The Democratic Party’s 2016 presidential candidates have worked hard to stress their policy differences before voting is underway. Earlier this month, former Secretary of State Hillary Clinton’s daughter, Chelsea Clinton, mentioned how Bernie Sanders will “dismantle” President Obama’s health care law — a disingenuous claim meant to portray Hillary Clinton as the defender of Obama’s legacy.
Perhaps if Clinton focused her energies on policy rather than misleading rhetoric, she could point out how untenable Sanders’ single-payer plan really is. Yet as Sanders and Clinton sparred in the limelight, former Maryland Gov. Martin O’Malley, now suspending his presidential campaign, seemed to have the most reasonable health care platform to control rising costs and a record of accomplishments to back it up.
O’Malley’s platform was impressive in two ways. One, he successfully lowered costs in his state by changing the way hospitals are paid. And two, he hails from a state that has successfully run an all-payer system.
In a single-payer system, the government insures all citizens with a single plan, essentially abolishing private insurance. Such systems cut costs by increasing the negotiating leverage of the insurer.
Government-run health care such as Medicare and Medicaid currently pay much less for care because their patient populations are so large. This means they provide a large number of patients to providers who work with them.
A single-payer system simply insures everyone this way. However, raising the revenue for such a system requires a massive increase in tax revenue with consequent economic repercussions. The government must also decide which procedures to cover, leading to contentious political fights over newly developed but unproven treatments. This would stymie health care innovation by discouraging experimentation.
Finally, government-run health care tends to distribute service inefficiently. Canada’s single-payer system has infamously long wait times, and the U.S.’s Veterans Health Administration has received the same criticism.
Alternatively, an all-payer system preserves the present combination of public and private insurance plans, but regulates the maximum cost of each procedure. Maryland adopted this system in 1977.
From the time Maryland created the Health Services Cost Review Commission — the independent board tasked with negotiating rates with hospitals — in 1971 to 1995, Maryland’s cost per hospital admission went from 25 percent above the national average to 6 percent beneath it. This also limited cost shifting, wherein free emergency care given to the uninsured forces hospitals raises rates exorbitantly on insured customers.
During his tenure, O’Malley overhauled and updated Maryland’s all-payer system, requiring hospitals to cap cost increases at 3.58 percent — equal to the average per-capita economic growth of the state, according to Governing magazine. Under the plan, hospitals will also save Medicare approximately $330 million over five years starting in 2014.
Other countries have used this model with great success. In 2013, the U.S. health care expenditure to gross domestic product ratio — the highest of 35 countries measured by the Organization for Economic Co-operation and Development — was about 5.5 percent higher than in Germany and 6 percent higher than in Japan — two countries that have all-payer systems.
Furthermore, under a payment scheme commonly referred to as global capitation, O’Malley created an incentivized structure to promote higher quality care.
To clarify, imagine a consumer at McDonald’s. The consumer decides how many hamburgers to buy based on the information about their hunger. Health care consumers don’t have the same information. Service providers, just as in a capitalistic enterprise like McDonald’s, have an incentive to supply more service. But unlike McDonald’s, service providers have a monopoly on information. U.S. health care expenditure is most likely high because doctors order more expensive procedures or more frequent hospitalizations under this fee-for-service incentive.
Under global capitation, rather than receive money for each hospital admission, hospitals receive a lump sum of money based on projected admittances. If the hospital is able to coordinate with the primary care physician to provide care outside of the hospital — where it is less expensive — then they keep admittances below the projection and retain the additional profit.
In Maryland, preventable hospitalizations dropped by 11.5 percent between 2011 and 2014. O’Malley’s goal in 2011 had been a 10-percent decrease by 2015. Moving from fee-for-service to global capitation contained costs, and, according to The New England Journal of Medicine, the system created an incentive for high-quality preventive care.
Despite the resounding success of Maryland’s health care model and the comparable efficiency of similar foreign systems, such reforms are earning little attention from the media. During the Democratic debate in Charleston, O’Malley forced himself into the discussion when health care was discussed. He only had the brief opportunity to vaguely reference his achievements.
It’s clear that O’Malley had the best health care record in practice. Unfortunately, due to his withdrawal from the presidential race, we’ll never get to see his ideas implemented on a nationwide scale.
Rather than focusing on Sanders’ grandiose promises and Clinton’s rhetorical claims about defending Obama’s legacy, perhaps we should’ve examined the progress of state-level experimentation in this election. Of course, that doesn’t offer the same level of political theatrics.
A previous version of this story omitted “President Obama’s health care law” after “dismantle” in the column’s first paragraph. This correction is reflected in the story above.
