The problem with the current proposals is not only the $400 billion price tag.
The greatest problem in rising health-care costs today is that the consumer is given incentive to overconsume health care. Additional subsidies will, of course, increase demand and increase inflationary pressure on health-care costs generally and prescription drugs specifically, exacerbating an already tenuous situation.
John Goodman, president of the National Center for Policy Analysis, recently noted that "Some members of Congress apparently believe government should design the benefit package and let the private sector compete on the price of supplying those benefits. They have it exactly backward." The government, he added, "is much worse on designing benefits than it is on skimping on reimbursement amounts."
While I am critical of the current plans on the table, I was entirely sympathetic to the president's original proposal, which was modeled on the Federal Employee Health Benefits Program. That plan, covering more than 9 million federal workers and retirees, allows workers to choose from a number of plans, all with prescription drug coverage. And, as Heritage's Robert Moffit points out, the "federal employee program is decentralized, not managed, claim-by-claim, by a cumbersome bureaucracy." While that program is far from perfect,
it is a much better model than either plan going to conference today.
The conference committee would be wise to ensure that all seniors have access to a basic safety-net health-care package for routine and preventive health care, which should include an affordable deductible and co-payment based on ability to pay combined with catastrophic health insurance that pays major expenses. This could be accomplished with the Health Savings Accounts and Health Saving Security Accounts provisions, expanded Medical Savings Accounts, which were included in the House version of the bill.
Under the new savings account provisions, senior citizens' Medicare funds could be transferred to a qualified insurer, who would then deduct the cost of catastrophic insurance and deposit the rest of the money into the senior's personal HSA. While HSA plans may not be a panacea, they will do no harm, and will provide the introduction of market-oriented forces into the Medicare system, which is long overdue.