July 2007


WOOSTER, OHIO — Twenty-three years ago, when discussing the rising cost of treating the terminally ill, Governor Richard Lamm of Colorado famously quipped that elderly people who are terminally ill have a “duty to die and get out of the way.” He had a salient point somewhere in there, but he got a lot of flack for the indelicacy of his rhetoric.

The truth is, however, that health care is a finite resource. There is ultimately only so much of it to go around, and, whether or not it is immediately apparent to us, every nation on earth has a system of rationing health care.

In a single-payor system, such as the one that exists today in Canada and the United Kingdom, health care is rationed through delays and inconveniences. (Michael Moore tries to show otherwise in his provocative and illuminating film Sicko by interviewing people in Canadian and British hospital waiting rooms; the test, however, is not whether you have to sit in a waiting room for very long, but rather, whether first-choice therapy is delivered without delay.) In the U.S., health care is rationed by leaving 40 million people uncovered. By leaving 40 million people uncovered, those who receive good coverage in most cases get all the attention they desire, while the uninsured do everything in their power to avoid going to see a doctor at all, for fear of the cost of being ill.

To underscore the point, and to give Governor Lamm the benefit of the doubt that he wasn’t just being a hard-hearted son-of-a-bitch when he made his radical statement about health care back in 1984, three years ago Governor Lamm said the following in an interview: “Right now we don’t have a moral health care system. We have a technologically brilliant, but morally inadequate health care system because we let 40 million people go uncovered.”

It is the ethical aspect of leaving people uncovered that makes the upper middle class in this country squirm, because they also intuitively understand that health care is both a basic need and a rationed resource. Michael Moore appeared on Hardball with Chris Matthews last Monday and asked him: “Would you mind sharing your [private hospital] room if it meant that 47 million Americans would be covered tonight?”

MATTHEWS: Interesting question.

MOORE: Would you?

MATTHEWS: I think I should, let me put it that way.

There is a middle ground between giving everyone full coverage, and giving those of relative affluence every health care amenity while others get nothing. There is potentially a middle ground that will give us, as a nation, the ability to improve the rate of infant mortality (which today is the 32nd worst out of 33 of the world’s developed nations), while at the same time giving recognition to the role of insurance companies as major drivers in our capital markets. There is, potentially, a way of rationing health care in a way that does not permit the least financially secure among us to succumb to outrageous costs or, literally, to poor medical care, while at the same time preserving choice and freedom – all within the framework of a Ward Republic solution of drawing upon federal resources and the federal power to tax, but leaving important decision-making to be made at the community level.

My health care reform proposal, the Public-Private Healthcare Trust Program, would create a single-payor system for basic needs while maintaining a robust market for private insurance for ancillary needs and premium services. Here’s how it would work:

Coverage

Specific coverage issues would be subject to local decision-making, except that, at minimum, a trust must provide the following:

  • 100% coverage for
    • Pre-natal health care
    • Children’s health care
    • Catastrophic and long-term chronic disease health care
    • Emergency trauma health care and post-emergency rehabilitation
    • All senior healthcare (68 years and older)
  • Trusts must provide at least 50% coverage for adult health care not otherwise falling within these categories (the remaining 50% being referred to as the “gap”), excluding procedures traditionally considered to be elective “non-health care” procedures such as elective plastic surgery .
  • Local trusts may, subject to fiscal limitations, provide more than the minimum coverage, thus providing an incentive for a community dialogue on preventive health; the less basic coverage that a particular trust must pay for, the more ancillary coverage it will be able to provide.
  • Local trusts may, subject to fiscal limitations and on a discretionary basis, provide health care grants in hardship situations to deal with unexpectedly high gap expenses.
  • Citizens may opt out and opt into the system at will, but may not opt out of paying for the system. No “preexisting condition” limitations shall attach.
  • Patients will have the unqualified ability to choose their health care providers — unlike the current system, in which private health care insurance typically limits the extent of its coverage to services performed by preferred providers.

Administration

Federal funding will be distributed to each local trust, consisting of groups of 5,000-7,000 people within a locality, on a pro rata basis (with adjustments for age and existing disabilities within a particular group). Trusts will be governed by a local elected board of citizens. The activities of the trust may be administered as a local business, or by a private insurance company, subject to a capped administrative fee of 6% of federal funding per year. Real administrative costs should be lower under the Program due to the fact that administrative decision-making will be limited to a determination of whether the health care provided is 100% covered or 50% covered. Trusts will be subject to an annual federal audit.

