NCPA - National Center for Policy Analysis


October 25, 2006

Health care costs are not just soaring, they're reaching unaffordable levels.  What's the cure?  Congress needs to administer a strong dose of capitalism, says David Gratzer, a senior fellow at the Manhattan Institute.

Here are five simple steps:

  • Make health insurance more like other types of insurance -- health savings accounts (HSAs) legislation is overly rigid; Congress must expand and revise the structure of HSAs, and level the tax playing field for those not covered by an employer plan.
  • Foster competition -- Americans can shop out-of-state for a mortgage and they should be able to do so for health insurance; Congress should reconsider such laws, beginning with the federal Emergency Medical Treatment and Active Labor Act.
  • Reform Medicaid, using welfare reform as the template -- Congress should fund Medicaid with block grants to the states, and let them innovate.
  • Revisit Medicare -- back in the late 1990s, a bipartisan commission approved a reasonable starting point for Medicare -- junking the price controls, and using the Federal Employees Health Benefits Plan as a model; elderly Americans would then have a choice among competing private plans.
  • Address prescription drug prices by pruning the size and scope of the FDA -- it costs nearly a billion dollars for a prescription drug to reach the market, and roughly 40 percent of that is due to safety requirements; this is effectively a massive tax on pharmaceuticals.

None of these steps would be dramatic but all are important.  Congress also slowly needs to weigh bigger issues: how to shore up Medicare, create portability of health insurance, and foster a market for medical innovation, says Gratzer.

Source: David Gratzer, "For Health Care Woes, a Capitalism Prescription," Washington Post, October 25, 2006.

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