Source: http://www.ibdeditorials.com/IBDArticles.aspx?id=327541560527871
By PAUL HOWARD AND DAVID GRATZER | Posted Monday, May 18, 2009 4:20 PM PT
Worried about increasing health care costs, Americans understandably want meaningful reforms that make health insurance more affordable. All the momentum currently rests with the Democrats, who are pushing a new, expensive health care entitlement modeled on Medicare or Medicaid.
But a huge new bureaucracy overseeing health care — which would be the result of such a plan — would cause more problems than it solves. Rather than step into a national health care quagmire, more modest, but important and effective reforms should be considered.
No one disagrees that our health care insurance model needs reform. For those not covered by their employer, health insurance is feverishly expensive. A family plan in New York costs more than $12,000 a year.
But an interstate comparison yields surprising results: a family policy can cost a fraction of that amount in Wisconsin (about $3,000).
Everyone's Covered
Why the extraordinary difference? Partly because in many states, regulations force people to buy coverage for certain conditions or treatments, driving up the price of basic policies.
In 46 states, for example, health insurance must cover chiropractor services; in 13 states, it must cover in vitro fertilization; in 11 states, it must cover acupuncture services. People who want to try to conquer their nicotine habit with a needle in their foot should have that right, of course — but should this service really be required?
Other states have gone further, demanding that no one be refused insurance — a policy known as "guaranteed issue" — and that everyone pay the same price, regardless of age or health status (known as "community rating").
Combining these ideas — as legislators have done in New York and Massachusetts — makes it easy for people to take advantage, waiting until they are ill before getting health insurance. The resulting system is expensive and dysfunctional.
Reduce Regulation
If Washington really wants to get to the root of the problem, it needs to focus on reducing the regulatory burden. There are different ways of doing this, but among the simplest would be to permit people to buy health insurance across state lines, thereby diminishing the impact of the regulations by increasing competition between jurisdictions.
Members of Congress have exempted themselves from these very regulations. What's good enough for them ought to be good enough for the rest of us.
Another major problem is the existing U.S. system of employer-based health insurance and the way our tax code favors wage-and-salary workers. Thus, an executive with a gold-plated health insurance plan will receive his benefits tax-free, but his out-of-work cousin (or his early-retiree brother) who wants a bare-bones policy will be forced to pay in after-tax dollars.
The self employed are not treated equitably by the tax code, either: They get a deduction, but not one equal to the benefit received by wage-and-salary employees.
Why not cap the health insurance tax exclusion and extend it to others who want to pay for their own insurance? And because some would opt out of their employers' plans, this incremental step would start divorcing Americans from job-based insurance — but gradually and on a voluntary basis.
Finally, Americans don't just need competition in health insurance to tame rising costs. They need to take their own health seriously. American health care, as it is currently structured, gives people little incentive to attend to diet, exercise and other health concerns.
Employer-based and government-provided health insurance can offset the financial consequences of bad health habits, since all the people in a corporation pay the same premium regardless of their health status.
Thus, someone who overeats and never exercises may have his diabetic medications subsidized by a health-conscious colleague working two cubicles down the hall. If, as we so often hear, obesity is a major national problem, why not offer an incentive for those who make better choices? One simple approach would be to offer Americans a small tax rebate if their doctor certifies that they have a BMI (Body Mass Index) under 30.
Moving Forward
These three modest reforms — permitting interstate competition among health plans, changing the tax code's treatment of health insurance and offering tax incentives for better personal health — would extend access to affordable private health insurance and help tame rising health care costs. They would also help instill in the system the oldest of American virtues: personal responsibility.
Sure, they may not be as flashy as promising Medicare for everyone who wants it. But these prudent proposals would at least help move the system toward a sustainable future, instead of a costly and inefficient government bureaucracy.
Howard is director for the Center for Medical Progress at the Manhattan Institute.
Gratzer, a physician, is a senior fellow at the Manhattan Institute.
This piece is excerpted from an article in the Spring issue of The New Atlantis (TheNewAtlantis.com).
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