Two months ago, David Ziegelheim ’75 started a discussion on LinkedIn about health care reform: “What is your solution for health care services?” he asked. His question generated nearly 800 replies.

Comments have continued since Obama’s landmark legislaton passed earlier this week. Read Ziegelheim’s opening statement and some recent remarks after the jump.

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Original question:
What is Your Solution for Health Care Services?

Health care…now that there appears to be a nearly clean sheet of paper to start over…what should be done? What are the issues? What are the solutions? As MIT alums, as a whole we probably have a more analytical viewpoint. Individually, many of us are physicians or work in health care related industries such as pharmaceuticals. What do we think?

Let me start off, addressing it from the standpoints of economics, research, and fairness.

1. Economics

Whether a country, a company, or an individual, the lowest cost producer always has the advantage. Whether the goal is to deliver a better product for the same price, the same product at a lower price, generate a higher return to attract more investment for future growth, reach out so that more consumers of your product are aware of its features, or improve your distribution so more people have access, the person who can deliver more for less has the advantage.

The only way to achieve this is to have a competitive environment on a level playing field. That requires no single participant to have a dominant market share and that no player can break the rules without penalty. We have seen in many industries with players such as Intel and Microsoft, where a dominant market share leads to predatory practices that hurt overall competitiveness and the development of products to meet customer needs. We don’t have that today. Over half of individuals are covered by a government run program. Most others are covered by their employers where they have no choice other than three predetermined options from the same carrier. Even the employer has a very limited number of options, with state insurance boards limiting the number of players.

Without a change here the underlying forces to make health care responsive to people won’t be there.

2. Who Should Pay?

Who should pay? People covered by their employer, whether private or government, pay directly if invisibly as it is a cost of their employment. To the extent that the employer’s cost reflects the age and the health of the employee it makes it difficult to gain employment for older workers. Those on government plans have no choice in their coverage and transfer their costs to people who don’t receive a benefit from their coverage.

Ezekiel Emanuel, brother of the White House Chief of Staff and senior healthcare advisor to the OMB in the White House probably had the best plan. Every individual would receive a voucher for health care coverage. The size of the voucher may vary depending on age and health, but the individual would be free to choose among a large number of suppliers (Emanuel suggests 60-70) who would compete in the way auto insurance and Medicare Part D providers compete. Individuals could pay more than the voucher, and there would be intense competition for the best benefit package within the cost constraints of the voucher. As with Medicare Part D and auto insurance, there would be minimum required coverage levels and oversight to prevent fraud.

Emanuel suggests paying for it with a VAT. The advantages and issues of a VAT are a different discussion. However, a dedicated generally regressive tax, preferably not related to employment income directly, that was dedicated to the program would let the government determine the tradeoff between cost and benefit directly. If the tax isn’t regressive, large parts of the population would have no stake in anything other than a maximum voucher size. There can be other mechanisms to soften the impact on lower income individuals unrelated to the tax.

Recent response:

For the record, I agree that Republicans presented many good ideas (tort reform among them) that weren’t included in the final bill. Even if those ideas had been included, though, the bill would not have garnered a single Republican vote, because both parties were voting based on party politics rather than on what’s best for the country.

Regarding your point that future Congresses can vote not to appropriate funds, you seem to have missed my point that it’s not politically expedient for them to do so. People who are upset about this bill may carry their anger to the polls in November (although 8 months is a long time in politics – how many people are still thinking about Sotomayor or ACORN from last July, or the Franken/Coleman battle for the Senate?). Nonetheless, by the time the new Congress passes the budget for the following year, people will be expecting the health care reform bill to be part of it. Many measures in the bill, such as closing the Medicare donut hole and allowing parents to keep their young-adult children on their family medical insurance, take place right away. If the next Congress votes not to fund this bill, they will anger a large number of constituents who will expect these benefits while only appeasing a fringe minority. Since congresspeople vote based on getting themselves and/or their party re-elected, denying funding for the health care bill seems unlikely.