America's system for delivering health care is a modern miracle. However, America's system of financing health care¡ªfragmented, cumbersome, inefficient, limited in accountability¡ªis a modern nightmare. Under that system, health care spending has risen from 7 percent of gross national product (GNP) in 1970 to 12 percent now. It may break 15 percent of GNP, or about $1 trillion, in the next five years.
This rate of growth is clearly unsustainable. It conjurs up images of a malignancy, relentlessly feeding off the body of its host. Our health care system is already doing harm to those it is meant to heal, as its growing cost eats away at worker paychecks, retiree savings, public budgets, entrepreneurial initiatives, and U.S. competitiveness.
Although our health care system has grown more expensive, it has not grown more inclusive. Access, in fact, is on the decline, as employee health benefits are cut back. At least 33 million Americans remain without any health insurance, and millions more are underinsured. While the United States spends more on health per capita than any other developed nation, U.S. life expectancy in 1 987 was lower than Hong Kong's and more than a dozen other nations.
What can we do about a health care financing system that costs too much, covers too few, frustrates too many, and adds too little to our health? Given the system's comprehensive problems, will we seek comprehensive remedies?
I argue that we should. I also argue, contrary to the conventional wisdom, that we can. Many now assume health care reform must proceed incrementally. But the lessons of earlier incremental reforms, changes in our economy, and shifts in public opinion make comprehensive reform now more likely than in the late 1970s when Congress last seriously considered it.
The biggest barrier to dramatic change -- popular mistrust of government intervention -- will fall as Americans realize comprehensive financing reforms can reduce bureaucratic interference with the actual delivery of health care. And growing grassroots pressure from health consumers, doctors, small businesses, and state governments may reverse the certainty of Washington insiders that dramatic reform is in-feasible, implausible, and unpalatable.
Why the System Doesn't Work
Most observers identify two problems with the health care system: rising costs and lack of access to basic services among the uninsured and underinsured. While this diagnosis is mostly right, two clarifications are necessary.
First, we need to distinguish between our system of delivering health care and our system for financing health care. The delivery system may not be perfect (although it is extremely good), but it is the financing system that pushes up costs, limits access, and causes other problems. Imagine the Pentagon with no limits on its budget. Our soldiers would still be talented and our weapons effective, but the public would be justifiably angry as costs soared and accountability disappeared. The problem, as in today's health care system, would have more to do with how we financed the service than how we provided it.
Second, the problems of high cost and limited access are not independent. They are actually linked through a third issue: the pivotal role of employment in health insurance coverage. Most Americans have health insurance only if they "qualify" for it -- by working for an employer who provides it as a benefit or, alternatively, by entitlement to publicly financed health care due to such circumstances as old age (Medicare), poverty (Medicaid), or military service (the Veterans Administration).
These three attributes of the financing system -- limited access, rising costs, and employment-based health coverage -- create problems that compound each other. Employment-based coverage boosts costs, since thousands of firms, insurers, and public agencies must duplicate the work of evaluating risk and administering benefits. Employment-based coverage also limits access, since those without coverage by an employer tend to go underinsured. Limited access drives up costs, since the underinsured may forego inexpensive medical services (such as prenatal care), raising the likelihood of more expensive services (neonatal intensive care).
Faced with rising costs, public policy makers are tempted to reduce health care spending in arbitrary, ultimately self-defeating ways. Medicaid is supposed to assure it recipients access to medical care. But in some states, physicians receive so much less for treating Medicaid beneficiaries than for other patients that those on Medicaid have trouble finding a doctor willing to take them. Medicaid programs also typically pay hospitals less than their costs -- only 78 percent of costs on average in 1989, according to the American Hospital Association. Hospitals shift the balance of costs of treating Medicaid and Medicare recipients (as well as the uninsured) to paying patients in the form of higher charges. Insurers and employers, in turn, pass on these higher charges to employees in the form of higher premiums, higher copayments, and higher deductibles -- or employers simply cease offering insurance.
