If you’re not depressed about America’s “private” health-care system, you’re probably living in a cave somewhere in the Rockies. The bad news seems neverending: health-care costs keep going up, insurance coverage keeps going down, and routine errors — from deadly hospital infections to drug mix-ups — plague the system.
For all of America’s vaunted innovation — we lead the world in creating new drugs and devices that fight disease and save lives — health care is extraordinarily expensive, and quality can be maddeningly uneven. Americans, normally cheerful capitalists, can be forgiven for thinking that government should step in and fix the mess.
That would be a mistake.
After all, government helped create much of the mess to begin with. The tax deduction for employer-provided health insurance, which dates back to World War II, leads employees to choose plans with high premiums (paid with pre-tax dollars), but low deductibles for routine care, driving up health-care costs. Medicare pays for quantity of care, not quality — leading to massive spending disparities in care for chronically ill patients across the country; data from Dartmouth researchers shows
that more money doesn’t translate into better care.
Meanwhile, other state and federal regulations strangle innovation and discourage competition.
The solution is to make health care much more like other sectors of the economy, where competition drives entrepreneurs to offer a wide range of affordable products and services to consumers — like $300 laptops, cut-rate vacation packages sold online, and discount brokerage firms. To unleash a new wave of entrepreneurial energy in health care, policymakers should focus on a four-point plan of action:
Play fair in health care
Imagine charging low-income Americans more for health insurance. Outraged yet? We already do that. The tax deduction for employer-provided health insurance favors higher-income workers, who get a bigger deduction and are more likely to work at firms that offer insurance. Low-income Americans working at jobs that don’t offer insurance end up paying much more for their insurance out of pocket — if they can even afford it. The tax penalty against individually purchased health insurance (30 percent or more, depending on income) is regressive and unfair.
A tax deduction or tax credit for everyone who purchases their own health plans would be much more equitable, giving millions of uninsured access to insurance. A risk-adjusted voucher for our poorest, sickest patients (think cancer) would allow them to buy into insurance markets and encourage insurers to seek them out. Employers, unions, and other civic groups could act as buying clubs for their members — helping them navigate the system and find the best values.
One nation, one market
A 2007 study from eHealthInsurance found that monthly individual insurance premiums ranged from a low of $98 in Iowa to $338 in New York; the national average was $148. The disparity is partly explained by state regulations (like mandated coverage for chiropractors) that drive up costs. It’s time America became one market when it comes to health insurance — allowing consumers to buy insurance from across state lines. Freed from expensive state mandates, insurance would become more affordable, consumers would have more choices, and companies could target marketing efforts at the uninsured, newly empowered with tax-advantaged dollars.