High on the list of the things that frustrate people most about the current private health insurance regime is the facelessness and distance of the decision-makers, and the difficulty of enacting change or even getting coverage questions answered in a satisfactory manner. The idea here, however, is to keep the administration of public health care benefits as local, immediate and face-to-face as possible, to provide the most uncomfortable level of accountability possible, as well as to aid in the gathering of pertinent intelligence about a specific community’s needs.

Cost Caps

Health care falling within the specified areas of minimum public coverage will be subject to fee and expense caps, gauged at 2008 cost levels with a bi-annual cost increase mechanism, similar to the way in which public utilities are regulated in this country; provided, however, that the caps shall apply to services performed under limited program coverage, or for self-insured or privately insured patients, at a rate of 120%. Health care providers will be permitted to charge premium rates above the caps for people who wish to pay for premium services, such as priority scheduling of procedures and visits, private hospital rooms, etc.; but such premium services shall be paid for by individuals or through premium supplemental health care insurance, and not by the trusts. Competition among health care providers will be generated along two fronts: who provides the most successful care, and who provides the best premium care.

Liability for malpractice will be strictly limited, since the element of medical costs for any malpractice event in determining actual damages will be drastically reduced or eliminated.

Funding

In order to attain a level of health care spending in the U.S. under the limited coverage of the Public-Private Healthcare Trust program at $3250 per person in year one (which is more than Canada spends on a per capita basis for all health care, but only a little over half of what the U.S. currently spends), the plan would cost approximately $975 billion in year one. The principal sources of federal funding ($987 billion) would be the redeployment of the federal portion of the existing Medicare program, currently budgeted at $340 billion; the same payroll tax increase of 3.3%, shared between employees and employers, as proposed in H.R. 676, currently projected to raise $441.6 billion; the repeal of the Bush tax cut of 2001 and reinvestment of the Bush “economic stimulus plan” of 2003 into the Healthcare Trust, projected at $206 billion. Savings from citizen opt-outs will be reinvested in the program.

The payroll tax is a tax increase, but it comes with a potential cost savings to many working Americans and employers: most employers who provide health care coverage currently pay 6 to 17% of payroll to fund private health insurance, and most insured employees pay deductibles for even the most basic medical procedures that would be 100% covered under the system.

States and localities may supplement the Program through their own revenue sources. In 2006, this State of Ohio spent $12.25 billion on Medicaid. Many of the responsibilities that fell into the state’s lap would become the burden of the federal government under the Public-Private Health Care Trust plan; thus, even if the State of Ohio were to decide to spend only 10% of that amount under the Trust plan, it would still be contributing significantly to the provision of health care to its citizens, and potentially extending the level of coverage available under the Trusts to the citizens of Ohio.

In addition, individual and corporate charitable contributions to Trusts will be 110% tax deductible.

The Private Marketplace

  • This Program is designed to encourage the development of three kinds of private insurance markets: one aimed at people who wish to opt out of Trust coverage, and who still desire either full coverage, or a cafeteria plan for limited coverage; one aimed at filling the “gap” for those who are part of the Trust Program, which presumably will cost significantly less than full coverage currently costs; and one aimed at providing premium services – thus enabling the corporate executive who is able to negotiate for the best coverage to move to the head of the line, subject to available resources, in most situations. That’s capitalism, folks – and incidentally, it helps to preserve, at some level, the role of “wealth-and-business engine” that insurance companies have fulfilled for the past 30 years in the U.S. by being important public and private equity and debt capital investors in American business.
  • Private insurance, as a supplement to or instead of Basic Coverage, may be offered and sold to individuals or through employers or other collective organizations.
  • All subsidies of private insurance companies by the federal government, such as the Medicare Part D program, shall be abolished.

No health care plan is perfect, because the demand for health care in a world of limited resources (and money) will, at current population rates, always outpace the supply of health care. Our aim, however, is to create a moral system of health care in this country – one that is community-focused, and that will, in the best situations, galvanize communities around the issue of taking care of one’s neighbors.

I thank you for listening, and I’ll be seeing you along the trail.

WABASH, INDIANA – Off the Southwestern coast of Norway in the North Sea, there is a tiny dot of an island called Utsira. In 2004, the community there initiated a project resulting in something that plausibly looks like sustainable energy self-sufficiency. At that time, Norsk Hydro built a power plant that runs on a combination of wind, an abundant resource in the North Sea, and hydrogen. Wind, captured by two 600-kilowatt wind turbines, is now a primary source of energy for 10 residences on the sparsely-populated island; and when the wind provides excess capacity, that capacity is used to generate clean-burning hydrogen by electrolysis, which can then be stored in fuel cells and used when the wind dies down.