The interrelationships are complex, but the results are clear. Health costs climb; the number of underinsured grow (by about five million during the 1980s, according to a conservative estimate). The system is too fragmented for any of the players -- government, insurers, employers, workers -- to stop the cycle. We face the prospect of paying 10 to 15 percent more each year for our nation's health care system even as that system becomes less inclusive and less accountable.
Incremental Versus Comprehensive Reform
Broadly speaking, there are two kinds of strategies for changing how we finance health care -- incremental and comprehensive reform. Incremental strategies typically deal with the issues of cost and access separately and involve regulatory approaches that rely primarily on the private sector. Proposals for mandated employer benefits, for example, would require most businesses to offer health insurance to their employees, while expanding Medicaid (or other public insurance) coverage for the remaining uninsured. Similarly, a "pay or play" approach would require employers either to provide health coverage or to pay into a public fund that would finance health benefits for the uninsured. Such proposals have lately attracted significant support, most notably from the Bipartisan Commission on Comprehensive Health Care, called the Pepper Commission in honor of the late Congressman Claude Pepper.
"All-payer" proposals, another strategy of incremental reform, seek to control costs but not to expand access. Under this approach, major health care purchasers, such as business and government, jointly negotiate rates with health providers, principally doctors and hospitals. These negotiations might proceed on a statewide basis (as they have in several states) under the authority of some state office or quasi-public agency. Whereas mandated benefits reforms seek to expand health care access, all-payer reforms aim to contain health care costs by strengthening the bargaining power of health care consumers and intermediaries.
Comprehensive reform strategies, by contrast, propose to control costs and expand access simultaneously and give government a more direct role in financing health care. There is no clear line between incremental and comprehensive reforms. A national all-payer system that also made access universal would, indeed, be a comprehensive improvement. But, in general, comprehensive reforms are marked by two features: (1) universal access to basic health care services; and (2) a process that permits a high degree of control over total health care spending.
The leading comprehensive approach involves "single-payer" systems. Such proposals vary, but the essential idea is to create a single tax-funded system of financing basic health care services for all Americans. Privately provided medical services would be reimbursed either directly by the government or through a variety of health plans that could act as both financial intermediaries and managers of care. These approaches also tend to include negotiated rate-setting and overall budgeting for providers in a state or region.
Such proposals would substantially increase governmental spending on health care -- potentially by hundreds of billions of dollars. But this would not be new spending; it would simply replace what most businesses and individuals already spend for health care. The paycheck deduction now called "employee health insurance premium" would be relabeled "national health fund premium." Out-of-pocket expenses would shrink dramatically. The current system's hidden costs of massive administrative waste, uncompensated care, and cost-shifting would shrink or disappear. Most households would pay about the same amount on health as they do now, and over time they, and the nation, would spend substantially less than under our current system. If we spent the same proportion of our economic output on health care in 1989 as any of the industrialized nations with national health care financing systems, such as Germany, Canada, or Japan, we would have saved well over $100 billion, even though government would have done more of the total spending.
While some opponents label such proposals as "socialized medicine," comprehensive reforms actually preserve our public-private approach to health care. Most of the funding becomes public, but the providers of care, such as doctors and hospitals, remain in the private sector. Some proposals, including one I am offering, retain a role for private health insurers and HMOs as well.
Indeed, comprehensive reform would likely strengthen America's private sector. A universal health care program would relieve businesses from having to become experts on health care benefits (about two-thirds of large U.S. firms now self-insure the health benefits of their employees) and remove the uncertainty of volatile health costs from business planning. Universal health care proposals also promise to increase the efficiency of American labor markets by creating "seamless" coverage that enables individuals to move from welfare to work, or from job to job, without worrying about losing or changing health benefits.
The Conventional Wisdom on Comprehensive Reform
Despite these apparent benefits -- and despite the fact that every developed nation in the world except South Africa has some national system of financing health care -- the conventional wisdom sees such comprehensive reforms as unrealistic. Medicine and Health Perspectives, a leading Washington newsletter on health issues, proclaims: "Gone are the calls for national health insurance . . . Instead, the talk is of gradation, with proposals couched in terms of incrementalism." Writing in the New England Journal of Medicine, Samuel Levey and James Hill assert that "a complete government takeover of health care financing would be far too radical a step to be politically viable."
