Saturday, September 12, 2009

Health Costs - Basic Corrections Needed

Excerpts from John R. Graham's "Health Cost Crises":

Would-be health reformers in this country have painted an alternative narrative, of families trying to decide whether to go to the doctor or pay rent. It's a powerful image, but it's ignorant of the facts. And the government-heavy reforms these fear-mongers are pushing would only exacerbate the increasing costs in our health sector.

In fact, one of the reasons health-care spending has increased to one-fifth of personal consumption expenditures is that so much of it is not controlled by "we, the people." Instead, government gives our employers monopoly power over the pre-tax dollars used to buy health benefits, while government's appetite for tax dollars to fund its own expensive health programs is insatiable. As a result, the average household spends only 4.5 percent of its pre-tax income, or 5.7 percent of household expenditures, on health care of its own choice, with the government laundering the rest through third parties.

Further, costs for Medicare and Medicaid are spiraling out of control. Since 1970, Medicare's spending per patient has risen a third more than private spending on health goods and services. Medicaid spending per patient has increased 35 percent more than private spending. That's equivalent to $119 billion worth of inefficiencies in the last year alone. Why would we possibly extend that kind of fiscal mismanagement to the entire country, via a so-called "public option?"

Rising health costs are a natural consequence of our health system's reliance on third-party payment. We tend to consume more of a good or service when we pretend that someone else is footing the bill. By insulating patients from the true cost of their medical services, public and private insurance programs alike encourage over-consumption, waste, and fraud.

The answer to controlling health costs is not more government control, but less. Returning health care dollars and decisions to individual patients will encourage them to make more prudent decisions, spur competition in the health-care marketplace, and bring down overall costs.

Health reform is certainly needed. But politicians' fear-mongering about the costs of the current system isn't justified by the data. Creating a massive new federal bureaucracy that will fail to hold down health costs will have a deleterious effect on both the physical health of patients and the financial health of taxpayers.

Health Cost Crisis

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