Subsidiarity implies that responsibility for activities should take place at the lowest possible level, and higher levels should not usurp the responsibilities of lower levels. How do we apply this to healthcare? Many argue that any form of government involvement is an automatic violation of subsidiarity, but I think this misunderstands the issue. I would argue that, with an insurance-based system of providing healthcare, the appropriate level is the broad level.
The first point to make is that subsidiarity cannot be understood without solidarity. As Pope Benedict noted in Caritas in Veritate, “The principle of subsidiarity must remain closely linked to the principle of solidarity, since the former without the latter gives way to social privatism, while the latter without the former gives way to paternalist social assistance that is demeaning to those in need.” What does this have to do with healthcare? Well, there are ways to think of providing insurance — actuarial and social. Under actuarial insurance, premia are tied to individual risk (e.g. car insurance). This is exactly the wrong way to approach health insurance as it means that the young and healthy will get a great deal, while the old and ill are left high and dry. But this form of insurance in healthcare, I think, violates the principle of solidarity. The second way is social insurance — everybody pays the same, meaning that the old and the ill are subsidized by the young and the healthy, knowing they will in turn be helped in their hour of need. There is no a priori reason why this cannot be done by the private sector, as long as private insurance companies are forced to charge community rating (no exclusion or differentiation based on health status), and the purchase of coverage is mandatory. Basically, we need regulation to avoid the market failure of adverse selection. Note that this goes against many of the reforms proposed by the right, who favor decisions based on individual choice.
So far we have solidarity. But what about subsidiarity? Well, for this kind of insurance to work, to deliver care efficiently, we need risk-pooling. We need the largest number of participants possible. Here, cost is critical. The average inhabitant of the United States already spends more than twice on healthcare as the average inhabitant of other advanced economies, with little to show for it. While most attention to devoted to the part of the cost that comes from the government budget, especially when it comes to taxes, most of the cost comes it in form of lower wages, and so is not automatically transparent. Cost is critical, as all exports point to skyrocketing healthcare costs in the future. While the costs of reform are up for debate, I think it is undeniable that the costliest option if all is doing nothing.
But what determines the cost? There are a number of elements. The first is the fact that doctors and providers of healthcare are able to exploit another form of market failure, that of asymmetric information. If the physician’s income is tied directly to the quantity of treatment, then there will be excessive treatment (in the sense of providing little marginal benefit to the patient), and costs will keep going up. This is common in in the United States, where doctors have become profit maximizers (see the incredibly influential essay by Atul Gawande). An obvious solution would be to have doctors draw a salary, sundering the link between treatment and payment, as is the case in places like the Mayo clinic, the jewel of the American healthcare system. One step in this direction would be the comparative effectiveness review– a weak tool right now, but better than nothing.
Which brings me to the public option, which is the single largest cost saver in the whole program. Why? Well, it takes out the profit motive, which is not insignificant, but there is much more to it. Basically, size matters. First, the more covered, the more efficient in terms of costs. This is why single payer systems deliver the same outcomes as the US for a far lower cost. Second, the public plans can use their monopsony power to bargain over better prices. Third, it is easier to reap the rewards of information technology (which many experts think is critical to controling costs and delivering holistic patient-centered healthcare) in larger systems, without fragmentation and duplication.
This is why I believe that twinning of subsidiarity and solidarity in healthcare calls for the provision of insurance at the broadest possible level. People often mistake the provision of insurance with the provision of healthcare. Obviously, subsidiarity calls for a personal relationship between doctor and patient, which has little to do with the provision of insurance. (Incidentally, primary care is more emphasized in single payer systems than in the US system where the income from primary care does not attract enough doctors.) Sure, a government insurance system could theoretically dictate the choice of physician, but so can private insurers. In fact, private insurers do this all the time, either in “soft” form by forcing more out-of-pocket expenses for doctors outside of their network, or in “hard” form through managed care. All insurance plans set limits on treatments and associated costs. People talk about decisions made by big government and faceless bureaucrats, but not by big private insurance companies and faceless agents who are rewarded for denying claims, screening for pre-existing ailments, and dropping customers.
I think the case is clear– you cannot use the subsidiarity argument against healthcare reform that includes a strong public option based simply on the argument that the government is involved.