Politics & Policy

The Right Rx

Dr. David Gratzer has The Cure.

There’s a sickness in the air and near everyone has some kind of plan or another these days to both diagnose and treat problems in the American health-care system. Dr. David Gratzer is among them. A medical doctor and fellow at the Manhattan Institute, he’s author of The Cure: How Capitalism Can Save American Health Care. Dr. Gratzer recently took questions about health-care politics from NRO editor Kathryn Lopez.

Kathryn Jean Lopez: What say you about the president’s new health-care plan?

Dr. David Gratzer: It’s the right prescription.

The president proposes ending 60 years of arbitrary tax policy that — by making employer-provided health benefits tax-free — punishes the self-employed, rewards society’s most affluent, and distorts the entire health-care system at a cost of hundreds of billions of dollars to the Treasury. Should Bush’s proposal win approval, millions will have better access to health insurance and 80 percent of workers will get a tax cut.

What’s not to like?

Lopez: We’re fans here too.

On to another branch: Realistically what’s the best you expect from the 110th Congress on your issues?

Dr. Gratzer: Little — and nothing good. “Health care is coming back,” Senator Clinton recently stated. “It may be a bad dream for some.” Last month, Democrats voted to change Medicare’s prescription-drug benefit so that the federal government can “negotiate” prices. The agenda will likely include drug reimportation and an expansion of SCHIP, the Clinton administration’s health program for children — all heavy in government intervention, a bad dream for all.

But 2008 is fast approaching. The debates we are having today will have an influence on the election. While early, the Republicans are increasingly able to offer up a meaningful alternative to the Democratic proposals to further subsidize and regulate a health-care system drowning in subsidies and regulations.

Lopez: You’re a doctor. How did you wind up a wonky doctor?

Dr. Gratzer: Before I entered medical school, I’d estimate that I spent about ten minutes thinking about health policy.

As a Canadian, I assumed that government-run health care was compassionate. I had a rude awakening when I did my training. I remember one morning particularly vividly — on my way to class, I cut across the ER to shave a few minutes off my commute time. When I walked in, the ER was crowded with elderly people waiting for beds. Some had been there for 3 or 4 days. The smell of urine and sweat and fear hung in the air. As I navigated past the bodies, I began to question everything I thought I knew about health care — not only in Canada, but also in the United States.

The more I discovered about Canadian health care, the more enraged I became. After writing several op eds, I decided to write a book. By day, I attended classes and rounded on patients; at night, I worked on my manuscript. I titled the book Code Blue, literally the moment the patient’s heart fails and the staff must be galvanized into action. I argued that the waiting lists that plagued Canadian health care were a direct result of government central planning and rationing. A dozen publishers passed up the book. Finally, I found a small publishing house that was willing to give me a chance. Code Blue went through five printings and won the prestigious Donner Prize, the highest award in Canadian public policy writing — besting a book, incidentally, written by the current Leader of the Opposition.

Like many Canadians, I’ve found my future south of the 49th parallel. Yet, looking at the American health-care system, I find the same mistakes being made here as were made before in Canada — the quiet expansion of government. And so, I became and I remain a wonky doc.

Lopez: You look at Dick Cheney and what do you see?

Dr. Gratzer: A medical miracle.

Despite four heart attacks, Vice President Dick Cheney is alive and well and living at Number One Observatory Circle — a medical accomplishment that symbolizes the incredible progress of American medicine.

Cardiac care has been revolutionized in recent years: Death by cardiovascular disease declined by two thirds over the past five decades; according to the American Heart Association, 88 percent of heart-attack survivors under 65 return to their job. And other medical fields have been similarly transformed: depression is treatable, childhood leukemia is curable, and polio is history.

I speak often to doctors and health-policy experts who tell me of their frustration. I have no patience for this — medicine has never been better.

Lopez: Why does health-care cost so much?

Dr. Gratzer: Medicine has never been better; health care has never cost more. People often assume that we pay so much because of the remarkable advances in medical science. Yet, in every other sector of the economy, prices fall as technology advances. Why is health care so different?

As I write in The Cure, American health care has been shaped by two days: October 26, 1943 and December 1, 1942.

On October 26, 1943, the IRS ruled that employers could continue to pay health-insurance premiums in pre-tax dollars. As a response to wage and price controls, employers had begun to offer health benefits to attract better employees. The IRS ruling legitimized and encouraged the practice, giving rise to the dominance of employer-sponsored health insurance.

On December 1, 1942, Lord Beveridge issued his report on health care and pensions to the British parliament, envisioning zero-dollar public health insurance. Lord Beveridge had enormous influence here, particular among Democrats; his thinking (and persuasiveness) helped lay the intellectual foundation for Medicare and Medicaid.

