Letter from America: the political economics of US healthcare reform.

Abstract

Obama's proposals are incremental and reflect the lesson learned by Hilary Clinton: that small steps are required to address big problems and the fact that there are no simple ‘magic bullet’ solutions to improving its performance. Lack of universal coverage and uncontained costs lie at the heart of the ‘broken’ American healthcare system and the current reforms do not offer an easy or assured approach to reducing both in the near term. Despite high expectations, the proposed investments are likely to be inflationary and any cost savings are likely to be longer term. Aspiring to universal coverage is more feasible than reducing costs that require some stakeholders to lose in order for the government to achieve its savings. The economic price attached to the current reforms is considerable and so controversy is inevitable. Nevertheless, Obama's election and his proposed reforms mark a significant political milestone. It was small step from the free market ideology of Friedman, Hayek and others to the assertion by President Gerald Ford that ‘a government big enough to give you everything you want is a government big enough to take from you everything you have’ and President Ronald Reagan's later claim that ‘government is the problem not the solution’. So long was the shadow cast by this stance that President Bill Clinton subsequently felt obligated to maintain that ‘the era of big government is over’. In his November 2008 victory speech President Obama told Americans that ‘we have never just been a collection of individuals’, signalling that the political pendulum might be swinging away from the dominant conservative ideology of recent decades that has emphasized the self-interested individual. During his inauguration he went further, to declare that the ‘stale political arguments … no longer apply’ and in respect of healthcare that, ‘the question today is not whether our government is too big or too small, but whether it works, whether it helps families … find care they can afford’. There is increasing consensus that the need for government regulation of the financial markets is a matter of degree. This was given voice by Obama during his inauguration speech when he stated that despite its strengths, ‘without a watchful eye, the market can spin out of control’. Though it is not clear how far-reaching health reforms will eventually be, it is reasonable to assume they involve stronger state involvement and the time when the US healthcare system has been an open playing field for free market ideology may now be passing.