Such observers often view comprehensive reform as an idea whose time almost came, but has long since fled. After all, they say, prospects for such reforms are worse than when national health insurance gained steam but ultimately failed in the 1970s. They argue:
- ¡ö The public has grown even more hostile to big government and tax increases.
- ¡ö An enormous federal deficit -- newly compounded by a recession, a banking crisis, and the Gulf War -- makes it harder to fund new spending programs.
- ¡ö Health related industries, doctors' associations, and other opponents of dramatic reform in the 1970s are said to have grown more powerful; according to Common Cause, federal campaign contributions by health-related political action committees grew more than eleven-fold between 1978 and 1988.
- ¡ö One of the major health reforms enacted in recent years, the Medicare Catastrophic Coverage Act of 1988, was quickly repealed under pressure from its intended beneficiaries, the elderly, who objected to the method of financing adopted for the program and its failure to cover long-term care.
Many conclude that the same obstacles that blocked national health insurance in the 1970s will continue to block comprehensive reform in the foreseeable future.
The Case for Comprehensive Reform
The conventional wisdom usefully identifies some of the obstacles that face any reform effort. But it ignores three important changes since the 1970s that make comprehensive reform more likely: first, changes in thinking caused by disappointments with past incremental reforms; second, shifts in the economy; and third, a turn in public opinion.The lessons of past incremental reforms. The critics of comprehensive reform assume that we can live with incremental reforms. Recent experience suggests otherwise.
Over the past two decades a string of incremental policy initiatives were introduced to contain costs -- regulatory efforts to reduce excess hospital capacity and unjustified use of hospitals and high technology; incentives for HMOs and other alternative methods of health care delivery; a Medicare prospective payment system using "diagnostic related groups." Some of these initiatives had positive results, but as a whole they did not appreciably succeed. Instead, they led to new forms of cost-shifting and gave birth to an entire industry dedicated to holding down the use of medical services by questioning providers' clinical decisions. A prominent medical commentator says today's layers of regulation and review may be "crippling the soul of the kind of doctor we should all want to preserve." Countless discussions with infuriated physicians in my own state confirm this observation. (As a country-western lament, the refrain would be: "Stop your third-party second-guessing of my first-rate care.")
The inadequacies of the incremental, regulatory approaches to reform have produced some cracks in the medical profession's historical opposition to federal intervention in health care. The American College of Physicians, for example, last year stated its support for "a nationwide program ... to assure access to health care for all Americans," including future consideration of "a nationwide financing mechanism." And in May the Journal of the American Medical Association devoted a ground-breaking two-volume issue to current problems in access to health services. The medical profession as a whole is not ready to endorse comprehensive reform. But some practitioners do, and several have directly advocated such reforms in leading medical journals -- often noting the decline in professional autonomy that physicians have experienced under our fragmented system.
Soaring costs, declining access, and the ineffectiveness of past incremental reforms may simply lead to further incremental reforms. But there are three reasons to believe they will instead increase calls for structural changes in our system of financing health care.
First, the experience of the past decade strongly suggests that the only reliable and efficient way to control health care costs is to do so directly by setting overall expenditure limits. Incremental regulatory reforms can provide incentives, alter bargaining positions, or erect cost barriers around portions of the health care system. By contrast, comprehensive changes, such as a single-payer system, can set decisive limits on total costs. The difference in certainty of control is likely to be increasingly important to policy makers who hear constituents complain of rising costs and who see growing Medicare and Medicaid expenses crowding out new public initiatives in other areas.
