Commentary

The Back Door to Nationalized Health Care

This article appeared in Copley News Service.

President Clinton knows how to talk the talk of limited government. The “era of big government is over,” he says. But he doesn’t walk the walk.

The president remains committed to using coercive state power to squeeze individuals and society into his preferred mold. What makes him so dangerous is his ability to disguise big new programs with the rhetoric of reasonableness.

Like health care. In 1993 he tried the direct approach proposing to essentially nationalize one-seventh of the US economy by having government take over the medical market. But the public recoiled at the prospect of central planning for medicine, and Congress buried the scheme.

Mr. Clinton learned from his defeat, however, and is now attempting to achieve the same end indirectly, by nationalizing health care piece by piece, starting with children. The administration backed by Sens. Ted Kennedy, Massachusetts Democrat, and Orrin Hatch, Utah Republican, has proposed universal care for kids. It’s an appealing notion, since 10 million children are said to lack health insurance.

But this number is dangerously misleading. First, there’s been no explosion of uninsured kids to the contrary, the number actually fell from 1994 to 1995. Second, some parents eschew insurance by choice. Fifteen percent of children without coverage have parents who earn more than $40,000 annually Twice as many live in families already eligible for Medicaid.

Of the rest, most are uninsured for only a limited time. Just 4 percent of children lack coverage for the entire 28 months used by the Census Bureau to determine the number of uninsured.

And even lack of health insurance doesn’t mean lack of medical care. Rather, it means less consistent attention, as poorer parents tend to take their kids to hospital emergency rooms rather than primary care physicians, and rely on charitable providers. This obviously isn’t the best solution, but there’s no crisis. Indeed, in general children don’t have to go to the doctor nearly as often as elderly adults.

Instead of treating symptoms, Congress needs to look at root causes, primarily the growth of a cost-plus health care system based on employer-provided health insurance.

Washington already accounts for more than 40 percent of medical spending through Medicaid and Medicare. Moreover, federal tax law, by treating health insurance as a business expense while excluding it from income, encourages employers to provide comprehensive medical policies. As a result, patients pay less than one-fourth of their bills directly, a prescription for overuse and cost inflation. (Consider the impact if everyone could choose a car knowing that three-fourths of the bill was going to someone else.) Patients and doctors have little incentive to hold down health care expenses. At the same time federal and state governments mandate that insurers offer expensive nonessential benefits such as hair transplants.

Since they buy the policies employers write insurance for their, and not their employees’ benefit. Thus, workers can’t take their benefits to another job, as they can life insurance. The widespread role of third-party payment also helps explain the rise of managed care, since the goal of those who are paying—employers, insurers and government, rather than patients—is to provide as little care as possible.

Finally, people without company plans must use after-tax dollars to secure coverage. They thus either spend significantly more on insurance or remain uninsured. All told, this perverse system has yielded rising costs, rationed care and inadequate insurance.

While reform is obviously needed, the answer is not piecemeal socialism. Government-run systems in Canada, Europe, and elsewhere suffer disastrous shortcomings.

Rather, Washington needs to return medicine to the marketplace. That requires either eliminating the tax exemption for health insurance benefits (counterbalanced by an equivalent tax cut), or allowing all Americans to have medical savings accounts, enabling them to keep some of the savings gained from shopping around. (Today only a few people are able to participate in an experimental MSA program.) As for Medicare and Medicaid Washington should provide vouchers for people to purchase their own health insurance policies, with a similar sharing of any cost savings for choosing catastrophic coverage.

Vouchers and MSAs would help the poor and near-poor acquire insurance, irrespective of their employment status, which would cover most kids who currently are uninsured. More fundamentally, injecting cost-consciousness in the health care system, along with repealing expensive government mandates, would help moderate price increases, making health insurance more affordable and thus more widespread.

Today the medical market is neither fish nor fowl, but an inefficient mix of public and private that both hinders access and increases costs. Congress should get rid of Uncle Sam as Doctor-in-Chief. That alone would not solve all health care problems—covering the poor will never be cheap—but it is necessary to solve them. Kiddie Care provides an important test of whether the Republicans are serious about leading when the issues get tough.

Doug Bandow is a senior fellow at the Cato Institute.