Market-driven health care is best

Doug Wilson
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Posted: Feb 04, 2007 11:42 PM
Market-driven health care is best

Few issues pique the interest of the American people like healthcare. Politicians know this and nobly attempt to solve America’s health care problem.

Once in a while good ideas emerge from this sausage factory: Health Savings Accounts, for example. But most of the time we’re left with little more than campaign bromides that never amount to much. Such inactivity is sometimes good, particularly when it prevents the implementation of a fatally-flawed single-payer health care plan; other times bad, particularly when inactivity results from an unwillingness to deregulate the insurance industry, a move that would precipitate a dramatic fall in the price of premiums.

When we consider recent healthcare developments in Massachusetts and California, however, one can’t help but wonder if the time of inactivity is drawing to a close. The question: Is this a good thing?

The first sign of action came from Massachusetts in April 2006 where then-Governor Mitt Romney led the charge to overhaul the state’s healthcare system. With the help of the conservative Heritage Foundation, Romney devised a plan that would drastically reduce the amount of “free-care” provided in the state by requiring all Massachusetts citizens to have health insurance.

Romney’s plan harnessed free-market principles to create an “insurance exchange” that provided citizens with a one stop-shop to purchase health insurance. According to Heritage’s Ed Haislmaier, one of the architects of the plan, the exchange works like a “stock or commodity exchange” and serves as a “clearinghouse” (but never a “product regulator”) from which individuals can choose affordable healthcare plans.

The plan requires all Massachusetts citizens to purchase health insurance from this marketplace of private insurers or from another source. Employers must provide employees with the option to purchase healthcare plans with pre-tax dollars. Those who can afford to but elect not to purchase health insurance face wage withholdings and the loss of tax exemptions. Those unable to afford insurance premiums receive government assistance to purchase insurance; the assistance is made possible thanks to Romney’s plan to redirect funds earmarked for hospitals to cover uninsured patients to help individuals purchase their own insurance.

Having uninsured “people show up when they get sick and expect someone else to pay—that’s a Democratic approach,” Romney told Fox News’ Neil Cavuto last April. “The Republican approach is to say…everybody should have health insurance. If they need help we’ll be there to help them—but no more free ride.”

The second sign of action came from my home state of California where Governor Arnold Schwarzenegger recently announced plans for a $12 billion universal health care system.

The plan seeks to insure all California residents (including illegal aliens) by taxing hospitals 4 percent and doctors 2 percent of their gross revenues. Furthermore, the plan calls for employers of 10 or more who do not provide coverage to pay an “in-lieu fee” of 4 percent of payroll.

On top of all this, the plan is sneaky. California requires any new tax measure to pass both houses of the legislature by two-thirds majorities, but since Schwarzenegger is calling his new taxes “fees” or “dividends” he hopes to avoid such a requirement. As the Wall Street Journal so brilliantly put it, Schwarzenegger wants to “call the elephant in the room a hippo and hope the public buys it.”

But the public isn’t buying. In fact, California voters defeated measures in 2003 and 2004 that would have required businesses to provide health insurance to their employees. Doctors pegged as the funding source for the plan aren’t buying either. Medgadget, a popular medical blog written by doctors, likened the plan to a declaration of “war on physicians” and said that Schwarzenegger’s action comes at a time when the medical industry is “already experiencing unprecedented levels of loss of economic liberties and…ever increasing regulation.”

Whereas Romney’s plan focused on creating an environment in which the free-market thrives, Schwarzenegger’s plan seems determined to expand government authority, create a vast new bureaucracy, and punish doctors and other businesses. Unfortunately, there’s little reason to believe that such a plan would do anything other than reduce innovation, increase costs, drive doctors and/or other employers out of state, and ultimately leave us Californians with the same (or worse) problems we face today.

Thus we encounter one of the great dangers of healthcare “reform”: we can make things worse, much worse. To avoid such calamitous situations, conservatives should follow Governor Romney’s example and embrace a free-market approach that emphasizes personal responsibility and consumer choice. In the end, the market is our best hope to make healthcare reform a good thing for America.