From the WONDERFUL HORRIBLE WORLD OF CRAPITALISM files

Going universal
The American healthcare system is, simply put, a mess, but we may finally be ready to fix it.

By Ezra Klein
The Los Angeles Times

EZRA KLEIN is a writing fellow at the American Prospect and a blogger at EzraKlein.com

December 26, 2006

THE STATISTICS, by now, are well known. Forty-seven million uninsured Americans. Premium increases of 81% since 2000. Small businesses failing, big businesses foundering, individuals priced out and, amid all this, skyrocketing profits for insurers, hospitals and pharmaceutical manufacturers.

The American health system, put simply, is a mess. An expensive one. Indeed, in 2002, we spent $5,267 per capita on healthcare — $1,821 more than Switzerland, the nearest runner-up. And yet we had higher infant mortality, lower life expectancy, more price inflation and an actual uninsured population, a phenomenon virtually unknown in the rest of the developed world, where universal healthcare is, well, universal.

These are unsustainable trends. The U.S. healthcare system cannot, in its current form, go on forever, or even for very much longer — employers can't afford it, individuals can't handle it and the country's conscience won't countenance it.

And change may come sooner than most think. Across the country there are unmistakable signs that the gridlock and confusion sustaining our sadly outdated system are coming to an end and that real reform may finally emerge, possibly even starting in California, where Gov. Arnold Schwarzenegger is promising to spend his upcoming State of the State speech explaining how he will push the Golden State closer to universal healthcare in the coming year.

And it's about time. Few mention this, but the American healthcare system is something of a mistake. It blossomed out of a World War II tax reform meant to guard against corporate war profiteering. Liberals, with their usual combination of good intentions and inadequate foresight, imposed massive marginal tax rates on corporations, effectively freezing their profits at prewar levels. But the law had a loophole: Corporations could funnel their wartime riches into employee benefits, such as healthcare, thus putting the cash to use within their company. And so they did, creating the employer-based healthcare system.

But healthcare was simpler in the 1940s, and far less expensive. In the 21st century, it's not simple at all. Once a perk of employment, health insurance is now a necessity, and a structure that dumps such power, complexity and cost in the laps of employers is grotesquely unfair to both businesses and individuals. There's no logic to an auto manufacturer running a multibillion-dollar health insurance plan on the side; it should stick to making cars. There's no excuse for pricing the self-employed and entrepreneurial out of the market. And there's no reason the owner of a three-employee start-up should have to go to bed with a heavy conscience because his coffee shop can't pay for chemotherapy.

But health insurance is not only the inexplicable responsibility of business; it is a big business, which is why the system survives. The medical-industrial complex is a massive, remarkable beast, consuming a full one-ninth of the American economy and offering astonishing profits to many of the participants (indeed, Big Pharma was the most profitable industry in the U.S. from the 1980s until 2003, when energy companies wrested away the top spot). As with any lucrative industry, the winners are resistant to reforms, and they have a formidable army of politically lobbyists, PR specialists and image consultants helping to preserve their position, to preserve a mistake.

But there is evidence, finally, that their castle is being stormed. Massachusetts has passed the nation's first near-universal healthcare plan, creating a structure that should cover 95%-plus of its citizens by making healthcare as mandatory as car insurance. Nationally, the Democratic resurgence has returned universal healthcare to the agenda and its advocates to power. In the House, Rep. Pete Stark (D-Fremont), a staunch Medicare-for-all advocate, is expected to be chairman of the health subcommittee.

Surrounded by an unlikely array of union leaders and corporate chief executives, Sen. Ron Wyden (D-Ore.) has unveiled an inventive, comprehensive reform plan that would end the employer system forever. What businesses pay in employee premiums would be redirected to employee raises; insurers would offer their plans through state associations that would no longer allow price discrimination for reasons of health or job status; and everyone would have to buy in. Universal coverage would be achieved in under two years.

The most compelling evidence that resistance to reform is futile, however, is coming from the insurers themselves. Cognizant that Congress and the nation are tiring of the current dystopia, the insurance industry recently released its own plan for universal healthcare.

It's a bad plan, to be sure. Its purpose is more to preserve the insurance industry's profits than improve healthcare in this country. But the endorsement of universality as a moral imperative, and the attempt to get in front of the coming efforts at reform, mark the emergence of a distinct rear-guard mentality within the insurance industry. Their game is up, and they're turning some of their attention to shaping their future rather than betting that they can continue protecting their present.

SOME OF THE industry's more enlightened members are going even further. In California, the heads of Kaiser Permanente — a historical "good cop" insurer amid the almost cartoonish villainy of the industry — have proposed a serious, albeit extraordinarily complicated, plan for achieving universal coverage in the Golden State. The details of the plan are unimportant; it's the constructiveness of the proposal that matters.

And joining them in calling for reform is Schwarzenegger, who recently seized on a report by the New America Foundation showing that cost-shifting caused by the uninsured population costs each family in the state the equivalent of $1,186 in annual premiums. His plans for reform will be announced at the State of the State address Jan. 9.

The work is not done, of course. There are arguments yet to be had, wars yet to be fought.

Insurers want to retain their ability to discriminate against the ill and the old; conservatives want individuals to assume more risk and expense in order to force wiser health decisions; liberals want the government to guarantee universality and utilize its massive market power to bargain prices down to levels approximating those paid by other developed countries.

What's important, though, is that for the first time since the early years of the Clinton administration, these arguments are being made, and employers, insurers, politicians and, most crucially, voters are making their way back to the table.

The realization that our illogical, mistaken healthcare system can't go on forever has dawned, and so it will end. The question now is what replaces it.

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