Unlocked Repost: Curing US Healthcare, Part III: The Future

What reform could look like

Taking this out from behind the paywall

The United States, uniquely among advanced nations, fails to guarantee healthcare to all its citizens. Partly as a result, it has worse health outcomes than comparable countries, including substantially lower life expectancy. Perversely, the U.S. delivers these poor results while spending much more per person on healthcare than anyone else.

U.S. healthcare performance improved in terms of both coverage and cost after the Affordable Care Act, aka Obamacare, was enacted in 2010 and went into full effect in 2014. But much of what was achieved during the Obama and Biden administrations is now being unraveled by Trump II.

Today’s primer is the third and final in a series. Part I laid out the basics of healthcare policy, why universal healthcare is a desirable objective, and why some type of government intervention is essential to achieve it. Part II described how and why the U.S. adopted Obamacare and the ongoing Republican assault on its successes. In today’s primer I will discuss a possible path forward. That is, basically, what Democrats can and should try to achieve if they have unified control of the government after the 2028 election.

Beyond the paywall I will address the following:

1. U.S. healthcare in international perspective

2. What kind of system is workable in America?

3. The changing political economy of American healthcare reform

4. The path forward

U.S. healthcare in international perspective

The United States, alone among advanced nations, has failed to create a system of universal healthcare for its citizens. We also have uniquely high healthcare costs. However, it wasn’t until the 1980s that the U.S. system truly stood out for its poor performance.

The Peterson-KFF Health System Tracker compares U.S. performance on several dimensions with a Comparable Country Average, where the “comparable countries” are Canada, Japan, and several European nations. Circa 1980 the U.S. was roughly similar to other advanced nations in both health outcomes and cost. As the charts below show, since then our relative performance has worsened.

Here’s comparative life expectancy:

In 1980 US life expectancy was already slightly below that in other advanced nations (a fact that was often greeted with incredulity when stated in political debates) but the gap was less than a year. The gap in life expectancy is now more than 4 years.

And here’s one measure of costs -- health expenditures as a percentage of GDP:

By this measure, US healthcare spending in 1980 was already higher than spending in other wealthy countries, but the gap was modest — about 1 ½ percent of GDP. By 2010, however, the gap had widened to more than 6 percent of GDP, although it has narrowed slightly since then.

Moreover, if we look at spending per capita rather than spending as a share of GDP, the U.S. looks even worse, because US GDP per capita is higher than in the comparator countries.

U.S. healthcare, then, has performed very poorly on a comparative basis, spending much more money than other nations yet delivering significantly worse results.

It’s true that our relative performance improved after the enactment of the Affordable Care Act: The percentage of Americans without health insurance declined substantially, while the rate at which costs were rising slowed sharply. But the U.S. system under Obamacare, the result of difficult political compromises, remained awkward and jerry-rigged. In effect, it was a complex add-on that remedied some of the failures of the pre-Obamacare system but still left U.S. healthcare both far less fair and far less efficient than it should be.

And now, under Trump II and Republican control of Congress, even the gains since 2010 are under severe assault.

Looking forward, if MAGA is driven from power in 2026 and 2028, Democrats will have a chance to repair the damage. But times have changed: they should not settle for restoring the status quo as it existed in 2024. Post-MAGA, Democrats can and should aim for a more comprehensive healthcare reform with the aim of achieving universal coverage.

Let me not be coy here about what will be achievable. Given the realities of America’s money-driven politics, I believe that a single-payer system — rather than either direct government healthcare provision or regulated private-sector competition — is the reform most likely to succeed in achieving universal healthcare at acceptable cost. But rather than imposing a single-payer system and eliminating private-sector coverage, U.S. policymakers should offer Americans the right to buy into government healthcare coverage – the so-called “public option”.

Government healthcare coverage like the public option has significant advantages over private-sector coverage: much lower administrative costs for patients, doctors and hospitals, along with elimination of the profit-making incentives of denial of care or the padding of bills for government compensation. Over time it is likely that the public option will dominate as Americans will voluntarily shift to it and away from private-sector coverage. But for obvious political reasons, private insurers should be outcompeted rather than forcibly shut down. And if they can, in fact, compete with the public option on a level playing field, that’s OK too.

To explain why I recommend the public option, I need to address two topics: one, what is likely to work in policy terms; and two, how the political landscape has changed since the adoption of Obamacare.

What kind of healthcare system is workable in America?

In the first installment of my series on U.S. healthcare, I explained that there are three basic ways a nation can ensure that healthcare is available to all its citizens.

· The government can provide healthcare directly by paying for and running the delivery of healthcare — so-called “socialized medicine”.

