4 Conundrums That Impede Healthcare Reform

Everybody agrees that something is wrong. Yet it remains remarkably hard to fix our $2 trillion healthcare system.

Part of the reason, obviously, is that a lot is at stake. Healthcare accounts for 16 percent of the economy, a far higher portion than in most other developed nations. Yet even though we pay more, the care we get is hardly better and in some cases worse than what's available elsewhere. President Obama's plans to improve the return on our healthcare dollar would affect the livelihood of millions—some for the better, and some for the worse. That makes healthcare reform an epic political battle.

[See why postal-style healthcare might not be so bad.]

But the sporadic availability and skyrocketing cost of healthcare are inherently vexing problems that have bedeviled reformers for 50 years. Here are a few of the factors that make it so difficult to revamp America's healthcare system:

Exorbitant costs are often hidden. The foremost problem with healthcare is its cost, which is rising at least twice as fast as overall inflation. Healthcare is becoming an unsustainably large part of the economy. Yet many of the people hurt most by this problem are oblivious to it.

Anybody trying to pay for medical care out of his or her own pocket knows how crushingly expensive it is. But those who have health insurance through their employer—about 61 percent of Americans—often feel as if somebody else is bearing most of the cost. Yet the real cost to workers is a lot higher than most realize.

As premiums shoot up from year to year, employers initially cover most of the increase in cost. But it gets passed on to workers in one way or another. Health insurance is usually part of an overall compensation package, which also includes pay. If employers are spending more on benefits, there's a good chance they're spending less on pay, in order to keep total compensation stable. That, in fact, is what's been happening: While healthcare costs have been skyrocketing, wages over the last decade have stagnated for the first time since the Great Depression.

[See the industries hurt most by soaring healthcare costs.]

The majority of Americans with insurance say they're satisfied with their healthcare. But chances are they're earning less money in exchange for satisfactory health insurance. There's even new evidence that soaring healthcare costs are killing jobs in industries with the highest rates of coverage, such as manufacturing, finance, and education. Pollsters should really ask Americans if they're comfortable giving up a raise, and maybe even their job, in exchange for decent healthcare. And whether they're willing to pay even higher roundabout costs in the future.

It costs money to save money. About one sixth of the American population, or 47 million people, have no health insurance, and when they need care it's often the most expensive kind: Treatment at the emergency room. That's one major source of healthcare inflation, and we all pay for it through higher premiums.

Containing other costs without covering the uninsured is like building half of a bridge: What's the point? But the upfront cost of covering the uninsured has driven the price tag for reform as high as $100 billion per year in new government spending. The savings are supposed to come later, through preventive medicine for the previously uninsured and greater competition between a new public plan and existing private plans.

[See why health insurers aren't as rich as critics claim.]

Uh, maybe. Was it also necessary to destroy the village in order to save it? It's hard to blame Americans for being skeptical of pay-now, save-later promises. A more rational approach might be to find cost savings first and use those to pay for increased coverage. But the political climate seems to dictate all-or-nothing reform rather than evolutionary improvements.

Rationing is OK in practice but abhorrent in theory. God forbid we should ever ration healthcare based on which treatments provide the most bang for the buck. We could end up with a system that's . . . the same as the one we have now.

We ration resources in virtually every aspect of our lives, based on how much money we have and how we choose to use it. Yet healthcare evokes an unusually emotional response, and we refuse to regard it as a scarce resource that must be rationed, even though that's what it is. Fears about government-backed panels that would decide how much to pay for various kinds of medical care, based on what works and what doesn't, have stoked rage over the prospect of denied care. Yet the system already denies care, and does so ruthlessly. To get affordable care, first you have to work for a company that provides it. If you have a pre-existing condition, you might be out of luck anyway. And if you need treatment that your insurer doesn't feel is medically necessary, your only choice is to pay the prohibitive fees yourself.

[See the trouble with healthcare reform, in numbers.]

Apparently we don't mind it when insurance companies ration healthcare, we only object to theoretical government rationing meant to keep the nation solvent. If we applied the same mentality to other aspects of government, we'd insist on a police officer to protect every home, a tutor to guide every student, and a food inspector to check every meal for E coli. All without a tax increase.

Incremental reform could be worse than nothing. A rational approach to any complex problem is to break it into pieces and tackle one thing at a time. Yet Obama and his congressional allies are doing the opposite, aiming for a massive overhaul of the whole healthcare system in the space of weeks. It's hardly surprising that Americans are jittery about sudden changes that are hard to understand, could cost them money, and might affect their access to a vital resource.

The catch, of course, is that politics isn't rational, and that Obama probably has a limited window of time to exploit his power and push this boulder up and over the hill. Americans would prefer incremental changes, but those could easily be undone if power shifted in Washington or special interests maneuvered adroitly. And stutter-step changes based on political whims are often worse than nothing at all, since they waste money and time.

So we will either wreck or save the entire system all at once. That's not what most of us want, but it's the best our politicians can offer. Good thing they're not doctors.