The Road To Big Government Health Care

Ray Keating
Chief Economist, Small Business Survival Committee
©1999 All Rights Reserved

Despite being plagued by potholes and detour signs along the way, the United States has been traveling down the road of government-run health care for decades now. That certainly is where much of the debate is pointed today, as illustrated by President Clinton's proposal to expand Medicare coverage to prescription drugs.

Of course, in sharp contrast to the nirvana predicted by the proponents of more government involvement in health care, the closer we get to their goal, consumers will only experience higher costs and taxes, less individual control, and fewer choices.

A government-run health care system or some kind of mandatory health insurance was first given serious consideration in Congress in the mid-1930s, and has claimed some part of the national policy debate ever since. However, it wasn't until defeat after defeat was experienced in the 1930s and throughout the1940s that advocates changed tactics to an incremental approach to nationalized health care.

The supporters of this strategy must have enormous patience, since incrementalism has been their rule for most of the past half century. For example, disability coverage was added to Social Security in 1956, and Medical Assistance for the Aged (MAA) was passed in 1960.

As health care analyst Charlotte Twight has noted, MAA was meant to derail broader efforts to inject government into the health care marketplace. This has been the typical response of the political opponents of socialized medicine for decades now. If we give them a little bit now, the thinking goes, then maybe they'll stop pursuing these really ugly proposals. Of course, it never turns out that way. After all, incrementalists, by definition, take incremental steps. After MAA was passed, the incrementalists were back again pushing for federal programs to cover all of the elderly.

Just a few years later, supporters of big-government health care made up considerable ground. In 1965, Medicare, the health care program for seniors, and Medicaid, the program for low incomes, were passed. Since then, both have been expanded on a regular basis.

Interestingly, a major pothole was struck when the President and Hillary Clinton tried to abandon incrementalism in the early 1990s, and go for a government health care takeover in one grand stroke. They failed, and their party lost control of Congress in the 1994 elections.

With a Republican congressional majority, you might have thought the road to nationalized health care would simply end; that public policy would have shifted back in the direction of free markets and individual choice. But incrementalism nonetheless returned. Mandates and regulations have since expanded. Price controls on Medicare have been squeezed tighter, even while services were expanded and red tape multiplied.

Today, the health care debate centers not on whether or not Medicare should be expanded to cover prescription drugs, just to what degree. Few elected officials seem to disagree with the notion that Medicare should be bailed out to the tune of hundreds of billions of taxpayer dollars over the coming decade. And most officials seem to be in favor of more mandates and regulations on HMOs, only disagreeing over how far to go.

Each of these steps obviously takes us a bit further down the road of big government health care.

A costly health care system micromanaged by government is not predestined in the United States, however, no matter the trend of the past sixty-plus years. A little clear thinking reveals that we need to regain the lost idea of what insurance actually is, i.e., protection against catastrophic illnesses and costs. Our current system is dominated by third-party payments--where somebody else picks up the tab for reasonable and predictable health care expenses. Especially when government is the third-party payer, no one is concerned about costs--not patients, not providers and not government bureaucrats--and demand is artificially juiced up. Higher costs result.

When it comes to the problems of cost, affordability, access, and free choice of doctors and treatments (including prescription drugs), market-based reforms are necessary.

First, Medicare should be shifted to a kind of catastrophic insurance program, with deductibles raised substantially and limits on Medicare reimbursements removed. Second, retirees should be allowed to opt out of Medicare in favor of a health care voucher they would use in the private insurance marketplace. Finally, limits and restrictions on tax-free medical savings accounts (MSAs) should be removed.

All health care consumers--including Medicare beneficiaries and Medicaid recipients--should have the option of an MSA tied to a catastrophic insurance plan. MSAs put consumers back in control; get rid of perverse incentives with third-party payers; allow savings to be built up; and protect consumers against the costs of catastrophic illnesses.

These reforms would allow the U.S. to finally exit the road to government-run health care, and get back on the health care highway of less government interference, lower taxes and costs and greater individual control.

Raymond J. Keating is Chief Economist of the Small Business Survival Committee, and co-author of the new book, U.S. by the Numbers: Figuring What's Left, Right, and Wrong With America State by State. Mr. Keating also co-authored D.C. By the Numbers: A State of Failure, and has written more than 300 policy studies, book reviews, and articles published in such periodicals as The Wall Street Journal, Investor's Business Daily, The Journal of Commerce, The Washington Times, Newsday, New York Post, Insight, The Freeman, Human Events, and many more. He regularly testifies before the Congress, and is an experienced and sought-after spokesman on a wide range of political and economic issues. He is currently at work on his second book tentatively titled New York By the Numbers: State and City in Perpetual Crisis.

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