Date registered: Jul 2007
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Calif Health plan fails; Candidates oblivious
A Clear Choice
INVESTOR'S BUSINESS DAILY
Health Care: Reform schemes are failing because they cost too much, and there are only two ways to cut those costs: competition or government controls. Which will it be?
Last week's collapse of Gov. Arnold Schwarzenegger's plan to overhaul health care in California was a teaching moment for all politicians, including would-be presidents. However you parsed it, the 7-1 vote by the Democrat-led state Senate Health Committee to scrap the $14.9-billion proposal came down to the issue of affordability.
There was no way to make this complex public-private scheme pencil out without putting an undue burden on the shoulders of employers, low-income workers, insurers and the taxpayers. As painful as the state's budget shortfall may be, in this case it was blessing.
It made typically free-spending legislators think twice about saddling Californians with a new budget-busting program. Some may claim to be disappointed. But far more, we would guess, are relieved.
So far, the demise of Arnoldcare doesn't seem to have changed the talk on the campaign trail (from the Democratic side) about patching together something similar on a national scale.
Hillary Clinton and Barack Obama both back mandates on individuals to buy coverage — a key part of the California plan, as with the Massachusetts plan signed by Mitt Romney when he was governor. The main difference is that Obama limits the mandate to coverage of children, while Clinton would leave no one out.
Neither seems to see the California story as relevant. Nor do they seem to notice that the much-smaller Massachusetts program has now racked up $400 million in cost overruns as low-income people flock to state-subsidized coverage after finding that the mandated private insurance was too much for their family budgets.
The failure of these universal-coverage plans does support the Democrats' argument that meaningful health care reform has to be national. But the answer is not to subject the whole country to ideas that don't work at the state level. What the country needs is a shift in priorities, from extending coverage to attacking costs.
Once that decision is made — to make affordability, not scope of coverage, the first objective — then there's a clear choice to make. Policymakers have just two options if they want to reduce the cost of something: They can stimulate competition or impose price controls.
Controls can be in the form of regulations or take-it-or-leave it deals based on the government's buying power. The more they work to hold down costs, the more they limit services and choices for the consumer. If they don't work, they let programs grow into budget-eating monsters, like Medicare.
Control is the norm in most of the world's health care. Competition is the insurgent model. It's getting a test in the Medicare prescription drug program, which actually has cost less than expected. Democrats still recoil at it, but Republicans are coming to understand and embrace it.
Its key idea is to give every individual a real choice of insurers and plan types, with incentives for buying frugally and choosing the one that delivers the best coverage and care for the money.
The incentives could be provided by tax-favored savings accounts (HSAs, expanded to cover premium payments as well as out-of-pocket costs) and limits on the tax-deductibility of premiums.
The harder part would be to provide the true competition, which is now being held back by a system of state-by-state regulation that loads costly mandates on insurers and stands in the way of a national insurance market.
Congress created the current regulatory regime and could get rid of it (there's no constitutional barrier here), but the political climate would have to change first. Democrats will have to stop scoring cheap points by demonizing the insurance business. They'll have to recognize that insurers are part of the solution, not the problem, and that profit in health care is not a dirty word
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--Hillary Rodham Clinton
Last edited by bottomline1; 02-01-2008 at 07:35 PM.