This article was originally published on Townhall.com. Comments welcome there.
It’s as predictable as the sun setting in the West: it’s an election year and reforming how we deliver health care is on the political agenda.
Advocates on the left are pushing an agenda of “universal health care,” by which they mean taking steps toward socialized medicine.
Advocates on the right are unfortunately divided. Principled conservative intellectuals promote free markets and disdain government intervention in the marketplace, yet when it comes to health care there are few politicians who are willing to advocate reducing the massive government role that exists today. McCain’s plan outlines some important reforms, but would not likely reduce the amount of health care spending controlled by government.
Government essentially controls health care for older Americans and is making significant headway into controlling children’s health care through S-CHIP. Finally government subsidizes employer-provided health care—keeping control out of the hands of individuals. Overall, government directly or indirectly controls about 50% (some estimates reach as high as 70%+ including subsidies) of health care spending. Consumers directly control relatively little of the total health care expenditures.
It is the structure of that government role and the subsidies of employer health insurance that has helped drive up costs to unsustainable levels—about 17% of our economy is spent on health care, or about twice as much as other industrialized countries. What we are doing today doesn’t work, and conservatives should be very afraid of new attempts to socialize medicine.
What we are seeing today is a slow-motion government takeover of health care, and it’s not pretty. Our current health care “system” works well for pretty much nobody. Costs are spiraling out of control—because of a system dominated by third-party payers–and Americans are getting more scared every day that a health crisis could bankrupt them.
Wading into this policy swamp is the Mayo Clinic with a proposal that has something for everybody to hate. Mayo is proposing a system that relies primarily on private funding and individual ownership of health insurance, but also one that blends a top-down structure that is intended to create the right incentives within the system.
Their proposal is pure Mayo Clinic. For anyone familiar with Mayo and how it has become one of the premier medical institutions in the world their proposal has a familiar theme: it’s the system, stupid.
Mayo’s strategy for excellence has never been to simply recruit the best or to be the most cutting-edge, but to build an integrated system that taken as a whole will consistently provide the best outcomes for patients. Mayo believes that the principles behind its own success are transferrable to the health care system as a whole.
It’s that philosophy that animates Mayo’s health care policy proposal. It begins with the recognition that America has no health care system, but rather an unworkable collage of government, semi-private, private, and individual providers and payers that don’t even talk to each other well today. Mayo’s plan is to impose some order over the chaos. And in the process try to hold down costs and improve quality.
It proposes, in other words, to make the health care system as a whole work a lot more like the Mayo Clinic does. Integrated care will become the norm, not the exception.
A few big questions arise immediately: 1) is creating a health care “system” desirable? After all, we don’t have a food delivery “system,” or housing delivery “system,” so why a health care delivery “system?” 2) Wouldn’t such a system undermine the freedom of individuals and providers compared to what exists today? And 3) if it does make sense to follow Mayo’s path, how can we get from here to there?
Mayo makes a pretty good start at answering the third question—they got a wide range of stakeholders on board in designing the system, including labor groups, businesses, patient advocates, and providers. Answering the first and second questions is a lot more difficult, especially if you are an ardent advocate of the free market as I am.
From the perspective of the free market, the best solution to reforming our health care system is a scaling back of the third-party payment system which drives up costs and reduces individual control. Unfortunately, our politicians seem unwilling or unable to push for this reform on a grand scale.
Mayo’s solution takes a small step in that direction by pushing for a system where individuals own their health insurance even when it is subsidized by the government or employer, because health care plans would be portable. Consumers would be much more active in making their health care choices.
But can any system work on the grand scale encompassing the entire country? Can the all-important relationship between patient and doctor be preserved and improved under any kind of national plan, even private-sector driven?
Top-down planning rarely works well, as is even proven within the private sector, and it’s hard to see how this plan avoids the inevitable pitfalls.
The one thing we can be sure of is that with the political heft that Mayo Clinic wields, its proposal is sure to get a hearing in Washington no matter who wins the next election.
Robin Hood Economics
This commentary was originally published for Townhall.com. Comments welcome there.
You have to give him credit; the Obama tax plan has a lot of appeal to the average voter. The sales pitch, repeatedly endlessly, is that under Obama 95% of Americans would see their taxes go down.
Of course, it’s not as simple as the Democratic candidate would like you to believe. Both the nature of the tax “cuts” Obama puts in place and the tax increases he is trying to sell could have serious impacts on future economic growth. Not to mention the ability of the American economy to get back on track building the number of jobs and growing wealth in this country.
John McCain’s tax plan is far from perfect, but at its core is reducing taxes on job creation and kick-starting the economy. The idea behind the plan is that a good job with a strong and growing business is a far better way to drive Americans’ incomes up than to distribute short-term government handouts, as the Obama plan does.
What is Obama offering? A witch’s brew of tax credits that are aimed at various groups rather than lower taxes for everybody. Obama pays for these tax cuts by increasing the capital gains tax, keeping America’s 2nd highest in the world corporate taxes, and whacking upper-income earners with dramatically higher taxes. All things aimed squarely at reducing economic growth.
Tax credits for some and raising taxes on the wealthy are standard fare for Democrats. Call it Robin Hood economics, which is based on the idea that the idea of wealth in Americais fixed and the role of government is to make sure that it gets into the right hands.
Such a plan would make sense if the economy were built on stealing from the poor and giving to the rich; then Obama would be the Robin Hood figure who was simply setting things right by reversing the transaction.
But modern economies build their wealth through investment and job creation, and Obama’s tax plan is aimed squarely at reducing investment and punishing wealth creation. Obama’s tax increases to pay for his new programs amount to billions of dollars on investments.
John McCain’s economic plan is aims to reduce the immediate tax burden of millions of ordinary citizens through tax cuts such as increasing the per-child personal exemption. But it also stimulates the economy by reducing the costs of doing business in theUnited States. More investment at home means more jobs and higher incomes for Americans.
Not to mention that millions of Americans are counting on their investments to help fund their retirement plans in the coming years, and Obama’s plan takes a bite out of their future wealth.
As anyone who has thought about outsourcing knows, Americacould and should be a much better place to do business than it is. The United States could and should be much more competitive than it is because of our high taxes and complicated regulations.
That’s the true story behind McCain’s plans to reduce corporate tax rates and cut taxes on dividends. Believe it or not, theUnited States actually has higher corporate tax rates than almost any other country. McCain aims to cut those taxes to stimulate economic growth, and keep rates on capital gains low to encourage Americans to invest in the future.
Obama wants to increase the tax on capital gains, cutting the investments that drive our economy—and history shows that higher capital gains rates actually means less tax revenue for the government as people change their investment behavior. That slows economic growth by making Americaless attractive to do business in.
Obama’s plan banks on Americans not understanding the basic economics of tax policy. It assumes that Americans would be willing to trade a more robust economy under McCain’s plan for a shot at some tax credits they may or may not qualify for.
That’s a bad bet for Americans and may well be a bad bet for the Obama campaign. His witches’ brew of tax increases for some and tax credits for others add up to a substantial increase in taxes overall. Those “middle class” tax cuts might be paid for with fewer jobs for Americans.
That’s a pretty high price to pay for a shot at a few tax credits.