The Corner

2009, Not 1992

Last week’s health-care summit made clear that, as far as the president is concerned, the question is not whether the U.S. will enact universal coverage but how. 


When Obama gets it enacted, most historians will revere him as the president who finally dragged barbaric Americans into the modern world. But some may note that the Obama system worsened results for the sick and killed the promising genomic industry, in which the U.S. currently enjoys a world-wide lead. These are the inevitable results of the Obama administration’s push for a statist health-insurance market that contains an underpriced Medicare as an option. The phony pricing for Medicare will draw vast numbers of enrollees, over 100 million in one estimate, and create a virtual single-payer health-insurance system. This system would control costs by rationing health care to the sick, especially when it comes to powerful, expensive new drugs. The U.K., for example, ranks last among the biggest economies in Europe in its uptake of cancer drugs and has the dreadful survival rates to prove it. If the U.S., which is by far the largest market for such drugs and the largest source of capital for their development, becomes a single-payer system, we can kiss this industry good-bye. 


Republicans, full of complaints about the Obama plan, have not coalesced around a viable alternative. Mired in fantasies about a replay of 1992, they think they can face down universal coverage and that their impossibly wonky ideas, full of tax takeaways and mysterious high-risk pools, will defeat Obama’s brilliantly clear proposals.  


It is 2009, not 1992. Many recession-buffeted Americans feel that our employer-based health-insurance system is crumbling and look for guaranteed access to affordable health insurance. Simultaneously, many employers are lobbying to escape from a system in which they are charged with buying ever-more unaffordable health-insurance policies for their employees. After all, they got into this mess by default, through an arcane tax provision that permitted employers, but not their employees, to use tax-free income to purchase health insurance. Because employers must factor U.S. health-care costs — which are at least 60 percent higher, as a percentage of GDP, than those of most of our global competitors — into the cost of their products, health-care-cost control is a matter of national competitiveness. 


There is only one viable Republican solution: A consumer-driven system that passes the employer tax exemption and funding onto consumers, so they, and not the government, control all health-care costs. Switzerland, which enables universal coverage without any governmental insurance through this system, benefits from costs 40 percent lower than the U.S. and, unlike the single-payer systems in the U.K. or Canada, excellent results for the sick. 


Will the Republicans prefer to whine or to emulate Nixon’s brilliant trip to China, supporting universal coverage, but in a market-oriented way? 

Regina E. Herzlinger is the McPherson chair of Business Administration at the Harvard Business School and a Manhattan Institute Center for Medical Progress senior fellow. She is the author of Who Killed Health Care? Copyright, Regina E Herzlinger. All rights reserved to author.

Regina E. Herzlinger, a professor of business administration at Harvard Business School and a senior fellow at the Manhattan Institute, is the author of Who Killed Health Care?