Jun 13, 2013

Solidarity, Subsidiarity, and the Problem of Healthcare

The more we learn about the implementation of the Affordable Care Act (called “Obamacare” by the popular press), the more we realize that the act ignores the core principles of solidarity and subsidiarity that make organizations and systems function effectively.  Initiatives that reject these principles are rarely successful.  Consequently, I don’t hold much hope that Obamacare will ultimately accomplish its goals of improving access and reducing costs.

How did we get to this point, anyway?
The healthcare system in the United States has problems. Healthcare costs have been rising at a greater rate than the cost of living for many years. The rising costs have exerted a drag on the overall economy and have made it more difficult for those with limited resources to afford care. In addition, despite increasing availability of Medicare (healthcare for senior citizens) and Medicaid (healthcare for those below the poverty line), more citizens are deciding to forego needed medical care due to the costs and hassles of obtaining treatment.  Simultaneously, healthcare providers are increasingly rejecting patients covered by Medicare or Medicaid due to reduced payments.

There were many things that Congress might have done to help alleviate these issues, ranging from reforms to decrease the payouts from mal-practice suits, decrease entry barriers for new health products, increase the supply of physicians and clinics, or provide tax incentives for expansion of local medical services. But what Congress chose to do was radical: to establish price controls, cost controls and reorganize the entire health insurance system.  A major consequence is the requirement that every individual must obtain a specific type of health insurance policy, whether or not they desire to have one.   

Their reasoning was simple: if everyone is required to have health insurance (an ability to pay for medical expenses), then access should increase. Further, if the Federal Government controls the insurance industry and mandates participation at both the individual and corporate level, the government can dictate what medical procedures are covered and how much reimbursement is paid out.  Increasing the use of preventative care and simultaneously curtailing the use of high cost or risky treatments will reduce total healthcare costs. Everybody wins, right?
Not exactly.  Here’s where rejecting the principles of solidarity and subsidiarity affect the operation of this whole scheme. 

The Solidarity Principle
Solidarity is the principle which recognizes that individuals are happiest when they develop lasting personal relationships with other humans. We develop the bond of brother hood when we recognize that another needs help and we sacrifice our talents, time and treasure to assist that brother in need through a personal connection. Solidarity is not simply a feeling of compassion or concern toward those in distress. Rather, solidarity is a call to action and a personal commitment to provide assistance.

Research by marketing scholars has long demonstrated the power of this personal connection.  Companies have prospered by developing good customer relationship strategies that put an individual face on customer contact. Think about the greeter who welcomes you to Wal-Mart or the golf professional who provides lessons and helps select custom fit clubs at the pro shop. Both parties are edified through the practice of solidarity: the receiver obtains needed assistance; the giver obtains the merits of Christian charity.  Both come away with greater respect and love for the other.  When these individual bonds are multiplied by the millions of such solidarity interactions, society as a whole becomes better connected and the common good is served. 

Some Catholic commentators have suggested that the Affordable Healthcare Act is a positive manifestation of the solidarity principle because through payment of taxes, higher income earners support the health needs of lower income earners.  The problem with this line of reasoning is that a government entity stands in the middle of the exchange, breaking the connection between giver and receiver. The giver never receives the merits of charity, and the receiver never gets to know the benefactor. Without this connection, society is broken into distrusting factions.

The Subsidiarity Principle
Subsidiarity is the principle that respects individual freedom, initiative and control of one’s own sphere of responsibility. The principle recognizes that humans do not react well to conditions in which individual and local autonomy is replaced by higher level mandates. Years of management research, for instance, has shown that individual workers are happier and produce more effectively in situations where higher-level management provides the necessary production resources and cedes responsibilities to local-level control. Under these conditions, the individual worker is respected as an intelligent, decision-making partner in the enterprise, not as a faceless cog in the production machinery. 

Similarly, when it comes to decisions regarding issues as important as the degree of medical care provided to family members, individuals are much happier when they can make the decision in conjunction with their own selected physician rather than have the decision forced on them by some distant insurance company, assigned medical provider, or government bureaucrat. Unfortunately, the Affordable Care Act limits individual choice by specifying policy particulars and coverage that insurance companies are mandated to provide.   This legislation would be much better received if insurance companies were permitted to offer policies structured to better meet consumer demand. If one group of individuals wants to buy insurance that excludes abortions and abortion-inducing drugs, while another group wants coverage that includes injuries incurred while sky-diving, insurance companies should have the freedom to develop products for both market segments.

The Bottom Line
My neighbor told me the other day, “Sure, Obamacare has its problems, but all of those kinks will eventually get sorted out, and then we’ll have a healthcare system that is much improved over what we had before the law was enacted.”   Perhaps he is right.  Systems that impinge on solidarity and subsidiarity won’t be effective or remain in operation long term, so it is very likely that changes will be forthcoming.  I just wish we had some legislators that understood good business practices and how the principles of solidarity and subsidiarity are necessary for success. Then we might actually improve the healthcare system the next go-around. 

Brian Engelland, Ph.D.
Associate Dean
School of Business and Economics

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