• SUPPORT CATO
• FOR STUDENTS
• FOR MEDIA
• FREE NEWSLETTERS

• HOME

• ABOUT

• BLOG

• BOOKSTORE

• EVENTS

• EXPERTS

• MULTIMEDIA

• PUBLICATIONS

Books

Reviews & Journals

Public Filings

Policy Studies

Opinion & Commentary

• RESEARCH AREAS

• SPEAKERS BUREAU

• SUPPORT CATO

• CATO UNBOUND

• DOWNSIZING
  GOVERNMENT.ORG

• ELCATO.ORG

Cato Dispatch for June 19, 2009

Subscribe to the Cato Dispatch via email

(Links to outside sources were active as of the date of this dispatch; however, not all news sources maintain links to current stories indefinitely. Some links also may require registration.)

The Right Kind of Health Care Reform
Market Solutions
Debating Health Care Reform

The Right Kind of Health Care Reform

We are facing some of the most sweeping changes health care has seen in decades. Reform is needed, but increasing government control over one-sixth of the economy and over important personal and private decisions would harm American taxpayers, health care providers and patients. Cato just launched a new Web site, Healthcare.Cato.org, which provides in-depth analyses of health care issues and reform initiatives that increase consumer choice and energize competition.

President Obama’s proposals will inexorably lead to a government takeover of the system.  According to health care expert Michael D. Tanner, this “reform” effort will give government greater control over more and more of our health care decisions. The plan will compel Americans to purchase health insurance, control its content and determine whether Americans receive certain medical services.

According to Tanner, the plan “would not initially create a government-run, single-payer system such as in Canada or Britain. Private insurance would still exist, at least for a time, but it would be reduced to little more than a public utility, operating much like, for example, the electric company, with the government regulating and controlling every aspect of its operation.”

What will it cost taxpayers?

Tanner explains, “Obamacare will be expensive. The Congressional Budget Office’s initial scoring of Ted Kennedy’s health-care bill shows it would cost at least $1 trillion over the next ten years.”

The CBO study also found that the plan would result in roughly 23 million people losing the insurance they currently have. The actuarial firm Lewin Associates estimates as many as 118.5 million would shift from private to public coverage, resulting in a nearly 60 percent reduction in the number of Americans with private insurance.

Market Solutions

There are market-based solutions to the problems besetting the current health care system. In a Policy Analysis, John H. Cochrane explains how “free markets can solve this problem, and provide life-long, portable health security, while enhancing consumer choice and competition.”

The key, he says, is "Health-status insurance.” He writes:

If you are diagnosed with a long-term, expensive condition, a health-status insurance policy will give you the resources to pay higher medical insurance premiums. Health-status insurance covers the risk of premium reclassification, just as medical insurance covers the risk of medical expenses.

With health-status insurance, you can always obtain medical insurance, no matter how sick you get, with no change in out-of-pocket costs. With health-status insurance, medical insurers would be allowed to charge sick people more than healthy people, and to compete intensely for all customers. People would have complete freedom to change jobs, move, or change medical insurers. Rigorous competition would allow us to obtain better medical care at lower cost.

Cato health policy analyst Michael F. Cannon says that one way to fix the health care system is to make consumers care about cost:

More than 200 million Americans have public or employer-controlled coverage, and all are essentially purchasing it with someone else's money. And that's the problem: Americans demand more coverage than they would if they were spending their own money. In fact, we demand as much coverage as Canadians, for whom health care is supposed to be free. Both American and Canadian patients pay only about 14 cents for every dollar of medical care they consume.

…If we want to increase access to health care, our first priority must be to contain costs. Nothing would help more than 200 million cost-conscious consumers.

Letting Americans own their health care dollars is the right thing to do. And as it happens, it would also cover a lot of the uninsured.

For an extensive analysis on the health care system, Tanner and Cannon explain more market-based solutions in their book, Healthy Competition: What’s Holding Back Health Care and How to Free It.

Debating Health Care Reform

Cato held an all-day conference on health care reformWednesday, featuring speakers from across the political spectrum to debate the issues surrounding this year’s health care reform effort.

You can watch all of the speakers and see the schedule of events here and stay up to date on the health care debate at Healthcare.Cato.org.

Chris Moody, editor, cmoody@cato.org