Moreover, expenditure limits are the only way to escape the bureaucratic in-trusiveness that characterizes our current piecemeal regulatory approach. People I talk with in Nebraska and elsewhere are understandably leery when I assert that a large public program could reduce inefficiency and interference; they simply don't want more government. But more government is what we will certainly get if we continue relying on incremental reforms. An analogy suggested by Kevin Grumbach and Thomas Bodenheimer in the quarterly Health Affairs helps show why. They compare controlling health costs to controlling the movement of cattle. Current regulation of clinical decisions is akin to tying a leash to each animal. Setting expenditure limits, by contrast, is like building a fence.
Setting expenditure limits would enable us to cut the tangle of "leashes" -- utilization reviews by insurers and employers, as well as government regulations -- that are tying American medicine in knots. The overall boundaries of negotiated fees, rates, and budgets would encourage medical professionals to become more cost-conscious, without dictating how they should diagnose and treat patients. If government can put up a fence around total costs, it can stop relying on regulatory leashes.
Second, only comprehensive reform can create a system that enables (and obligates) our country to make explicit choices between expenditures on health and other social goods, or among the competing objectives of health reform: universal access; cost containment; and quality care. The conventional wisdom holds that current budget woes make comprehensive reform less likely. To the contrary, tight budgets may lead voters and policy makers to address tradeoffs explicitly that in the past we were able to leave unexamined. These tradeoffs, and comprehensive reforms generally, seem to inspire a fear of health care rationing and waiting lines, particularly for those whose incomes approach or exceed $100,000 (such as members of Congress). But for many of the 59 percent of American households whose incomes in 1989 fell below $35,000, waiting lines and rationing are already part of health care. We currently deny timely, high-quality care to millions who are inadequately insured or who live in rural and urban medically underserved areas. Voters may conclude there are more equitable ways to allocate our scarce medical resources, and they may prefer entrusting those sensitive decisions to people whom they can vote out of office than to all-but-invisible insurance executives, hospital administrators, and physicians.
Third, only a single-payer system eliminates a multi-tier approach to health care that inevitably under-funds the bottom tier and creates inefficiencies throughout. Medicaid expansion may be the best short-term way to expand access. But because low-income health programs always have society's highest-risk patients with expenses that seem "too high," the programs will always be irresistible targets for budget-cutters. While Medicaid expenditures have been growing, the ratio of Medicaid enrollees to the poor has declined from 65 percent in the mid-1970s to just over 40 percent today. Budgetary pressures have also turned Medicaid into a program that often works against other social goals. For example, its income restrictions can induce recipients to reject employment to protect their health benefits.
No incremental reform is likely to end this political dynamic (with the possible exception of requiring Congress and the President to obtain their health care through Medicaid, which would produce rapid and impressive reform). The only real solution is to have everyone making, and abiding by, one set of decisions on society's level of funding and basic care. Indeed, by including all Americans in one system in which the full price for the nation's health care is readily apparent, comprehensive reform would profoundly change how we look for savings in health care. Taxpayers and public officials would no longer have any incentive to cut benefits for one group if doing so ultimately increased state or national health costs. Instead, they would have a direct financial incentive to focus on common-sense initiatives that could reduce overall health expenditures, such as greater preventive care, expanded medical research into life- and cost-saving technologies, better safety rules for products and transportation, and full funding of the Women, Infants, and Children (WIC) nutrition program.
Two decades of incremental reform prove why we cannot combat problems of cost and access separately. Inevitably, what incremental efforts achieve in one area comes into conflict with what they ignore in the other. Efforts to expand access through new Medicaid mandates, for example, are now being questioned by governors who resent the cost. Alternatively, efforts to control cost in Medicaid and Medicare have led to cost-shifting precisely because these programs only cover a portion of the population. Thus, we have reached a point where those who are interested in the conservative goals of saving money and reducing government interference in the practice of medicine should conclude that comprehensive reform is the better answer.
