Cable news is jammed with horrific stories of widespread destruction and disarray caused by an unpredictable calamity that struck with sudden, unstoppable force, thrusting many who were already sorely beleaguered into chaos and desperate disarray. Hurried rescue missions failed to prevent widespread pain and suffering. Such is life for the Democrats following the Massachusetts special election. Tip O’Neill was misquoted. All politics is loco. The big question now is whether the Mass. disaster presages a mass disaster for the Dems come November.

What does Scott Brown’s imminent coronation mean for health care reform? Unless Nancy Pelosi misspoke last week about not having the votes to pass the Senate bill, it seems almost certain that nothing like the House’s current tantrum of a bill or the Senate’s own throw-a-bunch-of-economically-dumb-stuff-against-the-wall-and-hope-it-sticks version has any chance. The Speaker still holds out hope, however, for punishing insurers for, well, being insurers. She wants to limit their profits and force them into business practices guaranteed to accelerate premium increases for the rest of us.  The President at one point last week seemed  to raise the white flag, but later erupted in populist demagoguery against “insurance-company bureaucrats,” pledging to press on to overhaul the system with an army of government bureaucrats. But major backpedaling by Harry Reid and other, more career-minded politicians strongly suggests that a major fix is out and face-saving is in. As we saw after the Clinton reform debacle of 1994, it may be a long time before the White House or Congress has the stomach to try it again. Let us hope so.

Yet anyone who thinks we’ll be waiting another fifteen years to revisit fundamental reform is smoking tea leaves rather than reading them. The problems of health care are too big, too serious, and too unstable for too many constituencies—Medicare and Medicaid beneficiaries, primary care physicians, the uninsured, small employers, large employers, and America’s taxpayers to name a few.

There is a real risk that, without a proper restructuring of safety nets and health insurance markets to correct the latter’s market failure, we’re heading toward a tipping point where our health care system simply and suddenly breaks down, either economically, socially, politically, or name-your-poison-ally. Won’t happen, you say? Then think sudden death of the Soviet Empire, or the great tech bubble/bust, or, most recently, the credit meltdown and Great Recession. We weren’t expecting those either.

Yet despite this past week’s undermining of whatever flawed political will there may have been to reform the system, there is hope. It just doesn’t lie in federal leadership. It resides in the states. That can be a good thing, because the risk is simply too great that a single one-size-fits-all federal solution will do more harm than good. We need the individual states to take up the mantle of health reform and engage in a multitude of iterative experiments to endeavor, learn, modify, adapt, discard, and perfect the mechanics of reform until a fittest survivor emerges that is worthy of widespread emulation—even by the Congress.

Already there are active state initiatives. The most visible is the Massachusetts’ Health Connector which, despite its deep flaws and accelerating costs, contains core market concepts that could succeed if modified in recognition of the critical importance of adverse selection, voluntary participation, free-rider prevention, adjusted community rating, rational benefit limits, and government restraint. Unfortunately, that’s not likely to happen. It’s still Massachusetts.

It’s early yet in the state race, but if I had to pick a likely winner, my money would be on Utah. Despite serious design defects in its v1.0 Health Exchange, the legislature seems determined to fix it, earning the state an early lead in establishing the kind of individual health insurance marketplace that could be a real game-changer. Behind Utah is Colorado where a core group of bi-partisan legislators are setting their sights on an even more comprehensive market-based solution. Elsewhere, Connecticut and New York already have functioning private insurance exchanges that might be encouraged to blossom into bigger things. Pennsylvania has some interesting, however fragmentary innovations that may offer promise as components of larger solutions.

Still, the states can go only so far by themselves. A big problem is that the feds hold a monopoly on too many key regulatory, safety-net, and tax policies.  Without liberal state access to waivers of key provisions of ERISA, HIPAA, Medicaid, TRICARE, SCHIP, and—particularly—Medicare, none will have sufficient freedom of action to enable the emergence of health insurance and medical delivery markets that can meet our essential needs. Let us hope that the White House and Congress will see value in letting, if not a thousand, then fifty flowers bloom in a new national quest for universal, high-quality, sustainable, affordable health care.

This entry was posted in Government vs Markets, Health Costs, Health Insurance, Health Reform Goals, The Health Care Crisis and tagged , , , , . Bookmark the permalink.


  1. Good analysis, Steve. Keep up the great work.

  2. John Sweeney says:

    Where would one find out more about Utah’s approach?
    - John

  3. Stephen Hyde says:

    John, I’m working on an article specifically about Utah, so please stay tuned. Steve

  4. Huson Middleton says:

    Steve, this is exciting commentary. We can only hope that the right people are reading this perspective and integrate it into new policy. Huson

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