Is the Price Right?

Everyone agrees that health-care costs are too high, but almost no one is asking what drove them up in the first place. Yet the answer is actually simple. And it's something you and I can do something about. Compare health insurance to other forms of insurance. You don't buy car insurance to cover minor repairs-to pay for new spark plugs or motor oil. If you did, your premiums would skyrocket. Instead, auto insurance is limited to major expenses like collisions. Yet in health care, we've allowed insurance to be expanded to cover every check-up, every test, every treatment, no matter how minor. It's the equivalent of buying coverage for spark plugs. No wonder premiums have skyrocketed. One of the simplest ways to reform health care is to return to its original purpose: to give protection against catastrophic costs. Studies show that when families limit themselves to catastrophic coverage, and pay for routine care out of their own pockets, overall health expenses plummet. This is something we can solve without waiting for government reform. We can start pressing our employers to offer plans with high deductibles and low premiums-plans that turn families into responsible, cost-conscious consumers, while still giving protection against catastrophic expenses. Ironically, the Clinton plan takes exactly the opposite strategy: Instead of reducing insurance coverage, it expands coverage by mandating benefits far beyond what most present plans offer. To keep a lid on costs, Clinton would establish a National Health Board to set fee schedules and cap premiums. In everyday language, that means price controls. The heart of the Clinton health plan is old-fashioned price controls. The trouble is that America has tried price controls in other industries, and it never works. If you hold prices down below market value, you drive out suppliers, who can no longer recoup their costs. At the same time you stimulate demand because services are cheap. It's a system that encourages overuse: seeing a doctor for every sore throat, taking medicine for every sniffle and cough. But high demand plus low supply equals scarcity. And in medical care, scarcity means waiting lists. Under Canada's national-health system, the wait for a pap smear is nearly 5 months; for hip replacement surgery, 18 months. Canada is even starting to cut back on the services it will cover. Britain, Spain, and Sweden are likewise cutting back on services. The verdict of history is clear: Government control of any industry leads to shortages. This is the pragmatic case against price controls. But there's also a principled case. Classic Christian social philosophy states that individuals should be free to exercise their responsibility before God in every sector of society. The church ought to be free from state control, and so should the family, the press, the arts, and the economy. To allow the state to set prices is to place an economic function under state control, which violates the principles of a free society. Real reform means finding ways to empower families to get the best value for their health-care dollar. To freely exercise their responsibility before God . . . in a free economy.

11/16/93