Bitter Medicine

Suppose the federal government discovered that 37 million Americans were not getting enough to eat, and decided to institute food reform. Imagine that the proposed solution was to herd everyone into groups and require them to eat their meals in a few huge cafeterias, all offering the same government-approved menu at government-approved prices. Sound crazy? Well, based on news reports, that's exactly how the administration wants to reform health care. One reason we need reform is that 37 million Americans have no health insurance. The proposed solution is to herd everyone into large purchasing networks, which would bid out their business to insurance companies. This is called "managed competition." The trouble with the plan is that it runs afoul of basic laws of supply and demand. By extending coverage to the 37 million uninsured, the government would increase the demand for health care—without increasing supply. And what happens when demand exceeds supply? Prices go up. Inflation. Never fear, says the administration. To prevent inflation we'll impose price controls. Fee schedules. Lists of permissible charges. But America has tried price controls before—I even helped institute them in the 1970's under President Nixon—and the results were disastrous. There really is a more effective approach to reforming health care. As Forbes magazine recently said, "Let individuals regulate this market, the way they do most of the rest of the economy." Think back to the food analogy. How does the government help people who don't have enough to eat? Not by herding everybody into huge cafeterias but by giving food stamps to the needy, and letting them make their own choice of grocery stores. This ought to be our model for health reform: Give tax breaks to individuals and let them make their own choices about health insurance. "With a simple tax change," says Forbes, "100 million individuals would police the health care market," in lieu of managers or bureaucrats. Under this plan, costs would plummet. When a third party picks up the tab for insurance—as many employers do today—consumers have no incentive to economize. People run to the doctor for every sniffle; doctors order unnecessary tests. But when consumers pay for insurance, they're likely to keep premiums low by taking large deductibles and paying for minor illnesses out of their own pockets. This system rewards people for economizing. In a Rand Institute study, families agreed to cover the first $1,000 of their medical costs each year. The result: They spent 40 percent less on medical care, with no difference in health outcomes. The real solution to reforming health care rests on a profoundly biblical principle: Empower families. Give families the opportunity to make responsible choices. Encourage them to count the costs. Government-run health care concentrates power in the state, reducing people to passive consumers. But a free market places economic power into the hands of individual families. It may be bitter medicine for Washington policy wonks, but the real way to cure our health system is to empower people, not bureaucrats.

06/4/93