· The delivery of healthcare is left to the private sector but the government provides health insurance to pay for it — the so-called “single payer” system.

· Both the delivery of both healthcare and insurance are left to the private sector, but private insurers are regulated and cross-subsidized in order to guarantee coverage for all. Obamacare fits into this last category.

All three approaches have been applied in the modern world — and all three are workable. Furthermore, we have partial versions of all three approaches operating in the United States right now, serving various segments of the population. Reposting a chart from my first healthcare primer:

The fact that many other countries manage to provide universal healthcare, while spending much less than the U.S. does, is really helpful for guiding reform here in the U.S. Healthcare isn’t one of those policy issues where nobody knows what will work, and reform must rely on untested theories. On the contrary, the world has abundant experience with systems that out-perform what we have, and we can use other nations’ experiences to construct a better system for America.

That said, America is exceptional — and when it comes to healthcare, that exceptionalism is overwhelmingly negative for the American people. To be blunt: Any effort to reform U.S. healthcare must take into account the way big money distorts both politics and policy to a greater extent than in any other wealthy nation. Generations of dysfunctional healthcare policy in America have created powerful interest groups that will attempt to corrupt any effort at reform.

How should our approaches to healthcare reform be shaped by these uniquely American political and policy realities? To answer that question let me discuss briefly each healthcare reform alternative.

“Socialized medicine”: A government-run system along the lines of Britain’s National Health Service, which directly employs doctors and nurses and operates hospitals and clinics has some clear advantages. Such a system can provide a higher level of integrated care rather than a patchwork of isolated treatments. It can prioritize care based on the judgments of medical professionals, directing resources to the procedures that deliver the most cost-effective health benefits. And government systems are probably less vulnerable than other systems to self-dealing – that is, doctors and other healthcare providers effectively directing medical spending to their own financial benefit.

Unfortunately, recent problems with the NHS highlight a key problem with such a system: Because it’s centrally controlled, it has a single point of failure. If badly managed from the top, it can fail comprehensively.

In the UK, the NHS has suffered from penny-pinching. A government trying to hold down spending will always be tempted to underfund healthcare, because cuts on the margin won’t have highly visible effects on healthcare quality until they reach a critical point. Given the way the United States has underfunded public services, especially at the state and local level, it’s very easy to see this happening to a government-run public health system.

And there’s also the question of whether political figures can be trusted to exert as much direct control over healthcare as they might in a direct-provision system. Again, to be blunt, imagine the whole system of medical care in America answering directly to Robert F. Kennedy Jr. or another crank.

So while socialized medicine can and in some case has performed admirably, it’s hard to see it as a safe role model for the United States. It might work, but there’s ample reason to worry.

Regulated private insurance: I wrote today’s primer in the Netherlands, where the main healthcare system is built around highly regulated private insurers. That system is widely regarded as highly successful. Could it work in the United States?

To some extent it already does. As I pointed out in my second healthcare primer, almost half the U.S. population is covered by private insurance provided by employers, which is effectively subsidized through the tax code and regulated because that tax subsidy requires that employers adhere to rules that prohibit discrimination based on health status or job title. Another significant chunk of the population is covered on the Obamacare exchanges, which subsidize highly regulated private insurance plans.

Yet given the power of money in U.S. politics and the power of the profit-seeking insurance industry, it’s unlikely that the United States could run a system centered on private insurers as well as the Dutch do.

And we already have a prime example of what can go wrong – the partial privatization of Medicare that was achieved through pressure from insurance companies. While Medicare originated as a single-payer component within the U.S. system, politicians subsequently allowed a significant carve-out in the form of the Medicare Advantage program. Medicare Advantage allows a large part of the funds to flow through private insurance companies. For such partial privatization to work, the government must “risk-adjust” payments to insurers – that is, paying less for healthy clients and more for patients with medical problems. Not surprisingly, insurers have been “upcoding” their clients, making their health seem worse and hence collecting extra payments. Moreover, the incentive to deny coverage for legitimate medical conditions still exists.

In the U.S. context, then, a system reliant on private insurers will inevitably be subject to gaming and some level ofcorruption. This is not to say that such a system cannot work— in fact, it does work to some extent for tens of millions of Americans. But given U.S. realities, along with our history of political and regulatory capture by big money, it is profoundly unwise to make regulated private insurance the heart of our healthcare system.

