Government as the Crucible for Free Market Health Care: Regulation, Reimbursement, and Reform

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Political
debates over economic policy commonly pit the virtues of the free market
against those of government oversight. Regulatory policy then
becomes an ongoing contest between the public and private sectors, infusing
policy debates with a sense that it is necessary to choose between them.
On closer examination, this duality is false. On a fundamental
level, free-market entrepreneurs and government regulators are not opponents,
but are, on the contrary, partners in a common enterprise. Across
a range of major industries, one party could not exist without the other.

In
no industry is this interplay more important than in health care.
A series of government programs, most initiated during the latter half
of the twentieth century, literally created the health care system as
it exists in the United States today. Hospitals grew to their
present size and technological complexity because of funding provided
by the Hill-Burton Act and Medicare. Medicare also
funds physician training, as well as reimbursement for many physician-provided services. Pharmaceutical manufacturers rely
on the National Institutes of Health to support basic biomedical research
that leads to the development of new drugs.
A huge tax subsidy for employer-sponsored coverage
finances, in large part, the health insurance industry. Without
these programs, none of these health care industry segments could have
approached its present size or vitality. To ignore this dynamic
is to ignore the true nature of American health care and to fundamentally
misunderstand the opportunities for reform.

The
Patient Protection and Affordable Care Act (PPACA) continues and extends
this paradigm. It will expand coverage
in large part by facilitating broader demand for individual policies,
which will revitalize private insurance markets. It will also
extend Medicaid, a program that in most states is administered by private
managed care plans, to millions more beneficiaries.

Far from representing a government takeover or novel incursion into
the health care system, PPACA extends the underlying arrangement that
has built and sustains the structure of American health care as it exists
today. In the American health care system, private innovation
and government intervention represent not opposing forces, but rather
partners in a common enterprise.

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