In Curitiba, Brazil, beginning in the 1970s, local leaders implemented several key changes that, over the last 30 years, have resulted in a greener, less oil-dependent city. They created an inexpensive, financially self-sustaining integrated rapid bus transport system, with routes along corridors of growth projected in accordance with the city’s master urban plan, while simultaneously restricting car traffic in certain areas of downtown and discouraging car-oriented new development. Buses on the system run one per minute at key stops during rush hour – at least as often many municipal subway systems — and the system’s bus stations are connected to nearly 100 miles of minibus routes and bike paths for easy access by outlying passengers. The result has been that, despite an unusually high level of car ownership among cities in Brazil, people in Curitiba now use their cars less. Two-thirds of all trips into the city are made by bus; and car traffic in the city has declined by 30% percent since 1974, at the same time that the population in Curitiba has doubled. By using existing buses and existing infrastructure, Curitiba managed to transform its citizens’ transportation habits at 1/80th of the cost of the construction of a light rail system, and it is estimated that the reduction in car traffic saves over 7 million gallons of gasoline per year. And, the best part is that the ten participating bus companies are privately-owned, and they operate at a profit.

In Congress, even as we speak, lawmakers are debating the merits of a Senate energy bill that would give some money to some companies doing research on efficient batteries and hybrid automobile technology; raise some fuel efficiency standards for new cars; and increase the production of ethanol for motor fuels by seven times the amount that was processed last year. Provisions that didn’t make it into the new bill included a requirement that utility companies produce at least 15% of their electricity from wind, biomass or other renewables, and a tax hike on oil and gas producers.

Setting aside the inherent inefficiencies of corn-based ethanol as a substitute for gasoline – it takes 29% more fossil energy to turn corn into ethanol than the amount of energy the process ultimately produces – the production of ethanol is a competing use for corn that will always, inevitably, be in constant conflict with the uses of corn as food. That fact makes President Bush’s call for the production of 35 billion gallons of ethanol by 2017, a level that would account for 100% of today’s domestic corn crop, just about impossible. If we think we’re worried about oil prices today, wait until we would have to worry about the fast-rising price of food staples that contain corn products, including frozen orange juice, instant coffee and most breakfast cereals.

So, instead of transformative plans such as those we see in Utsira and Curitiba, Congress is preparing to give us a few little tweaks at 50,000 feet above the problem, and a set of grand yet unworkable solutions. I don’t think our lawmakers do so with a harsh cast of mind, however. I would prefer to believe that our lawmakers are simply at a loss for ideas. I would prefer to believe that the problem in Washington is one of exasperated resignation, rather than a veiled conspiracy to keep petroleum companies fat and happy. I would prefer to believe that no one in a position of doing something about our collective fate could be that malicious. Short-sighted, maybe.

In that regard, however, our lawmakers have been no more short-sighted than the international auto, aerospace, oil and manufacturing industries. To the extent that such industries have publicly recognized the necessity for energy independence they have reacted slowly, if at all, in response. One can hardly blame them either, however – the commodity markets have remained relatively stable, or at least financially bearable; people are still buying the product; and everyone is still making money. There is no reason why anyone would change a thing. When you’re playing poker, and the pot has gotten so big and everyone’s having such a good time, why on earth would you want to stop and switch to playing Blackjack?

Except in this case, you know, for the obvious, albeit attenuated, reasons … even if you don’t believe in peak oil theory, there’s the global demand for oil, especially in the emerging industrial nations, that is outpacing supply, potentially driving prices toward the point where no economy is sustainable; there’s the increasingly life-threatening effects of fossil-fuel-burning on our atmosphere; and there’s a constant kink in the sacroiliac of American diplomacy, a pelvic tilt that causes us to lurch spastically toward the Middle East and its rich petroleum reserves with our every oil-thirsty step on the world stage … Today, oil prices are hovering around $73 per barrel, and Iran is announcing that it will break international custom and now ask the Japanese pay for its oil using Japanese yen instead of the American dollar. Energy independence is a lynchpin issue like no other.

I love capitalism. Its constant whir and hum is, at its best, the essential soundtrack for all that is good about the American ideal: hard work, dexterity, cleverness, good service, pride of craft, savvy, moxie, chutzpah, etc. But, at the risk of alienating my good libertarian friends, I have to break it you: capitalism occasionally needs a swift kick in the ass.

