Health Care Follies

This article originally appeared in The Washington Times on January 7, 1999.
  • Related Content

Socialism in one country seems to be the president’s motto, at least when it comes to medicine. The administration has unveiled a new initiative on long‐​term health care. Alas, like other federal programs, the proposed first step would likely be only the very small beginning.

The ultimate goal of President Clinton was evident when he launched his health care campaign five years ago. His radical scheme would have determined what insurance benefits people could buy, how much they could spend and what care they could receive.

The plan crashed and burned as soon as Americans understood its expense and intrusiveness. But what the administration could not achieve in one stroke it has sought to implement in pieces.

Unable to force employers to provide insurance, the administration successfully pushed through Congress mandates regarding insurance portability and insurability. Although poor children were already covered by Medicaid, the president won passage of an additional kids’ health program.

Congress rejected the administration’s proposal for managed care run by regional health authorities, but allowed the tax system to continue encouraging the spread of HMOs. As patient dissatisfaction rose, the administration pressed for controls over treatment decisions. Moreover, Mr. Clinton reportedly plans to renew his push to allow many 55- to 64‐​year‐​olds to buy into Medicare, even as that program teeters on the financial brink.

It is a mistake to redesign the system based on its weaknesses rather than its strengths.

Finally, he is advancing a new, seemingly unobjectionable, initiative for long‐​term care, one of the few health care areas without a major federal presence. With a modest — by Washington standards, anyway — budget of $6.2 billion over five years, the scheme offers tax credits for people caring for aged relatives, insurance for federal workers and retirees, information for Medicare recipients and grants to states.

This is only a start, however. Although the administration would negotiate rates rather than pay for long‐​term care insurance, pressure for subsidies would begin immediately. Indeed, Clinton aides say they hope federal coverage would spur private employers to follow suit. If companies don’t, proposals for federal mandates or, more likely, a full federal insurance program, might well follow.

The economics of such an initiative would be frightening. At Medicare’s inception, the House Ways and Means Committee predicted the hospital insurance portion would cost $9 billion in 1990; outlays actually exceeded $9 billion in 1974. Within eight years of Medicare’s passage, its tax rate was running twice the initial projections. Other federal health programs have also rapidly spiraled out of control.

Of course, there are problems of cost and access to health care in America: insurance premiums for 1999 are rising an average of 8 percent. But it is a mistake to redesign the system based on its weaknesses rather than its strengths.

Today, there is no better nation in which to become sick than the United States. America’s death rate, perhaps the best measure of access to and quality of care, is among the lowest, and often the lowest, for most major illnesses.

American medicine is so good because it rewards research and innovation, and utilizes the latest techniques and technologies. For example, the pharmaceutical industry is one of America’s most competitive businesses internationally. U.S. companies have developed far more significant drugs than any other nation. These products can actually reduce costs by cutting the need for surgery and other expensive alternative procedures, as well as save lives.

This superiority is obviously expensive. The problem is not that Americans spend a lot on health care — they are a wealthy people, after all — but that they are spending more than they need to.

The oversize role of the federal government, which accounts for more than $4 of every $10 spent on health care, and the vagaries of the tax system, which taxes wages but not health care benefits, have combined to create a system of third‐​party payments run by employers. The result: Those who are unemployed or self‐​employed are far less likely to be covered. Those with insurance often don’t choose their own plans, hence the rising crescendo of complaints against HMOs.

Instead of following the Clinton strategy of piling one regulation on top of another, Congress should dismantle the third‐​party payment system. Congress should expand existing Medical Savings Accounts to promote coverage for future contingencies, such as long‐​term care, as well as current health care expenses. Congress should also apply the principle of MSAs to Medicare and Medicaid.

In one sense, American health care suffers from too much of a good thing — too much new technology, too many new pharmaceuticals, too many elderly surviving ever longer, too many new lifesaving treatments. In such circumstances, medicine will inevitably be expensive. But it is well worth the price. Exposing health care to more market forces rather than more federal dictates is the best way to hold down costs and expand access.

Doug Bandow

Doug Bandow is a senior fellow at the Cato Institute.