Changes in the Economy. Global and domestic economic changes since the 1970s also make dramatic health care reform more likely and more necessary now. Throughout most of the 1970s, when national health insurance was taken up in Congress, U.S. competitiveness in global trade was a minor issue. During most of that decade, our trade accounts were roughly in balance. Since 1984, however, we have experienced annual trade deficits steadily in excess of $100 billion. As competitiveness has become a primary economic concern, American firms have recognized the disadvantage they bear due to high health care costs, which in 1989 were 127 percent more than Japan's, 91 percent more than West Germany's, and 40 percent more than Canada's. They also have realized that in the United States the lion's share of health costs is paid by employers in medium and large firms, while their competitors operate in nations where health costs are spread more widely across society.
Some argue that these higher health care costs should not hurt U.S. competitiveness; in the long run, they should be offset by relatively lower wages. But at times during the 1980s, double-digit increases in the cost of health benefits outpaced the ability of many firms to restrain wages. Health costs that could not be passed along to workers in those years resulted in higher product prices or lower corporate profits, both of which reduced the competitiveness of American firms.
Health costs that do get passed on to workers in the form of lower wages hurt our economy and standard of living. It is a painful fact to millions of American workers that real wages have declined through most of the 1970s and 1980s. And it is now clear the rising cost of health benefits has been partly to blame. Stagnant wages, in turn, have fueled middle-class resentment against taxes, which has crimped spending on education, infrastructure, and other public investments that would make our economy more productive. Management's attempts to shift health costs to workers have further restrained productivity by fueling labor unrest: health benefits were a major issue for 18 percent of U.S. strikers in 1986; by 1989 that figure had jumped to 78 percent.
In the 1970s rising costs and limited access primarily affected the poor and near-poor. Now that these problems are affecting the broader working population as well as industry, the cause of reform has gained some vocal middle- and upper-income constituencies: unionized workers, business executives, and corporate investors. If, as seems likely, incremental reforms continue to prove ineffective at containing health care inflation, these powerful groups may increasingly call for more dramatic structural changes.There are already impressive signs of this shift. The auto and steel industries -- hard hit by rising health costs due to their aging workforce and large number of retirees covered by industry health plans -- have been the most outspoken. The United Auto Workers recently secured a pledge from the big three auto makers to support single-payer and other comprehensive reforms, and the United Steel Workers joined with five steel makers to create a health care task force. Other corporate giants, such as AT&T, Xerox, Safeway, and Southern California Edison have joined in various pro-reform coalitions, such as the National Leadership Coalition for Health Care Reform and the Alliance of Business for Cost Containment. In the business community, according to an official at the U.S. Chamber of Commerce, there is "a consensus of frustration" over health care costs, even if there is no consensus about what reforms to endorse.
These public rumblings may understate the true extent of restlessness for dramatic reform among industrial organizations. I am told that as a matter of custom the health-related committees of some of the nation's leading business organizations have long been dominated by insurance, pharmaceutical, and other health-related firms. Similarly, recent opposition within the AFL-CIO to an endorsement of single-payer reforms reportedly came from some of the individual unions that participate in running health and welfare funds for their members. As a result, the positions of national industrial organizations may not fully reflect the enthusiasm for comprehensive reform among their rank and file.
Even more important than the shifts among large employers may be a less publicized, emerging shift in opinion on health care among owners of small businesses. Over half of all American firms with fewer than ten employees offered no health benefits by 1988. Small firms that do offer benefits typically pay 10 to 40 percent more than larger firms for comparable plans and benefits. Farmers are particularly hard hit. I know of farmers in my state who pay over $2,400 annually to insure their families and still face deductibles of $5,000.
While small business organizations have been relatively silent on this issue, I know from personal experience as a small business owner that many entrepreneurs cannot afford to absorb increases in premiums, yet do not want to stop offering health benefits. Small firms and the associations that represent them are going to be under increasing pressure to recognize that the existing system of health care finance serves them poorly.
A final economic issue that improves the chances of comprehensive reform involves the mobility of the labor force. Each year over twenty million American workers start a new job. As health costs climb, many employers and insurers have sought to hold down costs by denying coverage to new employees who have pre-existing medical conditions or who have high medical risks for other reasons. According to the Office of Technology Assessment, about half of employers in the early 1980s required medical screening exams, up from 40 percent a decade earlier. When workers change jobs, they must ^vade through stacks of paperwork to chahge their health coverage; many lack coverage for weeks before their new benefits take effect. The growing barriers and exceptions to insurance not only make it harder for Americans to change jobs or start work; they also hamper economic adjustment and growth.