Single-payer, aka “Medicare for all”: Americans over 65 have lived under a single-payer healthcare system — standard Medicare — for 60 years. Tens of millions more are covered by Medicaid. These programs are hugely popular, and despite the growing problems caused by partial privatization have been relatively successful in containing costs. As the Congressional Budget Office has documented, costs for these programs are far below projections made soon after the Affordable Care Act was passed:

Source

Single-payer isn’t a perfect system, but it is a system that has been run effectively not only abroad but in the United States. While I am by no means dogmatic about this, my view is that the next phase in U.S. health reform should involve an effort to transition away from private insurance to single-payer.

Longtime readers may recall that this was not my position in 2009-10, when Obamacare was being put in place. Nor did I support Bernie Sanders’s call for single-payer in 2016. However, like many and probably most supporters of Obamacare, I backed patchwork rather than comprehensive reform not because I believed that it was the best policy but because I believed that it was the only politically realistic way forward in 2010 and in 2016.

But it’s now 2026, and the political landscape has changed in ways that arguably put fundamental reform in reach.

The changed political landscape

Given the history of U.S. health policy, described in my previous healthcare primer, and the intensity of right-wing opposition to any expansion of coverage, the passage of the Affordable Care Act in 2010 was a political miracle. It was possible only because progressive policy experts had spent years hammering out a policy framework and because the 2008 financial crisis briefly gave unified control of government to politicians who listened to these experts.

Even so, it was a very close win — it would have never passed Congress without the extraordinary leadership of Nancy Pelosi, Democratic Speaker of the House. And thanks to constant political attacks by Republicans, the new law was highly unpopular for years. It gained strong public support only after Americans experienced its benefits and faced Trump’s 2017 efforts to kill it.

Given the current high popularity of the ACA, however, the political prospects for another major reform are good -- if and when we emerge from MAGA efforts to destroy it.

In addition, there is now very strong support for the idea that the U.S. government should, one way or another, ensure universal healthcare:

Another way in which the political landscape has changed in a way that is favorable to reform is the huge public backlash against the insurance industry. In my brief history of US healthcare policy I pointed to the key role insurers played in defeating the Clinton reform, most famously through the “Harry and Louise” ad campaign. Obamacare was designed the way it was, with a large role for subsidized private insurers, in part as a way to buy those insurers off and avoid a similar lavishly funded opposition campaign.

But health insurers are now immensely unpopular, especially over the issue of delays and denials:

Source: KFF

The industry’s reputation is now so bad that a shockingly large number of Americans said that they approved of the 2024 killing of UnitedHealthcare’s CEO. As a result, while private insurers can and will throw money into a campaign against any healthcare reform that will reduce their profits, they won’t possess the veto power they had in the past.

Finally, if we are going to make a major effort at healthcare reform, it will come in the aftermath of four years of Trump administration destruction — destruction that is underway on many fronts, but in particular includes devastating cuts in Medicaid and Obamacare subsidies. The human cost of these cuts will be immense. But it may be easier to pursue more comprehensive reform amid the wreckage than would have been possible if we still had the sort-of acceptable system we had two years ago.

Arguably, then, if MAGA has been decisively beaten by 2029, the stage will be set for more than a restoration of the status quo ante. America will, instead, be potentially ready for more fundamental change. What might that change look like?

The path forward

As I’ve shown, there are three different approaches to universal healthcare, all of which can work and have worked in different countries. However, I believe that single-payer — the government provides insurance, but doesn’t directly provide healthcare — is likely to be the best system in terms of both providing adequate care and keeping costs manageable given U.S. political realities.

But how should we get there from here — or rather from the healthcare wreckage at the end of the Trump administration?

I still believe that it would be a political mistake to simply impose single-payer, requiring Americans to give up private insurance. Buying off the insurance industry is much less important than it was in the past, but it’s still difficult to sell people on giving up what they have in favor of something else, even if the replacement would be better.

Americans now dislike insurance companies far more than they did in the past. But most people with private insurance still say that they are satisfied with their coverage, although not as satisfied as Americans covered by Medicare:

This suggests that an attempt to push people into Medicare-for-all would run afoul of concerns about change.

But it would be much less controversial, I believe, to offer a public option — allowing Americans, including employers providing insurance to their employees, to buy into a Medicare-type system. Many people surely would avail themselves of that option. And if they like what they get, which they probably would, we could transition over time to a single-payer system without forcing Americans into it.

Of course, insurance companies would hate this, and campaign furiously against it. But given their current reputation, this might even help the cause of reform.

Now, I am not offering policy specifics, partly because this post is already long but mostly because this is the point at which we need details from real experts. And I am not at all dogmatic about the path forward.

The main point is, instead, that we are approaching a point at which ambitious healthcare reform, well beyond simply repairing the damage to Obamacare, will be possible. And Democrats should be prepared to rise to the occasion.