Don’t tell me you didn’t notice how American capitalism was beginning to grow stale when World War II came along, and the government’s preparedness program injected new life into American industry. When we came out the other end of a period of the most extreme government intervention into the machinery of capitalism America had ever experienced, we were a new nation, in which war-time technologies were turned loose on an optimistic post-War populace, and we were all left to dream about driving our flying cars and our jet-packs to work every morning. We still don’t have flying cars or jet-packs, but I dare say we wouldn’t have even dreamed of them with any sense of conviction were it not for federally-funded wartime innovation.

Time for a new dream, and a swift kick in the ass of capitalism.

Saving the world from the rise of Fascism was, appropriately, a national effort with a national focus, but pretending that we can “do a Manhattan Project” with the problem of energy independence simply by throwing hundreds of millions of dollars around laboratory workbenches is the wrong way of looking at the problem at hand. If you live here in semi-rural Indiana, you use energy differently than you do if you live in San Francisco; you use it differently during the winter in Plattsburgh, New York than you do during the winter in Needles, California; a college campus has different energy needs, and potentially different energy solutions, from a Coca-Cola bottling plant or a residential subdivision in the suburbs of St. Louis; and the local “found” energy resources available to people living in Chandler, Arizona are substantially different from those available to people living in Marietta, Ohio. What works in Utsira or Curitiba won’t necessarily work in Buffalo or Peoria. There is no “one size fits all” solution to our energy quandary, and Washington has to stop pretending that there is one.

Taking my cue from the locally-devised and implemented solutions of Utsira and Curitiba, I would propose a federally-funded Energy Innovation Model City program – a modest step towards implementing new and existing technologies in the real life laboratory of up to fifteen model cities, handpicked from among American cities with populations under 100,000. Each city chosen for the program would be provided with a budget of federal funds, to be matched dollar-for-dollar by local private funds, and a mandate to form a public-private corporation to achieve two important missions: (1) an across-the-board reduction of 40% in the use of oil and gasoline within the city, and (2) a financially-sustainable model for meeting redesigned city energy capacity through the private sector, without additional federal aid.

Each corporation would be led by a proven local entrepreneur and staffed from the local brain trust, with special preference given to hiring recent engineering grads and from among the increasing class of seasoned ex-industry consultants who know their way around the practicalities of energy generation, use, storage and delivery, providing a good combination of passion and wisdom, in all. A visiting committee of local energy-using constituents would operate both as a focus group and as a repository of “answerabilty” for the progress of the corporation. Federal funds will be disbursed in stages based on the availability of matching local money as well as on the progress of local efforts, with a little bit of a competitive component, in part to keep the program visible to the rest of the nation: if Wilmington, North Carolina is outclassing Orem, Utah, for example, then Orem will need to get a move-on in order to keep receiving its funds on a timely basis. Heck, turn it into an Apprentice-style reality TV show, if you like. It might be the first time reality TV actually served some public good.

At any rate, with a combination of good business stewardship and the pressure of local, face-to-face accountability, by the end of four years we would hope to see up to fifteen models — warts and all — for profitable private sector reduction of local dependence on oil and gasoline, based on meeting local needs with locally-practical energy solutions. As a nation, we will have learned more about implementing energy solutions that have a demonstrable impact on the lives of 100,000 or so people, and with any luck we will have provided inspiration to entrepreneurs and capitalists in other regions of the nation to attack the energy quandary locally – for all the right reasons, including the almighty profit motive. We will have begun to break the problem of national energy independence down to smaller, bite-sized chunks, showing the way to use local talent and resources to chip away at a global issue.

Within the context of a program of practical local implementation, a federal policy that encourages better fuel efficiency standards in automobiles actually begins to make sense, as does a targeted, federally-funded alternative energy research program – especially one that ditches the “fuels made from food” approach in favor of encouraging synthetic biology to develop microorganisms that produce biofuels through the consumption of low-grade agricultural waste, such as the efforts that are under way at companies like SunEthanol and Amyris Biotechnologies. A highly-visible program of practical local implementation will help to focus our national research efforts on building tools that can actually be used today, instead of simply funding more blue sky research. We can create an environment of troubleshooting in which success is contagious, without turning U.S. energy policy into a lumbering, ultimately stale and fruitless entitlement program for American business.

If you sense a theme here, it is this — if we’re smart, we won’t expect Washington to wave its magic wand and legislate a panacea for the American energy quandary. Instead, we will let Washington kick capitalism in the ass and unleash the ingenuity in our own backyard to begin to make transformative changes in the way real people produce and consume energy – community by community, today.

I thank you for listening, and I’ll be seeing you along the trail.