Changes in the Public Opinion. Opponents of reform, and even some supporters, have argued public opinion does not support sweeping changes in our health care system. Robert Blendon and Karen Donelan, reviewing polling data on health care in the New England Journal of Medicine, recommend that reformers push for "creative compromises" such as mandated benefits, rather than publicly funded, universal approaches.
The data, however, show that public support for dramatic health care reform has never been stronger. A Harris survey in 1988 reported that 89 percent of Americans believe our health care system requires "fundamental" change or complete restructuring. Polls by the Los Angeles Times and Gallup in 1990 found that over 72 percent of Americans want that change to take the form of some kind of national health care program.
Even more significant, among those who favor major reforms, support has increased since the 1970s for a universal approach with public financing over a mixed system of public-private financing. Blendon and Donelan's review of polling data on health reform found that, during the 1970s, 22-27 percent of those favoring reform preferred a universal public plan. By 1990 the figure was 46 percent. The authors cite these data as evidence of "public ambivalence" about the kind of reform it wants. An alternative interpretation is that support for a universal approach has roughly doubled since the 1970s.
Other data confirm that support for a tax-funded system is growing. The 1988 Harris survey found 61 percent of Americans polled preferred a single-payer, tax-funded system along the lines of Canada's health care program over the existing American system. A similar Los Angeles Times survey in 1990 found that figure had grown to 66 percent, with the increase in support strongest among high-income respondents. Although the wording in the 1990 survey was slightly more favorable to the Canadian system, it is surprising that the level of support did not decline, given the American Medical Association's national campaign in 1989 to publicize the problems Canada has experienced, such as long waiting times for certain high-cost procedures.
The overwhelming support for dramatic reform also seems to defy traditional patterns of opinion on social programs. Such reforms are popular among Republicans, upper-income individuals, and residents of the South. A survey by Opinion Research Corporation conducted in April 1988 found high levels of support for national health insurance among self-identified supporters of then-candidate George Bush (61 percent), among those with income over $35,000 (66 percent), and among respondents in the South (71 percent). Indeed, these levels were not much lower than support among respondents as a whole (72 percent).
Comprehensive reform may draw support across traditional partisan and class lines for at least three reasons. First, Americans in the South and West are more than twice as likely to be uninsured as those in other regions. Second, a national health program, by offering universal coverage, does not alienate middle-income taxpayers by asking them to pay for benefits targeted exclusively to the poor. A final reason may be that universal health insurance would not be a new spending program, but a different (and eventually cheaper) way of paying for the same health care that we are already consuming.
The broad support for comprehensive reform is doubly significant given our nation's growing interest in the general question of health. According to the Center for Media and Public Affairs, the number of nightly news stories about health on the three major networks grew from 354 in 1989 to 629 in 1990. In addition to basic issues of medical costs and access, concerns such as AIDS, smoking, organ transplants, and the status of America's children increasingly command our attention. Perhaps most significantly, a steadily increasing number of Americans will confront the financial and emotional challenges of providing long-term health care for elderly relatives or friends. Over 80 percent of American families either have already confronted that challenge or expect to soon, and the number of American elderly is growing far faster than the overall population.
Undoubtedly, the American public understands we will not cure all the ills of our health care system by changing the way we finance it. We also need to encourage health-promoting behavior, improve the quality of care, and address medical research priorities, malpractice, and other issues (although these may all be easier to deal with under a national health program). But the data above suggest great support for comprehensive reforms that can significantly improve the way we finance and obtain our health care.
