Health care policy reform - in the public interest or for the special interests?

Business Economics, April, 1993 by Ross C. Korves

CHANGE IN public policy on health care at the federal government and state government levels is one of the major public policy areas for 1993. Hundreds of plans have been proposed by various health care provider groups, representatives of consumer groups and elected officials. The claimed goal of these efforts is more access to needed care for more people at more reasonable prices.

If governments did not intervene in the health care delivery system in any manner, some amount of health care would be demanded by consumers of care with money to pay for care, and some amount of care would be offered by health care providers responding to the market demands of health care consumers. We could argue over how this market would operate and how much care would be consumed, but a market would exist without public policy on health care. The only reasons to have government intervention is to increase the quality, increase the quantity, lower the price and expand the number of people who could afford to have care. The 1993 debate about public policy on health care begins with the assumption that increased government intervention will lead to a more positive outcome than would occur without that additional intervention.

Public policy on health care, or any other issue, is not made solely by disinterested public servants toiling to improve the lot of the common man. Votes are made in the Congress and state legislatures by human beings who have their own opinions shaped by their personal experiences and the experiences of family and friends. Millions of dollars, perhaps billions, will be spent by providers and receivers of care to influence votes by our elected leaders.

Public policy on health care is made by compromising many different special interest views to the point that enough groups will not oppose an outcome so that it can command a majority vote. Public policy on health care will change when the pain associated with maintaining the status quo is greater than the pain caused by moving to new policies. Economists should be concerned for personal reasons, because the quality of our lives and the lives of people we care about will be influenced by who controls the money in the health care system. But business economists also need to watch this debate for two business reasons:

1. Business costs will be directly impacted by changes in health care policy. Employers with employer-based health care plans are already familiar with the costs of health care. These costs will be impacted by federal government-imposed minimum benefit requirements. Employers who do not provide health care plans may be required to provide a plan or pay a payroll tax to fund employee health benefits from a state or federal plan. Higher business taxes may be imposed to pay for expanded care for low-income families.

2. The outcome of the health care policy debate may establish new precedents on how businesses can use public policy to influence the cost of inputs. If businesses can use public policy to force suppliers of health care for employees to accept government set prices, could they do the same with other suppliers? Would washing machine manufacturers then try to use public policy to control the price of steel or plastic, or car rental companies use public policy to limit price increases on automobiles? By the historical accident of providing health care as a fringe benefit, businesses have been sucked into a much wider debate of government-set prices and standards.

THE ACCEPTED POLITICAL AGENDA

The debate on health care policy has already been shaped into a narrow debate over how to implement changes that have become part of the accepted political agenda. This agenda is articulated in many different ways, but basically it comes down to universal access, cost control and redistribution of who pays for care. All plans, regardless of how "marketed-based" or how much "government control," come back to those basic points, Goodman and Musgrave describe from a public choice economics perspective why that has happened:

". . . political competition inexorably leads candidates to adopt a specific position. It is called the winning platform. The idea of a winning platform is a fairly simple one. It is a set of political policies that can defeat any other set of policies in an election. A politician who wants to be elected or re-elected has every incentive to endorse the winning platform. If he does not, he becomes vulnerable; for if his opponent adopts the winning platform, the opponent will win the election . . .

"This line of reasoning leads to a remarkable conclusion: In democratic political systems with two major political parties, the tendency is for both to adopt the same political policies. They do so not because the party leaders think alike or share the same ideological preferences, but because their top priority is to win elections and hold political office."

During the presidential campaign, the language of President Bush and Governor Clinton may have been different, but the expansion of the role of government in the delivery and payment of health care was at the root of both policy positions. What is true about politicians and elections is also true of special interest groups trying to influence politicians. The ongoing debate on health care is not a philosophical one. The action in 1993 will be a fight of special interest groups to turn the accepted political agenda to their advantage.