“It will be repealed and replaced and we’ll know […] that’s what I do, I do a good job”, so were the words President-Elect Trump spoke during a 60 Minutes interview on November 13th. Elected on a platform which promised to repeal the Affordable Care Act (henceforth “ACA”), Donald Trump benefited from a wave of right-wing populism aimed primarily at the bureaucracy of the Washington Elite.
To that end, Obamacare came to embody all which Trump vowed to fight in his mission to “Drain the Swamp”: a government program which sought to benefit public welfare through compulsory payments but which failed to live up to its initial promises of widespread prosperity. Even worse for its proponents, Obamacare premiums rose in nearly every state in past October, continuing a sad trend seen throughout the 44th President’s two terms which has seen coverage costs rise by nearly 50% since 2008.
Though hundreds of analyses have already been undertaken as to why Obamacare has fallen short on its initial promises, the main overarching argument is the following: forcing more people to purchase healthcare (thus artificially raising demand) while keeping supply essentially stable at every price level (which can only be increased through large hands-on government programs, which are unlikely to be approved by Congress) will inevitably lead to a higher equilibrium price.
Forcing more people to purchase healthcare (thus artificially raising demand) while keeping supply essentially stable at every price level (which can only be increased through large hands-on government programs, which are unlikely to be approved by Congress) will inevitably lead to a higher equilibrium price.
Yet, for all this brouhaha, I am not here to talk about Obamacare specifically so much as to talk about healthcare provision in general. First of all, I will not belie the fact that I am a classical liberal, and that I shudder at the thought of said large, hands-on government programs. My rule of thumb is that money is best spent by those to whom it shall be of service. Simply put, an invisible bureaucracy in Washington will never be able to buy me better insurance than I would have myself. But I too will not belie the fact that I recognize that money is often lacking for those poorest in America, even for the most basic things as healthcare. Even today, nearly one out of every ten Americans is uninsured.
Though I cannot in good conscience state that we as are individuals entitled to another’s service, I do believe that it is the duty of an industrialized nation to ensure its people’s health. As such, I see no wrong in pursuing a government mandate to ensure universal healthcare coverage.
Unfortunately, there are many who hold extreme views in regards to healthcare coverage. On one hand, even minor attempts to establish an insurance mandate, like the ACA, are cried out as “socialism” or “tyranny” by an increasingly right-wing Republican base. On the other hand, support for a single-payer system like that of Great Britain is ever-growing within a Democratic Party that nearly nominated a self-described “democratic socialist” in 2016. Yet as a man of many nations and tongues, I have come to encounter systems that fall in-between this divide, mandates that promote competition and innovation inherent to a market system while ensuring total welfare akin to many public programs.
The Physicians for a National Health Program, an interest group in favor of a single-payer healthcare system, prepared a wonderfully comprehensive list of the four main systems seen worldwide. I invite you to give it a look if you have time, though I will briefly summarize these here.
The first, and simplest to explain, is the “Out of Pocket” system. Much like pre-ACA America, this system is completely privatized. Each person pays for his or her own coverage through a private, often for-profit insurer.
The second and third systems – the Beveridge model and the National Health Insurance model – are both similar in the sense that the government pays for every citizen’s coverage through taxes. The only difference is that while in the former the government also runs most hospitals and directly pays medical professionals, in the latter taxes are given out to heavily-regulated private providers. In both cases, the government remains the single payer.
Admittedly, these are the main systems we have come to encounter through coverage of the current healthcare debate within the United States. Whereas the left clamors for a single-payer system, the right winces at the thought of socialized medicine.
However, amid this massive polarization between options, this on-or-off paradigm when it comes to healthcare provision, there lies a fourth, extremely prevalent system – the Bismarck model.
Named after the late 19th century German chancellor Otto Von Bismarck, this system will seem familiar to most Americans. Employees feed part of their salary into a payroll fund, which is subsidized by their employers according to their base income. This fund is then used to pay heavily regulated, non-profit private insurers. This coverage includes dependents, such as stay-at-home spouses and children. Those who cannot receive coverage through employment, like the retired or the long-term unemployed, received Medicare-type government coverage.
In a 2000 WHO Report, nations were ranked by the quality of their health system. Among the top 10 nations, only one – Spain – did not have a Bismarck system. Why is this system so successful?
What the Bismarck system achieves is the best of both worlds. On one hand, it ensures that the entirety of the population has some sort of basic health coverage. On the other hand, it promotes innovation and affordability through the inherent competition of a market system. In short, it ensures universal, majority-private insurance.
Now, I will not deny that this Bismarck system seems awfully familiar to the ACA. Here too, insurance is supposedly universal and majority-private, since citizens are forced to have some sort of coverage. But there are a few key – and important – differences in these two models.
The ACA for instance does not ban for-profit private insurers, who remain the overwhelming majority of providers. The ACA does not provide for universal employer mandates, with partial existing ones having been delayed numerous times. The ACA does not make for widespread competition – still today most providers are limited to the state level, where options remain relatively few compared to the 700+ providers the average Frenchman can choose from.
These three stated differences are only part of a larger divide between the current state of American health provision and the greatness it strives to achieve. Though a simple single-payer system might seem like the easy way out of pre-ACA madness (indeed, many comparably wealthy nations with single-payer systems rank higher than the U.S. on the WHO ranking), the Bismarck model not only seems more efficient but may also be more feasible. By ensuring that healthcare remains essentially out of government hands and that it becomes universally available, it meets the grievances of conservatives and liberals respectively.
Obamacare may be “a disaster” as Trump says so eloquently, but reforming rather than repealing it seems not only more politically viable but better for the American people on a whole. If his initial decisions to retain some key parts of the ACA are anything to go by, the 45th President of the United States may well have just that in mind. In waiting for these coming changes, Americans must remain steadfast in their pursuit of affordable coverage for all, no matter how difficult it may seem.
As part of a new initiative between the Harvard Economics Review and the Columbia Economics Review, we will regularly showcase a selection of the Columbia Economics Review’s online articles on our website. We hope you enjoy “A Cure for the ACA” by Mathieu Sabbagh as much as we did!