicians have to admit that universal health care will require additional revenues. The likeliest sources are limits on certain tax deductions and a cap on tax-free employer-provided health care.”  So for the plan to be realized, the Obama administration will have to annoy the pharmaceutical giants, US employers and the middle classes.  Good luck. 

 

Whilst we observe this debate from afar, we should recognize that this is a living, breathing example of the ‘hard choices’ spoken about so often – by politicians, and by thinktanks like ourselves.  We should all watch with interest, and hope that a progressive approach in this case can set the benchmark for creative reform in other areas. 

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Posted by Henry Kippin at 8:18 am
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  1. [...] have written on this blog

    Pingback by The Healthy Option? « The 2020 Public Services Trust Blog — July 31, 2009 @ 9:54 am

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