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The future of health care

By Stephen Moughon
web posted October 25, 2010

Earlier this summer, two of my brothers and I decided to take a road trip. We jumped in the car and started the seven-hour drive to Washington D.C. Of course, before we had traveled fifty miles, one of us announced, "Hey I'm hungry. You guys want to stop?" We pulled into a Wendy's and perused the menu for the lowest priced food. After ordering a number of junior bacon cheeseburgers, we continued our journey.  The trip was an eye-opening experience. Up until that point I had never eaten a junior burger and could probably count on my fingers the number of times I had ordered from a value menu. Normally, my parents would be with me to pick up the tab. But when I was faced with the bill, I found a way to cut costs.
 
Congressman Paul Ryan uses this same principle in his policy proposal, "A Roadmap for America's Future". In it he suggests that, among other things, health care be dramatically reformed (again). The dominant theme in Ryan's suggestions is that individuals, as opposed to the government, should choose how to pay for their health care. Single tax filers would receive a $2,300 ($5,400 for families) health insurance tax credit, while Medicare and Medicaid beneficiaries would be given vouchers to cover their health care expenses.
 
This plan would encourage competition. As the laws stand now, customers are restricted to purchasing only the health insurance provided in their state of residence. If Paul Ryan has his way, patients in Boston who pay $750 a month for health insurance, or more than the lease of a Porsche, would have access to a similar plan for $170 a month offered in Kansas City. Additionally, Ryan's proposal would reduce third-party payments. Today, only 14% of health care spending comes directly from individuals.
Representatives Marsha Blackburn and Phil Roe use the case of TennCare, a failed attempt at universal single payer care in Tennessee, to explain the costly effects of third-party spending in their article, Lessons For Health Care Reform, "TennCare's gold plated coverage included every doctor's appointment and prescription. As such, patients with a cold opted to charge the state hundreds of dollars for doctor visits and medicine instead of paying $5 out of pocket for over-the-counter cold medicine. Over-use caused TennCare's…cost to explode. While TennCare consistently covered between 1.2 and 1.4 million people; costs increased from $2.5 billion in 1995 to $8 billion by the time of TennCare's restructuring [in 2005]." This is the inherent flaw in third-party payments.
 
Although the aggregate cost of health care may fall, or at least rise slower if this proposal is enacted, individuals will end up paying more out of pocket. According to Matt Miller, a senior fellow at the Center for American Progress, a "health tax credit of $5,700 per family…won't go far for average Americans when the most popular preferred provider organization family plan enjoyed by Congress today runs about $14,000." Moreover, as Washington Post economic analyst, Ezra Klein, points out, the vouchers seniors would receive grow "far slower than the expected growth of health care costs." The same applies to health care tax credits. Finally, although Paul Ryan's plan is meant to trim the long-term deficit, it will not significantly affect short- or medium-term budget shortfalls. The proposed Medicare reform itself would not go into effect for over a decade.
 
Every policy has its pros and cons. Many of the benefits in this plan will not be seen for years, but the disadvantages will be felt immediately. Ultimately, the question is, "Do we have the will to enact severe cost cutting measures?" If history is any guide, I wouldn't bet on it. ESR

This is Stephen Moughon's first contribution to Enter Stage Right. © 2010 Stephen Moughon

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