Fast forward 60 years, and the end result of these two days is that Americans — whether privately insured or publicly covered — tend to be over-insured, and thus less sensitive to prices. And so we come to a paradox: American health care is so expensive because it’s so cheap. That is, with Americans paying just 14 cents out-of-pocket for every health dollar, they have little incentive to economize on health expenses. Americans have access to the most technologically sophisticated system in human history — yet pay pennies on the dollar out of their own pockets. The upshot? A health-care system that is heavy in cost but not necessarily strong in satisfaction and uneven in quality.

Lopez: Why do you call Canada a nightmare?

Dr. Gratzer: As I mentioned before, I was born and raised in Canada. I did my med school there. While Canadian medicare was created with the best of intentions, the reality is that waiting lists plague all aspects of care.

Some years ago, I spoke to Doug Hitchlock. At the time, Hitchlock ran a small business offering Canadians timely health care — south of the 49th parallel. Hitchlock was a frequent target of criticism. Dr. Michael Rachlis called Hitchlock a “parasite” in a national newspaper. Dr. Rachlis, a physician, left his practice in order to defend Canadian medicare, largely by doing contract work for unions. Hitchlock also left his original career to involve himself in health care, but for different reasons. He stopped working as a stockbroker after almost 40 years because of his daughter’s illness. She needed an angioplasty for a weak heart. She didn’t get it — she died waiting for the procedure. Hitchlock’s daughter was 9.

These stories are too commonplace. I’m not suggesting for a minute that American health care is perfect — I’ve just written an entire book arguing for some strong medicine for the U.S. system. But it’s important not to be seduced by the siren song of “compassionate” government-run health care.

Lopez: As we move toward 2008: Is their enough capitalism in the Mitt Romney Massachusetts approach for your liking?

Dr. Gratzer: It’s important to remember that Governor Romney needed to work with Democrats — and fairly liberal ones at that — to get his legislation passed. With that in mind, I don’t think it’s fair to blame the governor for every wart and blemish. And there are some remarkable ideas in the plan. I particularly like the concept of the connector, which allows individuals with several part-time jobs to pool their employer contributions.

That said, there is plenty to dislike in the proposal. It will dramatically expand Medicaid; there are too many regulations and not enough in way of deregulation.

Lopez: Was Hillary Clinton’s health-care dabbling a certified disaster…or did it just make her a qualified expert in the eyes of Americans?

Dr. Gratzer: I’ll let you know in two years.

Lopez: What’s your ideal presidential health-care platform?

Dr. Gratzer: Here’s my five-point plan:

Make health insurance more like other types of insurance. Health savings accounts, which passed as part of the Medicare reforms of 2003, were an important first step, separating smaller expenses from high-deductible insurance, for catastrophic events. However, the legislation is overly rigid. Congress must expand and revise the structure of HSAs, and level the tax playing field for those not covered by an employer plan.

Foster competition. American health care is the most regulated sector in the economy. The result? A health-insurance policy for a 30-year old man costs four times more in New York than in neighboring Connecticut because of the multitude of regulations in the Empire State. Americans can shop out-of-state for a mortgage; they should be able to do so for health insurance. Likewise, many laws intended to promote fairness end up reducing competition and thus innovation. Congress should reconsider such laws.

Reform Medicaid, using welfare reform as the template. Medicaid spending is spiraling up, now consuming more dollars at the state level than K-12 education. Like the old Aid to Families with Dependent Children, part of the problem stems from the fact that the program is shared between both the federal and state government — and is thus owned by neither. Congress should fund Medicaid with block grants to the states, and let them innovate.

Revisit Medicare. Back in the late 1990s, a bipartisan commission approved a reasonable starting point for Medicare — junking the price controls, and using the Federal Employees Health Benefits Plan as a model. Elderly Americans would then have a choice among competing private plans. Given that the unfunded liability of Medicare is four times greater than that of social security, the time is right to experiment with this idea.

Address prescription drug prices by pruning the size and scope of the FDA. It costs nearly a billion dollars for a prescription drug to reach the market, and roughly 40 percent of that is due to safety requirements. This is effectively a massive tax on pharmaceuticals. With new technology and focus, it would be possible to update the FDA, drawing from President George H. W. Bush’s experiments with contracting out certain approval steps to private organizations, which boasted lower costs and faster approval times.

For the record, because of family obligations and constitutional restrictions, I’m not going to run in 2008.

<em>The Cure</em>, by Dr. David Gratzer



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