REGINA E. HERZLINGER
Let’s get serious about cost control with something more than the standard Republican Band-Aids. Health-care costs are already killing the economy — they are not only the highest in the world but also grow at the highest rates. And that’s not counting trillions in unfunded Medicare liabilities.
The subsidies in Obamacare will swell these costs by at least a trillion dollars. And its futile cost controls involve either rearrangements of the deck chairs on the Titanic (oligopolistic, unfeasible Accountable Care Organizations, for example) or gross governmental usurpations of the citizenry’s economic rights (for example, the Independent Payment Advisory Board, which will allow a handful of people, rather than the American public, to cap health-care expenses).
Switzerland shows how to achieve universal coverage and excellent health care with the lowest cost growth relative to GDP among developed nations. The key? Consumers, not governments or employers, control the purse strings of the Swiss health-care system.
The resulting competition for customers lowered the average private Swiss insurer’s general and administrative expenses to 5.1 percent versus 11.1 percent for insurers in the U.S., and the competition also controlled growth rates. From 2000 to 2008, the compound annual growth rate (CAGR) of Swiss health-care expenses relative to GDP plummeted to 1.1, after Switzerland dropped its prior employer-based system, from 1.7 in the decade before. In contrast, the CAGR of U.S. health-care costs relative to GDP is 1.65.
We can achieve Swiss results simply by enabling employees who choose to receive risk-adjusted cashouts from their employer-sponsored insurance to deduct the amount they spend on health insurance from their taxes. This consumer-driven system will not only control costs but also, finally, raise worrisomely flat U.S. after-tax incomes (and tax revenues) for those who prefer marginal income to health-insurance coverage.
— Regina E. Herzlinger, the McPherson Professor of Business Administration, Harvard Business School, is the author of Market-Driven Health Care and Who Killed Health Care? and the editor of Consumer-Driven Health Care.
Conservatives and the Republican party are now left scratching their heads about how somebody as usually clear-headed as Chief Justice Roberts could produce a decision replete with such stunningly convoluted and unpersuasive reasoning. The practical result is that all of us must now carry the fight politically — and with intelligence and energy. To do that, we must do a far better job explaining what our alternative to the president’s health-care monstrosity would look like, and why it would better serve individual Americans.
Alas, this is anything but a strong suit for presidential candidate Mitt Romney. The survival, for now, of Obamacare makes it imperative either that he choose a running mate expert in this issue, and in explaining it — somebody such as Bobby Jindal or maybe Paul Ryan — or that he publicly designate a respected point person on health care.
Second, we should redouble our efforts to support, both in public discussion and in all legal and financial ways possible, the important points that the constitutionality and morality of Obamacare remain in serious doubt on two other fronts: the unaccountable, extra-constitutional Independent Payment Advisory Board and of course the religious-liberty-destroying HHS abortifacient-contraceptive mandate. We must explain that the only way to short-circuit the continuing constitutional uncertainty is to repeal the whole darn law and start over. The American public wants health-care solutions, not the paralyzing confusion and intrusiveness of Obamacare.
— Quin Hillyer is a senior fellow at the Center for Individual Freedom.