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Healthy competition

"Healthy competition" Continued...

Issue: "Millions cut down," Jan. 17, 2009

Q: How can Congress make consumer-driven health care happen-and do you think Congress will?

A simple tax law change will do the job. Right now I permit my employer to take money that would otherwise be my salary and to use it to buy my health insurance. Yet I would not want my bosses to buy my food, clothes, or housing. They simply cannot obtain what I consider value for the money and will likely simplify their lives by offering me a narrow range of choices.

For example, if my boss bought housing for me, I would likely have a much smaller range of choice that I do in the open housing market. Similarly, when my employers buy my health insurance, I have very little choice. Without choice, there is no competition. Without competition, there is no incentive for productivity.

I permit my employer to buy my health insurance only because she can use my pre-tax salary-but if I bought health insurance myself, I could use only after-tax salary. A tax shelter for the purchase of health insurance would dramatically transform this situation and enable consumer-driven health care.

Watch the Swiss

Herzlinger writes that "Switzerland is the only developed country with a long-standing consumer-driven health-care system. In essence, consumers purchase their own insurance and everyone is required to insure themselves. Those in financial need are not simply left out in the cold; there are tax-financed, means-tested subsidies for them. Furthermore, health insurance plan options vary substantially in price and coverage, providing options to the health-care consumers.

"The Swiss model is a good one. There, the price for health insurance is determined by gender and age, not the level of sickness; but the insurers have formed an exchange where they risk-adjust each other. They remove the profits earned by insurers solely by enrolling people who are healthier than the average for their gender and age and redistribute this profit to the insurers who have enrolled those who are sicker than the average.

"These risk-adjusted prices mean that sick people pay the same price for their insurance as everyone else, but providers receive more money for treatment of the sick. This way, health providers are encouraged, rather than dissuaded, to help those who need it most."

Consumers in charge

Herzlinger argues that consumer-driven care will lead to lower costs because "consumers will be rewarded by the entrepreneurial innovation that can simultaneously improve quality and control costs. Examples include convenient, inexpensive, 'you're sick, we're quick' retail medical centers; competition among doctor-owned, specialty hospitals; and integrated teams for the treatment of chronic diseases or disabilities.

"Other examples include global health services in developing countries that offer care to international patients; this enables countries to minimize the capital investment health facilities require. This also helps by reducing waiting times and capacity pressures in single-payer countries-and the services offered are typically cheaper than those in developed countries."

Marvin Olasky
Marvin Olasky

Marvin is editor in chief of WORLD News Group and the author of more than 20 books, including The Tragedy of American Compassion. Follow Marvin on Twitter @MarvinOlasky.

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