Reforming health care

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America's health-care system is in need of serious reform, but the solution is not Cuban-style socialized medicine, as Michael Moore advocates in his new film "Sicko." We need a uniquely American approach to health care, based on a free, competitive marketplace, organized to make private health insurance affordable for all Americans. There has been a longstanding debate in our country over competing philosophies of health care. One would have government own and run the health-care system: setting prices, making choices, and taxing people to pay for it. The other would have government organize the health-care marketplace so that the vulnerable get government help and everyone else has access to affordable, private insurance — either through their employers or on their own.

When governments run health care, the results are always the same. We see it in countries all over the world: longer waiting lines, less incentive to improve quality, and higher taxes. Care is rationed. It's the only way to keep costs down.

The results are different when government organizes a competitive health-care marketplace. Prices drop and quality rises as providers compete for business. Innovation blossoms as the market rewards risk-taking. People enjoy more choices and better access to higher-quality, lower-cost care. This approach is why America has the finest system of private medicine in the world. It's why over 150,000 Canadians and countless more people from other countries come here each year for health care.

Congress should keep that in mind when it debates health care this summer. The issue will be renewal of the State Children's Health Insurance Program, or SCHIP. Some in Congress want to use SCHIP as a step toward universal government-funded, government-run coverage. They have proposed a massive expansion of the program, adding $50 billion to SCHIP's budget and doubling SCHIP's original income limit so that it would cover children in families of four earning up to $82,600. This would make 71 percent of American children eligible for public assistance.

The problem is that most of the children they want to add to SCHIP already have private insurance. So these children would give up the private insurance they have now as they move to government health care. The Congressional Budget Office recently estimated that as many as half of the children enrolling in SCHIP would drop their private coverage. The independent National Bureau of Economic Research put the crowd-out rate as high as 60 percent. Instead of encouraging people to drop private coverage in favor of government programs, we should be making basic private health insurance affordable for all Americans. There are three steps in doing that.

First, we need to provide sustainable assistance for the poor, the elderly and the disabled. That means reauthorizing SCHIP but redirecting it toward its original target — low-income, uninsured children. It also means encouraging competition-based reforms like Medicare Advantage and Medicare's new prescription-drug benefit. We proved how competition lowers costs with Medicare's new drug benefit. Instead of a single government-run drug plan, seniors are given a choice of private plans that compete against each other. As a result, the Medicare drug benefit has turned out to cost seniors and taxpayers a lot less than projected.

Second, we need to empower the states to organize the marketplace to make private insurance more affordable for all Americans. The states are more fiscally responsible than the federal government. They have to balance their budgets. They can't promise the moon and charge it on the federal credit card. There is already a torrent of activity at the state level on health-care reform. Literally dozens of states are working on plans to extend coverage to all of their citizens. They are making different choices and testing different tools. They are also learning from each other what works and what doesn't.

Third, we need to fix federal tax policy to eliminate the blatant tax discrimination against those who buy health insurance on their own and not through their employers. Right now, only insurance provided by employers gets a tax break. This is indefensible. President Bush has proposed a tax deduction to level the playing field. Others have proposed a tax credit. Either way would solve a systemic problem that states can't solve on their own. Neither would threaten the protections employers have for the insurance they provide employees. Those protections should be continued.

It's clear that the health-care conversation needs to be not just about how we insure uninsured children, but about how we ensure that every American has access to a basic, affordable plan. Competition is the key. Only the free choices of American consumers and the competition of an organized marketplace can keep costs in check, and only by keeping costs in check can we achieve our common goal of making certain that every American is insured.

Mike Leavitt is the secretary of Health and Human Services.