An Affordable Physician- and Consumer-Friendly Health Care System: 2008 Democratic and Republican Presidential Candidates' Views


Regina E. Herzlinger, DBA, Harvard Business School Boston, MA 02163; e-mail:


Winter issues of The American Heart Hospital Journal traditionally focus on health care policy issues. As health care reform in the United States is a topic of major importance in the upcoming presidential election, we invited Dr Regina E. Herzlinger, the Nancy R. McPherson Professor of Business Administration at Harvard University and a noted expert in the field, to provide an analysis of the major proposals currently under debate by the candidates. We invite your comments in the coming months as the field of candidates narrows and the focus on reform sharpens.—Sylvan Lee Weinberg, Editor in Chief

The most heated national debate about health care since Hillary Clinton's failed health care reform attempt of 1993 is now unfolding. In response, all the presidential candidates have offered different platforms. In this editorial, I will attempt to unravel these intricate plans and focus on their implications for specialist physicians.

What Are the Problems?

The current widespread interest in health care reform is somewhat surprising. After all, we are living in a Golden Age of medicine in which the revolutionary understanding of genetics and astounding advances in computation will enable medicine to finally provide effective therapies, and perhaps even cures, for bedeviling diseases and disabilities.

But although the American people admire and respect their doctors and their research, the new focus on health care reform is driven primarily by their concerns: they typically rate health care as the number one domestic policy issue.1 Those who receive health insurance from their employers worry about losing it and about the adequacy of their coverage should they become seriously ill.2 The 40 million or more uninsured Americans despair of ever obtaining it. All too many of them are uninsured primarily because they cannot afford it.3 Because health insurance costs are so high and inflate at rates that outstrip those of most other economic metrics, they worry that they will never be able to afford it. Then too, employees who would like to leave their jobs in the big firms that primarily offer health insurance and work in small, entrepreneurial companies, which are a major source of the employed uninsured, may remain locked in their unwanted positions. This job lock is a major public policy concern because small firms are the main engine of growth for the US economy.

Our outsized health care costs affect the US business community, too: globally competitive firms find their health care costs, which dwarf those in other developed countries, to be a serious competitive disadvantage, as illustrated most recently by the contentious exchanges between the United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) and General Motors and Ford regarding custody of their multibillion-dollar unfunded health care retiree liabilities. The UAW capitulated in both cases because it understood that a stalemate could cause the bankruptcy of these companies.4–6

US physicians are also worried. All too many find their professionalism compromised and their income expectations unmet by various insurer care management schemes. More than 30 years ago, when I began to teach at the Harvard Business School, there were only a handful of physicians in the MBA program. That handful has grown to 50 or so; currently, many of them are specialists. When I ask why they have decided to essentially leave clinical medicine, they sadly reply, “I love medicine; but I can no longer practice it.”

Presidential Candidate Health Care Platforms

The dozen or so presidential candidates all purport to address the concerns about access to health insurance and costs, but their responses vary.7 Those variations are critically important for physicians. As always, the devil is in the details.

Virtually all the Democratic candidates promise to enact universal coverage except for Sen Barack Obama. Because universal coverage will raise overall health care costs substantially, the Democratic candidates plan to control them through various technocratic remedies (eg, disease management) and new bureaucracies (various forms of regional exchanges) that would manage the types of health insurance plans offered to consumers. The intended payers for all this vary from Rep Dennis Kucinich's proposal for a single-payer system, in which all health care expenses are paid by the government, to the other candidates' proposals that would maintain the current employers' role and supplement it with new taxes to pay for health care for the uninsured.

None of the major Republican candidates have opted for universal coverage. Instead, they all promise to institute tax shelters—credits or deductions—that would allow uninsured Americans to buy health insurance with pretax income (currently, corporations are virtually the only entities that can use pretax funds to pay for health insurance) and to support state efforts at health reform. The most salient federal-level effort would permit the states to band together into regional buying cooperatives that could supersede the mandated benefits imposed on health insurance plans by individual state legislatures.

