REFORMS TO AVOID

July 24, 2007

This is the season for health insurance reform, and that's dangerous. The odds of doing something bad are much higher than the chances of doing something good, says John C. Goodman, president of the National Center for Policy Analysis.

With that in mind, here are four things policymakers should avoid:

  • Do not turn a tax subsidy for health care into an entitlement; Medicare and Medicaid entitlements are already on a course to crowd out every other government program -- we cannot survive creating more health care entitlements.
  • Avoid mandated insurance coverage and mandated benefits; proposals to require everyone to have health insurance increase the likelihood that the government subsidy will become an entitlement.
  • Don't create perverse incentives for health plans; if people can switch insurance plans annually at premiums that are unrelated to expected costs, the plans will seek out the healthy and avoid the sick.
  • Don't encourage people to forgo private coverage by expanding public coverage; there should be no expansion of Medicaid or the State Children's Health Insurance Program in a way that encourages people to drop their private coverage in order to get free public coverage.

A much better idea would be to employ a pay-or-play system.  Since mandates can't really be enforced anyway (and rigorous attempts at enforcement would cost far more than they are worth), let people choose whether to be insured or not.  Under pay-or-play, if they choose to be insured, you give them a subsidy; if they choose not to be insured, you make them pay a tax penalty and put the unclaimed subsidy (or the tax penalty) into the safety net program.  Additionally, we should give plans an incentive to compete for the sick and use public money to encourage private insurance, says Goodman.

Source: John Goodman, "Reforms to Avoid," Heartland Institute, August 1, 2007.

 

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