- The Washington Times - Thursday, July 30, 2009

OPINION/ANALYSIS:

Momentum for the Obama administration’s health care proposal seems to be dissipating as concern about the plan mounts. But why is it so difficult to overhaul our health system when there is bipartisan agreement it needs to be fixed?

First, let’s understand the immensity of the task. If the U.S. health care sector were a separate national economy, it would be the sixth largest in the world - bigger that Britain’s entire economy. Imagine five bickering congressional committees trying to redesign the British economy successfully in just a few weeks. No wonder people are getting nervous.

Second, the congressional majority wants to revamp the huge health care economy using the doctrine of central planning. So we have thousands of pages of legislation, with potentially hundreds of thousands of pages of rules and dozens of boards and “czars.” These will regulate prices, reorganize hospitals and doctors, and decide what health care each of us should and should not have.


It is inconceivable that this could work successfully.

So it is time to take a deep breath and take a different direction, one based on the traditional American approach of gradualism and experimentation, rather than the European vision of micromanagement and central planning.

How would we do that?

First, we take care of simple things that can be done right now to expand coverage. For instance, millions of uninsured Americans are eligible for private insurance or programs such as Medicaid, yet they don’t sign up. Now some low-income workers can’t afford their employer’s coverage. So let’s provide tax credits or other subsidies to help them. Others just don’t get around to signing up. So let’s encourage auto-enrollment, where workers are automatically signed up unless they actively decline coverage.

Many eligible people just don’t enroll in Medicaid. We should make the enrollment process easier for them. But the program is also defective in many ways, and so we need to give states more leeway to improve it.

Second, let’s build a new system one stage at a time and test each stage to be sure it works before building the next. People in both parties agree that one of the first stages to create is effective “shopping malls” for affordable coverage in each state. That requires information for people to compare plans. And it requires cooperation between insurers, working with state governments to design insurance rules, reinsurance systems and other changes so sicker Americans can get coverage.

Third, rather than micromanage the health system via central planning, we need to get the system’s basic incentives right. Today, those incentives are totally messed up.

It’s remarkable how creative Americans are when they have the right incentives. But today, with tax-subsidized, third-party insurance, everyone has the incentive to spend more of someone else’s money. No wonder costs are exploding.

Getting incentives right means things like pushing employers to show their employees how much of their compensation comes as health insurance. It also means limiting the tax advantage for health plans - just as tax breaks are limited for 401(k) plans or IRAs. That would encourage all of us to look harder to see if our insurance is good value for money and to opt for fatter paychecks and less costly fringe benefits.

Fourth, to the extent that government has a role in health reform - and it does in areas such as insurance rules - we are more likely to get it right if states are given more power to try different approaches. If we first allow that kind of experimentation, we can then compare the results.

No one answer will work the same in Manhattan and rural Arkansas. So the federal government should set broad goals for coverage and then give wide leeway for states to try different approaches and learn from one another. That’s American federalism - and it is exactly the opposite of Congress’ current obsession with dreaming up delivery system “game changers” and imposing them from coast to coast.

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