Impact on Physicians

Will these proposals provide universal coverage? “Yes” for virtually all the Democratic candidates and “no” for all the major Republican ones. Universal coverage would be a boon for many physicians who worry about their patients' ability to pay for their services and who currently donate charity care.

Will these proposals increase health care costs and control their rate of growth? The Democratic proposals will all substantially expand the total costs of health care. If you believe that “care management” and limits on the choice of health insurance plans will control the growth of costs, count yourself in their camp. But there is no evidence that these remedies work. The United States has experimented with care management, ranging from managed care to pay for performance, for decades with no evidence of its efficacy. And, as for the “exchange” solution, which limits the choice of insurance plans, the choice of health insurance plans is already highly constrained: choice is limited typically to a PPO, an HMO, or a high-deductible plan. In contrast, the retailing sector, which typically contains at least hundreds of choices, is noted for its productivity. The reason is simple: choice creates competition and competition spurs the innovation which makes most goods and services better and cheaper.

The Republican proposals will also increase costs with their tax-sheltering plans, but likely to a lesser extent than the Democratic proposals. But the Republicans' cost-controlling plans are no more promising than the Democrats'. There is no evidence that states can control health care costs any better than the federal government or employers. The Massachusetts universal coverage plan, for example, has increased total costs and has not affected their rate of growth. Total costs have grown not only because of the enrollment of those previously uninsured but also because the state government offers only very expensive plans. More than 60,000 people have already been excused from the requirement that they buy health insurance because they cannot afford the plans.8

These results should come as no surprise. When government runs the only store, dubbed an “exchange,” and designs the products in it, they will inevitably become very expensive and not reflect the buyers' ideas of value for the money. Think, for example, of buying a car from only one car distributor, one run by the government and offering only government-designed products. Soon all the cars will feature heated seats because the heated seat lobby will convince the government that it is a crucial feature. But many consumers, left to their own devices, might decide that they can tolerate a little chill in their rear ends to avoid the $1000 cost of this option. It is worrisome that virtually every state that is currently contemplating health care reform is focusing on the Massachusetts model.

Both Republican and Democratic proposals mean that your taxes will go up and you will be subjected to more “care management” by government payers, who will run the markets in which the uninsured can shop for health insurance, and insurers. On the plus side, however, more of your patients will be insured.

Will these proposals alleviate the cost pressures of the business sector? Virtually all the Democratic candidates favor increasing the health care costs of businesses by forcing those that do not offer health insurance to pay their “fair share.” Maintenance of the current employer-based system, favored by all but the single-payer advocates, maintains the current job lock problem.

Is There A Better Proposal Out There?

The country of Switzerland has universal coverage, costs that are 40% lower than ours and that inflate at lower rates, and an excellent health care system in terms of outcomes and resources. And because neither the Swiss business sector nor the government buys health insurance, Swiss employers avoid the global competitiveness and job lock issues of their US counterparts.

The key to their success is that the Swiss system is consumer-driven: consumers buy their own health insurance from more than 90 private health insurance firms. If they cannot afford it, the cantons subsidize it. If they are sick, they pay no more for their health insurance than the well (the Swiss insurers risk-adjust each other). Consumer oversight insures value for the money better than oversight by governments and employers.9,10

The Republicans and Sen Hillary Clinton have proposed bits and pieces of the Swiss health care system by extending subsidies for the uninsured and permitting them to shop for their own health insurance. It would be helpful to physicians to urge the adoption of the consumer-driven Swiss system lock, stock, and barrel because it is the only reform that will satisfy the needs of virtually all the many health care stakeholders, including its two most important constituencies, the doctors and their patients.

Regina E. Herzlinger, DBA is the Nancy R. McPherson Professor of Business Administration at Harvard Business School. She is the author of Who Killed Health Care? (McGraw-Hill, 2007), which describes the implications of the Swiss health care system for the United States.