With the presidential primary campaigns in full gear, health care is again a main issue. Each of the major candidates has a plan for addressing the cost, coverage, and quality of modern medical care in America.
All the plans have many technical differences in provisions, funding, and coverage. However, let’s look at the big picture — at fundamental philosophies that drive all proposals. I argue there are two such philosophies, a top-down centralized approach, and a bottom-up, decentralized strategy. Knowing the pluses and minuses of these competing ideas will enable you to better judge any specific plan.
The top-down philosophy is best illustrated by plans that embrace a single-payer health-care system. Under this plan the government would pay for all health-care expenditures in the country. Funding would come from some form of taxation, most likely a new payroll tax shared by businesses and workers. Everyone would be included, so the issue of uninsured individuals is immediately eliminated. Also, affordability would not be an issue because the government would pay all medical costs.
Supporters of the single-payer plan see several advantages. Besides full coverage for all, they see a streamlined system that eliminates many administrative costs and in which profits don’t have to be paid to providers. People would no longer worry about losing health insurance when changing jobs, and quality of care could be better equalized across the county.
However, critics of the top-down philosophy point to three potential pitfalls. One is the lack of competition, which is required in any market to motivate producers to focus on consumers’ needs and wants. The removal of the profit motive, critics argue, is a disadvantage of single-payer plans because the pursuit of profits is what causes businesses to eliminate waste and be cost-effective.
But the biggest concern with the single-payer system is the imbalance it creates between the quantity of health care that consumers want and the amount the government will fund. Even though consumers would pay for the plan through taxes, there is no direct tie between taxes paid and health care used. Any trip to the doctor or hospital is free, in the eyes of the consumer. So, government would have to limit health-care usage with rules about what and when care is authorized.
The alternative path to changing health care is the bottom-up approach. This philosophy says that, given enough information as well as the financial means, individuals can best make their own health-care choices. By putting consumers of health care in charge, competition between providers will result in the highest quality and most cost-effective health care possible.
Implementing this “consumer driven” path would require changes from both consumers and providers. Universal coverage would be guaranteed by requiring everyone to purchase health insurance. Health insurance policies would be linked to individuals, not to jobs, by giving the same tax advantages to individual purchases of policies that company purchases now enjoy. For people who don’t have the financial resources to buy health-care policies, government subsidies, in the form of vouchers, would be provided.
The bottom-up philosophy would also require changes in the provision of health care. In particular, health care and health-care insurance would be opened to many more types of companies and many more types of insurance policies. Government regulations on providers would be curtailed. The idea would be to make the health-care industry more competitive and, consequently, more price-friendly.
Skeptics of the consumer-driven approach say it would create an unregulated “free-for-all” in health care with the consumer on the losing end. They question whether consumers have the knowledge to make the competitive system work in their interests, and worry that profits, not people, would drive providers’ choices.
In some sense, the debate between the top-down and bottom-up approaches to health care is symbolic of a wider, centuries-old clash over what kind of economic system best serves consumers. My reading of economic history gives the clear nod to individual, and not state, control, but this debate is still far from resolved in the public’s mind.
Michael Walden is a William Neal Reynolds distinguished professor at North Carolina State University and an adjunct scholar of the John Locke Foundation.