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How to Fix Health Care: the Sequel

SMG prof’s new book: system “still broken”

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SMG Professor Stephen Davidson says the recently passed health-care bill has flaws, but he doesn’t think anyone will be enthusiastic about tackling more reform for a while. Photo by Kalman Zabarsky

Just when you thought it was safe to go to the doctor, a BU expert says we have miles to go before we can sleep soundly. Stephen Davidson, a School of Management professor of business, policy, and law and former director of the school’s graduate program in health-care management, says the hard-won health-care bill has many virtues — mandatory national coverage, subsidies for the needy, government-regulated marketplaces (“exchanges”) where people can shop for plans and compare prices — but there’s much more that this country can and should do. Davidson’s ideas can be read at length in his new book Still Broken: Understanding the U.S. Health Care System.

We asked the author to talk about the biggest failings of, and the most needed amendments to, the health-care package.

BU Today: Your book lays out what’s necessary for reform. How does the new law stack up?
Davidson:
Even with all the good it does, few serious students of the health-care system would have chosen this approach, which is to rely on competing private insurers to accomplish the goals of reform. No insurer can do much more than limit who can buy its policies and limit what those policies cover or how much the insured person pays out of pocket when he uses services. With the new law, Congress constrained insurers’ ability to decide who and what they’re going to cover, so they don’t have a lot of wiggle room to keep costs down.

Insurers recently tried to avoid covering children with preexisting conditions, arguing that the law doesn’t require such coverage for several years. They backed down under tremendous public pressure.
Chances are they will try to do more of that, but more quietly in the future. Nonetheless, I believe the law does a lot of good things, so in my view, it’s a net plus.

What would you tell President Obama if he asked what he should do now?
First, make sure the implementation goes smoothly. Then, since I think the insurers are going to game the system as much as they can, a public option would be a way to minimize the damage that private insurers will be able to do.

If private insurers need to compete with a public option, wouldn’t that restrain their ability to game the system?
Yes. One thing that’s likely to happen is that the insurance sold on the exchanges is going to be bought by higher-risk people who don’t have access to coverage through employers. Therefore, those policies will tend to be more expensive. One way to ameliorate that effect is a public option that will either force insurers to meet the competition or to get out of that market. The big advantage a public option would have is that it would not need to earn large profits to satisfy investors.

Going forward, you would also alter financing for reform?
Having individuals pay insurers directly is fragmented and more expensive than necessary. You can manage the system better if all the money’s coming into a single place. That could be done with Medicare for All. It’s not my ideal, but it would be a lot better than what just passed. We would reduce the numbers of people excluded from the system and encourage investments to prevent some illness and improve quality of care.

Your book suggests a progressive income-based tax.
Yes, that would be my ideal. However, the probability of that happening is virtually nil. There’s a somewhat higher probability of coming around to Medicare for All. Medicare is a popular program. The elderly and their children are very supportive of it. While providers would like to be paid higher fees, they have fewer hassles from Medicare than from private insurers.

Is it essential to have a public option or single payer? Switzerland has affordable quality care with no public option.
They have something that looks like our new system. But with one big difference — all their insurance companies are not-for-profit.

Not too many years ago, most insurance in this country was not-for-profit. It was all Blue Cross/Blue Shield. That began to change in the ’80s, when the Federal Trade Commission decided there should be more competition. Investor-owned companies saw an opportunity to increase their share of the market, and the problems we already could see emerging got much worse.

Do the political winds favor the additional reforms you suggest?
Not for now. I don’t think anybody is enthusiastic about tackling health-care reform for a while. But as this program begins to roll out, there are going to be things we won’t like. As more people are affected by it, there may be more support for changes.

So the system is still broken?
Yes, I think the title of the book is still appropriate.

Rich Barlow can be reached at barlowr@bu.edu.

3 Comments

3 Comments on How to Fix Health Care: the Sequel

  • Anonymous on 04.27.2010 at 12:01 pm

    Time for a u-turn

    Professor Davidson should have titled his book “Still Broken: Let’s Break it Even More”. It is telling that his proposed solution is to put us all on Medicare – a program that is already irretreivably insolvent. Of course, if you buy into Davidson’s fantasy that there are enough undertaxed rich people to pay for everyone else’s health care, his plan should work out just fine. In the real world, the ink isn’t even dry on the Obamacare Law, and we are already discovering that it will cost far more and deliver far less than advertised. No one who lives in Massachusetts should be surprised.

    Davidson also claims that competition from a “public option” is necessary and sufficient to keep private insurers in line. This is at best a pseudo-competition, as a government-run insurer is not constrained or incentivized by market forces. If Davidson took his own rhetoric seriously, he would champion genuine competition between private insurers, with open access to interstate markets and flexible levels of coverage to meet the varying needs of the young, middle-aged, and elderly. But if he is simply going to dismiss such competition as “gaming the system”, it is hard to take his advice seriously.

  • Anonymous on 04.27.2010 at 12:21 pm

    in response to health insurance

    The lowest I have seen is $176.78/month on the site you supplied http://ow.ly/1AqF1.

  • Anonymous on 04.27.2010 at 3:33 pm

    yikes!

    I think somebody out there is watching too much Fox News.

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