Health Reform: If Not Now, When?

Two recent encounters have gotten me thinking about health reform.  The first was with my hair stylist—hardworking, talented, bright—who had a bad respiratory infection. She had just finished a 7-day course of antibiotics, but still had symptoms of a secondary bacterial sinus infection. Because she has no health insurance, she was thrilled that the antibiotics had only set her back $70. She was dismayed that she was still sick after a 7-day course of antibiotics. She was terrified that it might still land her in hospital. Another stylist at the same salon with the same symptoms had ended up in hospital with pneumonia. The other stylist also did not have health insurance.

The second encounter occurred a few days later when I gave a seminar at a university in another city.  During the cab ride to the train station after the seminar, my 38 year old cab driver revealed that he had recently obtained health insurance for the first time in his life.  He was thrilled, but also concerned that his new insurance was not comprehensive and most likely would not cover a serious illness or injury.

Then he asked me THE QUESTION: What do people do who don’t have insurance?

Many if not most hair stylists and cab drivers are essentially self-employed independent contractors who “rent” the place where they stand in a salon or the cab that they drive. They receive no health insurance benefits, no sick days, no retirement benefits. If they don’t work, they lose income. If they get really sick or injured, they lose everything.

The inequalities in income distribution  that have become greater in the US over the last 30 years are nothing compared to the growing inequalities that will result from an increasingly larger pool of Americans who lack adequate health insurance cover. Each unforeseen, primary care-preventable illness, every serious injury will cause them and their families to fall further behind economically and in the quality of their lives.

Joseph Stiglitz, Amartya Sen, and Jean-Paul Fittousi recently wrote in the Report of the Commission on the Measurement of Economic Performance and Social Progress:

But while the precise list of the features affecting quality of life inevitably rests on value judgments, there is a consensus that quality of life depends on people’s health and education, their everyday activities (which include the right to a decent job and housing), their participation in the political process, the social and natural environment in which they live, and the factors shaping their personal and economic security.

The Gini coefficient captures our growing income inequality. How do we capture the inequality induced by 30 million people and growing who have no health insurance?

More importantly, why, in a nation whose national narrative extols the virtues of entrepreneurship and individual effort, are young entreprenurs who choose jobs like hair styling or cab driving penalized for that choice?  I personally know two hair stylists who started as  independent contractors and worked their way to salon owner and employers of 10 to 20 stylists, manicurists, and estheticians. A major uninsured illness could have stopped them and the contributions they made to our economy dead. Literally.

As I contemplate this, I find myself recalling one of my favorite passages from Adam Smith’s Wealth of Nations (B1, Ch 2 )

The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came into the world, and for the first six or eight years of their existence, they were perhaps, very much alike, and neither their parents nor playfellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance. But without the disposition to truck, barter, and exchange, every man must have procured to himself every necessary and conveniency of life which he wanted. All must have had the same duties to perform, and the same work to do, and there could have been no such difference of employment as could alone give occasion to any great difference of talents.

“...till at last the vanity of the philosopher [or banker or politician or school teacher or auto worker or college professor or physician or economist or...fill in your own occupation...] is willing to acknowledge scarce any resemblance.”

The division of labor has allowed us to enjoy the fruits of unfettered productivity and common wealth. Smith’s famous pin factory has over time given us greater output. With an assist from labor unions and the National Labor Relations Act  it has also given us higher wages, and more leisure time. In the US, the pin factory for a variety of reasons, some historical , some economic, some political, provides health insurance to its employees.  Over time, pin factories in the US have closed, replaced by large corporations that provide fewer manufactured goods and more services.  Those who do not work for large companies, including small business owners, independent contractors, and the individuals they employ, are often unable to obtain health insurance either as employer-sponsored groups or as individuals in private markets.  Yet these entrepreneurs are an important source of job creation and economic growth. Moreover, they represent the kinds of businesses we as a society should want to foster: embedded in their communities and therefore responsive to community demand and community welfare; small enough to fail and big enough to foster growth, employment, and innovation from the bottom up.

We in the US have been marginalizing the people who are the heart and soul of commercial enterprise, the small businesses and workers around which most of our communities used to be built. We are in effect segregating them based on employment status and health insurance cover. These are people who embody the values we say lie at the heart of our nation and our economic system: entrepreneurial, hard working, self-starters. By continuing to exclude them and their employees from affordable and adequate health insurance, we are in real danger of relegating them instead to a permanent underclass, a “servant” class that styles our hair, drives our cabs, cooks our food, cares for our children, and manicures our lawns. Until they get sick or have a car accident.

The divide is unsustainable. We cannot maintain economic growth and greatness with a growing proportion of US citizens excluded from one of the most basic requirements for the successful pursuit of life, liberty, and happiness.

I have written elsewhere about the efficiency aspects of a public option, but even without it Paul Krugman,  David Coates and Theda Skocpol are right.  Comprehensive, affordable health insurance must be made available to everyone. Every other developed country has done it. It does not get cheaper or easier to fix as time passes. We must do it now, in a form as close to optimal as can be achieved politically, and worry about the details later.  It’s the right thing to do both economically and morally.

Comments

[The Raven]

I don't think that's what we're going to get without a public option (or even with a limited one, though there is more hope if there is a limited one.) Instead, I think a lot of people will be required to spend money they don't have on insurance they can't use. Without cost controls--and despite Krugman's protestation, anything that the insurance and pharmaceutical industries thinks might actually reduce consumer prices has been left out of the bill--I think we're going to end up where we started, except that even more money will have gone into the financial services industry.

& the Obama administration seems to want the House Democrats to fall on their swords for the insurance industry.

[online doctor]

is it true that the public is not move on healthcare? I've recently read an article about healthcare, i hope that this issue will soon resolve.

[Maxine Udall (girl economist)]

You may be right, Raven.

I'm hoping that with more insured people, we're likely to have more engagement in the costs/rising premia issue, and that in turn will eventually result in the political will to address costs in a way that is fair to all. Also, in order for the Feds to regulate something, they have to own it. With the mandate in place, they will own it.

We are already moving in the right direction. Market forces, such as they are, are on our side. Employers are not immune to rising health costs and their impact on corporate bottom lines and competitiveness. Medicare reimbursement policy is on our side and will continue to "lead" other insurers in rewarding high quality, prevention, and chronic disease management and in penalizing waste and low quality. You can see this already in recent changes in reimbursement policy. Employers will demand the same as they shop for group policies (if they're self-insured, they'll have even higher incentives to reduce costs through disease prevention and health promotion).

Whatever reform bill passes can only be a first step. I believe it gets us over the most formidable hurdle: it acknowledges that everyone is entitled to adequate health care. Once that has been codified, it should be much easier to tinker with the details.

I hope I'm right. :-)

[Aetius Romulous]

I never believed health care was the issue. The issue is ideology. It is completely irrelevant what gets negotiated and passed. The ideological sides are entrenched.

Until social conservatives and liberal economists can account for the teeming masses of excluded that unfettered free markets produce, their broken theory will always provide ample fodder for the other side. Your comments on a "servant class" are absolutely spot on. This class is a victim of much more than health care.

No ideology of freedom, liberty, or the pursuit of happiness holds any water until the forgotten and disenfranchised have been addressed.

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