Donna Shalala on health care reform

Donna Shalala is an articulate, convincing, intelligent spokesperson for health care reform. She manages to be politely partisan, reflecting her long history as a liberal Democrat, using history to illustrate her perspective on appropriate solutions for the nation’s health care problems. She is also fun; Shalala knows her football, has a great sense of humor, and loves to engage in both.
Such are my views after interviewing the current president of the University of Miami and ex-Secretary of Health and Human Services, sitting with her at a banquet honoring recipients of the Choice Awards for Excellence in Workers Compensation, and listening to her keynote speech at that event.
Without directly endorsing a single payer system, Shalala made a strong argument for single payer national health care, noting that the Federally-run Medicare program’s health care costs are increasing at a rate well under that of private insurance while incurring administrative expenses that are one-third those in the private sector.
As an avowed capitalist, I’m a big believer in the free market, consumer choice, the invisible hand et al. Unfortunately, health care is not a typical economic good, where the buyer selects the product or service by balancing cost and quality/outcome/appeal. This is for a rather simple reason – in health care, the heaviest users of health care services pay little to nothing for the (most) services. The person ordering and/or performing the service, the physician, has no incentive or little interest in considering cost.
The payer, which is the insurer/employer, is a transaction processor/funds transfer agent who is also tasked with “managing” the usage of health care by the recipient that is ordered by the recipient’s physician.
Not a very clean system from an economist’s point of view.
Whether you agree or disagree with Shalala’s politics, her presentation on the history of managed care was compelling. It made it abundantly clear that the free market system is unable to constrain the growth in health care costs.
The follow on to that issue is industrial competitiveness. For companies such as GM, IBM, and CostCo who actually contribute significant sums to pay for their employees’ health insurance (and pay taxes to subsidize Medicaid programs used by other companies who do not provide coverage) health care costs are a major competitive problem. Toyota, Daewoo, Hyundai, VW et al have significantly lower health care costs than GM’s $1500 per vehicle.
So, the “free market” that some are so ardently advocating as the solution to the nation’s ills is actually hurting US employers whose underlying costs are higher than their competitors.
What does this mean for you?
Both Shalala and Bob Laszewski of Health Policy and Strategy Associates have stated that when enough large employers get behind health care reform, it will happen.
That day is fast approaching.