Robert I. Field from Drexel University says the federal government can’t step aside from health care for a simple reason: It is the force that created and maintains the massive system.
President Obama promised an effective government that can solve problems. But right now, it is the government solution that needs fixing. Maybe, the time has come for the government to get out of the way and let the private sector take a turn.
Polls show growing numbers of American reaching that conclusion over the past several years. And their numbers will surely grow as the insurance exchange debacle plays itself out. However, this sentiment, as understandable as it may seem, neglects a central element in the structure of American health care. The government can’t step aside because it is the force that created and maintains the system.
We tend to think of the American economy as a private sector engine of enterprise and innovation. Left to its own devices, there is no problem it can’t solve. And, indeed, it often is an indispensible font of inventiveness and ingenuity. But if left entirely on its own, the private sector can solve very little. It needs a well-funded infrastructure on which to build flourishing enterprises. And only the government can supply that.
This is nowhere more evident than in health care. “Free-market” principles are often seen as a driving force behind the American system. Yet the large and robust private health care sector is almost entirely the product of a half-century of vigorous government intervention.
Four key industry segments demonstrate the point. The pharmaceutical industry spends over $40 billion a year on applied research to turn scientific concepts into new drugs. But very little of this effort would be possible without a foundation of basic biomedical research funded by the National Institutes of Health at a cost approaching $30 billion a year. Almost every major drug developed in the past 50 years owes its existence to at least some NIH-funded research. And going forward, the emerging field of genetic medicine has grown entirely out of the NIH’s initiative to map the human genome.
Hospitals became the technological powerhouses of today on the back of two government funding programs. The Hill-Burton Act paid for the expansion of almost every hospital in America, distributing billions of dollars in the decades following World War II. And Medicare has provided the lion’s share of reimbursement for hospital care for almost 50 years. It is the financial foundation for the for-profit chains that criss-cross the country and for the academic medical centers that dominate high-end care.
Federal funding for education has caused the medical profession to more than double in size between 1975 and 2004. And Medicare supports the high incomes that many specialists enjoy today. Ironically, it is the structure of Medicare reimbursement that maintains the profession’s tilt toward specialty care, while policymakers bemoan the lack of sufficient primary care.
And the private insurance industry that Obamacare seeks to reshape took its present form from the hand of government. Laws at both the federal and state levels have regulated the parameters of coverage since the 1930s, and a huge tax subsidy for employment-sponsored insurance funds more than 35 percent of the premiums. The predominant form of coverage, managed care, would not exist but for the support it received from Congress through the federal HMO Act of 1973.
What would each of these private health care sectors look like had the government not intervened to support them? Each would undoubtedly still exist, as they had in some form for centuries. But none of them could have reached its present size, strength, or level of innovation without the infrastructure the government provided.
Through these and other programs, the government directly funds over half of the $2.7 trillion that America spends on health care each year. The proportion is closer to 60 percent when indirect spending through tax deductions is considered. No other entity has the resources or national perspective to underwrite our health care system on that scale.
And, of course, Obamacare continues the trend. It adds millions of new patients for pharmaceutical companies, hospitals and physicians, and millions of new customers for insurance companies. It will promote yet another private sector growth spurt.
And in fact, on Thursday three tech giants were enlisted by the Obama administration to help fix HealthCare.gov. It’s unclear whether Google, Oracle and Red Hat will have a role with the government besides making emergency repairs to the troubled website. However, at least in the short-term, these companies will enjoy new business opportunities arising from the latest major government health care initiative
It is meaningless to ask whether the government should get out of health care’s way. Computer malfunctions or not, the system could not exist without it.
Robert I. Field is professor of law at the Earle Mack School of Law and professor of health management and policy at the School of Public Health at Drexel University. He is the author of the forthcoming book “Mother of Invention: How the Government Created ‘Free-Market’ Health Care.”
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