May 11, 2009
The Medical-Industrial Complex
Posted by Gordon Smith

Prepare yourself to hear this term a lot over the next few years. It's been around since the early 1970s, but the Obama Administration is preparing to tackle health care, and the "medical-industrial complex" or MIC is its target. Paul Krugman's column yesterday described an initial step in the process: "Six major industry players ... have sent a letter to President Obama sketching out a plan to control health care costs."

That's the easy part, even though it won't seem so easy. The hard part is Krugman's stake in the ground:

I would strongly urge the Obama administration to hang tough in the bargaining ahead. In particular, [the "medical-industrial complex"] will surely try to use the good will created by its stance on cost control to kill an important part of health reform: giving Americans the choice of buying into a public insurance plan as an alternative to private insurers. The administration should not give in on this point.

Actually, "public insurance ... as an alternative to private insurers" sounds a lot better than nationalizing the whole system, though I assume someone will place nationalization on the table when the public debate gets going in earnest. Frankly, nationalization doesn't have legs in the U.S. Single-payer systems destroy two attributes of our current system that rich folks value too highly: access and innovation.

As a result, the debate in this country will center on some sort of hybrid solution. We just saw the Obama Administration employ public-private partnerships in addressing the banking crisis, and we will undoubtedly see an emphasis on public-private solutions to the health care crisis. At the heart of the Obama Administration's proposal will be some sort of "guarantee" of universal coverage, and the debate will revolve around the costs associated with provided that guarantee. We'll talk more about that when the time comes because once that debate gets going, it will be all consuming. For the time being, however, Krugman is positively giddy:

The fact that the medical-industrial complex is trying to shape health care reform rather than block it is a tremendously good omen. It looks as if America may finally get what every other advanced country already has: a system that guarantees essential health care to all its citizens.

And serious cost control would change everything, not just for health care, but for America’s fiscal future. As Mr. Orszag has emphasized, rising health care costs are the main reason long-run budget projections look so grim. Slow the rate at which those costs rise, and the future will look far brighter.

I still won’t count my health care chickens until they’re hatched. But this is some of the best policy news I’ve heard in a long time.

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