Form & reform: the economic realities of the United States healthcare system.


    Good afternoon, everybody. My name is Eric Steiger, I'm one of the editors-in-chief from the Journal of Law and Health. And I'm happy to welcome all of you to the second speaker event in the 2009/2010 Journal of Law and Health Speaker Series. Thank you all for coming.

    Now, I know that the news last week was dominated by the story of Sandra Bullock's breakup; however, some of you might have noticed that a small piece of minor legislation also got passed through Congress last week And you also might have noticed that it wasn't quite as full of bipartisan support as it otherwise might have been. And so, the real question: Could it have been? What would such legislation have looked like? And what's the real difference between that and what we have now? And in order to help us answer that question, we have Professor Mark Votruba from Case Western Reserve's Weatherhead School of Management with us.

    Professor Votruba has written on the allocation of medical resources, incentives for care, insurance markets, the effects of plant closings on communities, parental job loss and the link between divorced non-resident fathers' proximity and children's long-run outcomes. He has a Ph.D from Princeton University, and we're proud to have him here today. Everybody please give a warm welcome to Professor Mark Votruba.


    I'll start by echoing Eric's sentiment that I was as surprised as anybody to see how quickly the healthcare reform debate came to a conclusion. Certainly, when Eric and I started exchanging e-mails about what I might talk about today, this wasn't the anticipated title for my talk. I originally thought the title of my talk was going to be "Is There a Bipartisan Solution for Healthcare Reform?" not "Was There a Bipartisan Solution for Healthcare Reform?" Given everything that happened in the weeks preceding the resolution--the Democrats losing their 60-seat super-majority in the Senate and the apparent lack of trust between House and Senate Democrats--the Democrats appeared unable to resolve the differences between the House and Senate versions of legislation. I assumed we would still be discussing the possibility of large-scale reform. Then, suddenly, the Democrats agreed to resolve their differences and found a legal means for passing the legislation without any Republican support. And here we are.

    But I still think it is worth asking the question: was a bipartisan solution possible? I think the question is still relevant because understanding how a bipartisan solution might have been achieved might help us focus on issues that are going to get in the way of having productive public conversations in the future. And so, I hope that you will still find some value in this talk.

    What I want to talk about is not necessarily the positives or the negatives of what happened, but instead I'd like to reflect on the way that it happened, and especially the fact that reform was passed without any support from Republicans. This was a major piece of legislation, where we normally would have expected the kind of bipartisan compromises represented in other landmark pieces of social legislation. In the last century of U.S. history, all major pieces of social legislation have been passed with broad bipartisan support, including Medicare and Medicaid, the Social Security Act, and the Civil Rights Act. Shouldn't this have been the case for healthcare reform? Shouldn't a bipartisan compromise of some sort been possible?

    Certainly many people believe so. For instance, the following quote is from William Pewen, a former senior health policy advisor to Republican Olympia Snowe:

    Three in four Americans say the health care system needs to be overhauled, and many provisions in the pending legislation have strong support. What's more, the core of the Senate's legislation closely resembles the very bill the Republicans offered in 1993 as an alternative to the Clinton plan. This makes clear that bipartisan reform was achievable, and indicts Congress for its failure to realize that goal with broad public support. (1) I think this is an especially interesting comment coming from a Republican, who states plainly that the current reform legislation was essentially a modified version of the counter-proposal the Republicans offered in 1993. It also indicts Congress for not being able to achieve a broad bipartisan consensus on reform legislation.

    This is another quote along the same lines from Republican David Frum. Some of you might have seen this since it's gotten a lot of attention in the press. This was from his article entitled "Waterloo," which was very critical of the Republicans for the way they handled themselves in the legislation process.

    Could a deal have been reached? Who knows? But we do know that the gap between this plan and traditional Republican ideas is not very big. The Obama plan has a broad family resemblance to Mitt Romney's Massachusetts plan. It builds on ideas developed at the Heritage Foundation in the early 1990s that formed the basis for Republican counter-proposals to Clintoncare in 1993-1994. (2) This reflects the same sort of sentiment as the earlier quote. Obama put it more succinctly when he held his healthcare reform summit a couple weeks ago. He said: "We agree on 80% of the issues." (3) This might be an exaggeration, but in light of the earlier quotes from Republicans, I don't think it exaggerates by much. A little later, I'll be more precise about why I don't think this is much of an exaggeration.

    Before turning to that, I want to briefly address the issue about whether the lack of bipartisanship should really matter to us. I hope that most people will agree that it does matter because I'm not going to argue the point for very long. I tend to believe that both parties suffer from their own deficiencies as far as promoting extreme opinions and ignoring concerns from the other side. The legislative process is almost certainly improved when Congressmen of different political parties, with different priorities and perspectives, are able to work together.

    A second quote from William Pewen, who's the adviser to Ms. Snowe, captures the potential problem when only one party is forwarding a piece of legislation and is trying to do it with a very slim majority. "Ultimately, Democrats decided to pass their bill with no Republican support, sacrificing bipartisanship and empowering every Democratic senator to seek inappropriate concessions." (4) We saw the fallout from this sort of behavior in things like the Cornhusker Kickback, where the Senator from Nebraska was able to cut a special deal for his state. It's not surprising to an economist that these things happen when a vote is going to be close and you're a Senator who represents a key vote on a piece of legislation. You're obviously going to be able to demand special concessions for your constituents, and a lot of senators will do just that.

    A similar quote comes from David Frum again:

    "Barack Obama badly wanted Republican votes for his plan. Would we have leveraged his desire to align the plan more closely with conservative views? To finance it without redistributive taxes on productive enterprise--without weighing so heavily on small business--without expanding Medicaid? Too late now. They are all the law." (5)

    What he's suggesting here is that there was a possibility the Republicans could have engaged in the process a little more and perhaps turned the legislation into something better.

    The second thing that concerns me about the lack of bipartisanship is that it certainly led to an ugly and combative legislation process. As a result, it may have significantly undermined prospects for future compromises on other types of legislation that we need to enact in the future.

    The first point I would make about this is that healthcare reform is not ending with this bill; it's rather the start of something, and it's going to be an evolutionary process, especially as far as cost containment goes. I suspect we'll be talking about cost containment in healthcare for as long as we're all alive because the cost of healthcare is inevitably going to rise and we're constantly going to face difficult social questions about how we finance that care, and especially how we finance it for people who can't afford to finance it for themselves.

    The second point l would make is that, going forward, it's hard to imagine Congress forging the type of bipartisan consensus that will be necessary to address the long-term fiscal problems facing the federal government. Most people are probably aware that the budgetary outlook for the federal government looks terrible. Taxes are going to go up, and spending is going to get cut, and we're going to have to make tough decisions about how those things are going to happen. I tend to believe that we're going to make smarter decisions with respect to those questions if we're all working together--if we don't shell ourselves off into our ideological cocoons and if political opponents can discuss these problems with one another in an honest way.


    Now I'd like to turn to some "general consensus" issues--problems in the U.S. health care system that most everyone is aware of. First, everyone basically knows about our excessive health care spending. We spend about two times more per capita than what is spent in other developed countries. There's also widespread overuse of care that sometimes has questionable value for producing better outcomes. This is well-documented in medical literature: the over-use of angioplasty and stents, back surgeries on people that shouldn't have them, too many orthopedic surgeries, and we probably use advanced...

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