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Thirteen years ago Bill Clinton became president partly because he promised to do something about rising health care costs. Although Clinton's chances of reforming the US health care system looked quite good at first, the effort soon ran aground. Since then a combination of factors—the unwillingness of other politicians to confront the insurance and other lobbies that so successfully frustrated the Clinton effort, a temporary remission in the growth of health care spending as HMOs briefly managed to limit cost increases, and the general distraction of a nation focused first on the gloriousness of getting rich, then on terrorism—have kept health care off the top of the agenda.
But medical costs are once again rising rapidly, forcing health care back into political prominence. Indeed, the problem of medical costs is so pervasive that it underlies three quite different policy crises. First is the increasingly rapid unraveling of employer- based health insurance. Second is the plight of Medicaid, an increasingly crucial program that is under both fiscal and political attack. Third is the long-term problem of the federal government's solvency, which is, as we'll explain, largely a problem of health care costs.
The good news is that we know more about the economics of health care than we did when Clinton tried and failed to remake the system. There's now a large body of evidence on what works and what doesn't work in health care, and it's not hard to see how to make dramatic improvements in US practice. As we'll see, the evidence clearly shows that the key problem with the US health care system is its fragmentation. A history of failed attempts to introduce universal health insurance has left us with a system in which the government pays directly or indirectly for more than half of the nation's health care, but the actual delivery both of insurance and of care is undertaken by a crazy quilt of private insurers, for-profit hospitals, and other players who add cost without adding value. A Canadian-style single-payer system, in which the government directly provides insurance, would almost surely be both cheaper and more effective than what we now have. And we could do even better if we learned from "integrated" systems, like the Veterans Administration, that directly provide some health care as well as medical insurance.
The bad news is that Washington currently seems incapable of accepting what the evidence on health care says. In particular, the Bush administration is under the influence of both industry lobbyists, especially those representing the drug companies, and a free-market ideology that is wholly inappropriate to health care issues. As a result, it seems determined to pursue policies that will increase the fragmentation of our system and swell the ranks of the uninsured.
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