- The Washington Times - Thursday, January 3, 2002

The Medicare health plan covering just about every American senior recently announced it would delay paying 20 million hospital insurance claims.

An immediate public storm of protest led to a retreat, but the hospitals will still not receive all they are due.

Imagine if a private firm first announced such incompetence, instantly reversed itself, and still stiffed its creditors. The administrators would be in jail. In the government, it is business as usual.

The "emergency" was a new software system to record the 2002 repayment rates. The bureaucrats wanted a three months "time out" to make the switch.

The private company making such an announcement would be laughed out of business and the boss would be searching for new employment. The administrator of the Center for Medicare and Medicaid Services presumably has lifetime employment. His solution is to delay the repayment increases until April. Hey, if the hospitals receive lower reimbursement rates in the meantime, that is no skin off the government's back. At least they will receive something, which they would not have if the original plan stuck.

No rational system would handle all national claims at one time, from one headquarters, or use one software package. In the wonderful world of government bureaucracy, this is called planning.

Actually, there is a simple answer. While there was not much economic stimulus in the "stimulus bill" that died in Congress at the session's end another Washington oddity for another day House Ways and Means Chairman Bill Thomas, California Republican, had a modest proposal that if fully implemented would make this type of problem disappear.

Of course, it was so reasonable that the Democratic negotiators to the House-Senate conference were willing to defeat the whole stimulus package to block it. Democrats had insisted upon health insurance coverage for economically displaced workers, so administration officials and Mr. Thomas devised a two-year tax credit for them to purchase their own health coverage. What could make more sense?

The problem was that the Democrats knew Mr. Thomas ultimately wanted to roll the present employer-based private health insurance system, plus Medicare and Medicaid, into a new tax credit or voucher program covering everyone. The whole bureaucratic mess would be eliminated and individuals would buy their own health insurance just as they do for life, casualty and the rest. This reform would cut out all of the special benefits and political gaming of the present system and restore a market in health insurance and health care.

Of course, the poor would receive special payments for Medicaid and the aged from Medicare but all would buy health insurance in a common market. It would require a special risk pool (probably by the states) for the uninsurable but otherwise the system would work with market efficiency.

This is what frightened the liberals. People would not need government health experts to dole their benefits and cajole their health suppliers.

Hospitals and doctors could begin rational pricing and satisfy their professionals instead of chasing them into retirement or to other specialized fields. The nurse shortage would disappear. But, then, who would need the "caring" politicians except to fund the vouchers? That is hardly the fun of deciding who gets coverage for what health problems and who gets paid how much for doing so. If it worked for health care, who knows where this would end? What would happen to all of the well-paid government expert planners?

Critics of capitalism love to talk about "market failure" as the rationale for socialistic ownership or control of business. In fact, "market failure" usually means some politician has a vision different from consumers of what the market should produce and how. True failures are rare and mostly work themselves out. Extreme cases like the Great Depression usually result from government failure, such as Milton and Rose Friedman proved for the Federal Reserve's creating the 1930s currency mess. An inadvertent government decision a half-century ago to route health care through employers has produced a similar market failure today for millions of uninsured.

Mr. Thomas has the solution. Unfortunately, the welfare state troglodytes would rather delay payments or underpay claims on a massive scale and further disrupt an already reeling health care system and, with no stimulus, even take the whole economy down with it. This is what masquerades as liberalism as America meets the challenges of the 21st century.

Donald Devine, former director of the U.S. Office of Personnel Management, is a columnist and a Washington-based policy consultant.

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