How the Conventional Wisdom Can Change
Even if the pressures for comprehensive reform are dramatically increasing, many practical and political barriers make it unclear how we get from here to there. How, for example, can comprehensive reforms overcome opposition from all those who have a material stake in the current system of financing health care? How can they reconcile the divergent interests among those who favor some kind of reform?There is no simple answer. The power of these interests to shape public perceptions and influence legislative agendas has been the primary impediment to major health reforms throughout this century. Certainly, we are unlikely to see the comprehensive health care reforms the public seems to want simply by searching for the common ground among the myriad national organizations with a stake in the debate. But if public pressure for structural change gains steam, these groups may well shift their energies from opposition to accommodation.
The question, then, is whether we are likely to see effective public pressure for dramatic change generated from outside of Washington, D.C. I believe we will. Leadership is likely to come from governors and other state leaders. The National Governors Association, whose members have seen Medicaid's share of their state budgets double since 1975, has already put health care reform high on its agenda. The governors' call for change is likely to be joined by workers, family farmers, small business owners, and a growing number of physicians and hospitals, particularly in under-served rural and urban areas. I have concentrated my own efforts on working with these groups and individuals in Nebraska, to organize their concerns into a specific reform proposal. I am persuaded that as more calls for reform come from more states and communities, Washington's conventional wisdom about dramatic reform may shift rather quickly.
Indeed, policy makers who are proposing comprehensive reforms -- and there seem to be an increasing number of us -- experience some sense of d¨¦j¨¤ vu about today's conventional wisdom on health care. This is not the first time we have heard that, despite overwhelming public dissatisfaction with the status quo, sweeping reform of a major economic activity is impossible because of the strength of entrenched interests and a history of failed reforms.
A decade ago, a few academics and political idealists suggested that we could improve both public equity and economic efficiency by reforming the federal tax code to feature fewer loopholes and lower marginal rates. The conventional wisdom in the early 1980s, however, was that comprehensive tax reform was a naive, if perennial, proposal. After all, President Carter made tax reform a top priority, calling the federal tax code a national disgrace. But despite his best efforts he was able only to enact modest reforms, and even some of those were later repealed.
The conventional wisdom found a dear lesson: we should not expect comprehensive reform in an area that is dear to so many powerful interests. The case for comprehensive reform might be compelling to academics, but not to the public, whose active support would be needed to balance the pressure of moneyed interests. Voters might be angry about taxes -- as California's Proposition 13 had demonstrated in 1978 -- but that anger would not translate into positive support for a policy as technical and complex as tax reform.
By 1986, of course, the conventional wisdom had been turned on its head. Sweeping tax reform proposals gained momentum. Major industries shifted tactics from all-out opposition to competition for favorable transition rules. Both political parties scrambled to take credit as the Tax Reform Act was signed into law. While the act did not achieve all the claims of proponents in regard to fairness and simplicity, neither did it fulfill the dire predictions of its critics. Within a few years, some of the industries that had prophesied doom even admitted that the new rules had helped weed out inefficiency and paper profiteering.
The similarities to today's debate over health care reform are striking. As with the federal income tax prior to 1986, dramatic reform is essential since incremental changes would only compound the problem. And just as tax reform proposed to collect the same amount of money in a better way, comprehensive reforms propose to spend approximately the same amount of our resources on health care, but in a more efficient manner. Finally, as with tax reform -- for better or worse -- we are dealing with a case of unlimited demand. As long as we must finance a government, we will want our taxes to be more fair and less complex; as long as we are mortal, we will want health care that is more effective and less expensive. No policy reform can fully satisfy such desires. Americans will undoubtedly still resent the cost and failures of our health care system after it is comprehensively reformed, just as they still criticize federal income taxes despite the 1986 Tax Reform Act. What both reforms do, however, is highlight the fundamental choices involved -- tax preferences versus tax rates; health services versus health cost -- and enable those choices to be made directly and publicly.
There is great democratic appeal in that notion, just as there is growing frustration over the inefficiency and unfairness of our existing system for financing health care, which seems to take more from our nation even as it gives us less in return. As grassroots demand for change continues to rise, the verdict on comprehensive health care reforms may well switch from "implausible" to "inevitable."
