Investor's Business Daily, March 1st, 2007
Health Care: With Americans pinched by rising costs and looking for solutions, there's a risk of writing bad ideas into law. There's also a chance to do reform right.
The "universal care" bandwagon is rolling, as if it's 1992 all over again. Barack Obama says every American should have health coverage within six years. John Edwards promises universal care and says he'd raise taxes to pay for it. Hillary Clinton is for it but (who can blame her?) vague on the details. Even some Republicans, like Mitt Romney and Arnold Schwarzenegger, seem convinced they must take the lead in remaking the system so that no one gets left out.
As readers of these pages might guess, we see this as a time of some peril. U.S. health care has its problems. But as we've pointed out in a continuing editorial series, the system is not so dysfunctional that it can't be made worse by the wrong kind of reform. Vague talk of "universal" care is not harmless if it starts us down the road to a government monopoly -- the "single payer" option beloved by the left.
That said, there's no time like the present, well before a crisis, to start reforming health care in the right way. The current patchwork of public and private insurance, employer-paid premiums and out-of-pocket spending works well enough for most Americans now, but it will not be up to the task of caring efficiently for a much older population 30 or 40 years from now.
The system's basic problem -- what makes it more costly than it should be, and what makes insurance unaffordable for many individuals and employers -- is its disconnect between health care choices and costs. Except for the small share of costs paid out-of-pocket, most people don't pay directly for their care. Most of the costs are borne by their employers or the government. So they suffer little penalty for wasting money on unneeded care, and they get little reward for making economically sensible choices (such as preventive care or drugs that keep them well and help avoid much greater costs in the future).
Health savings accounts, which reward frugal choices through tax-free savings, are a step in the right direction. But most health care costs are not paid out of pocket, so they are out of the HSAs' reach. What's needed is a consumer-driven, truly national market in health insurance, with ample choices among plans and true competition among insurers to give the patients the best service for the least cost.
Right now, most private-sector workers get little if any choice in employer-paid plans. Outside the workplace, the pickings can be even slimmer -- and individuals with pre-existing conditions may find no coverage at all. A hodgepodge of state regulation and mandates makes nationwide marketing expensive and difficult. These rules, supposedly designed to protect consumers, actually narrow their choices and force them to pay more.
The idea of using private insurance as the primary cost-control force in health care is not new. It's the principle behind managed care, in which insurance plans use their buying power to negotiate low rates from doctors, hospitals and drug companies.
Managed care performed well in the 1990s, a period of low health care inflation. What it lacked was a competitive choice of plans. But that shortcoming would be remedied if individuals could buy insurance independent of their employers and had plenty of plans competing for their business. This is essentially how the Medicare Part D drug benefit works, and that program is holding down costs better than expected.
Who will pay? And how much? What's the government's role? These are all good questions, and we can't predict how policymakers will answer them.
We would like to see individuals pay as much as possible and government (along with employers) as little. Most of all, we would like to see the nation make a clear choice for competition over government control. If there is to be a great debate over health care between now and 2008, we expect it to be essentially between private and socialized insurance. Framed that way, the choice to us is clear.
Copyright 2007 Investor's Business Daily, Inc.
