NCPA - National Center for Policy Analysis

Ingredients to Successful Health Care Reform

October 23, 2013

An ideal health care system will provide better health care to more people at lower cost on a continuous basis. This should be the ultimate goal of health care reform. Yet decades of legislative attempts have failed to achieve this aim, says Robert Graboyes, a senior research fellow at the Mercatus Center.

Achieving a successful health care system rests on the following principles:

  • Cost-cutting innovation is achievable.
  • Consumers (patients) are paramount.Federal and state laws should enable competitors to challenge established providers, thus making the interests of consumers paramount.
  • Providers need autonomy.Innovation cannot flourish in a system focused on stabilizing the status and livelihoods of well-established producers. Providers must have sufficient autonomy to focus on consumers' wishes.
  • Innovators need rewards. Markets must reward innovators who provide services that consumers value, and these innovators must not face arbitrary punishment for taking reasonable risks.
  • Consumers need choices.Since World War II, laws have arbitrarily separated Americans into rigidly segmented insurance markets -- Medicare, Medicaid, CHIP, VA, ERISA, small-group, large-group, individual, high-risk. A unitary market would yield greater competition and more informed consumers.
  • Markets need prices.In the current system, prices bear little relation to underlying costs or consumers' preferences. So, neither consumers nor providers have adequate information to allocate resources efficiently. Innovation and efficiency require strong, reliable, and transparent price signals.
  • Finances must be stable and equitable.Medicare currently requires huge intergenerational wealth transfers to stay afloat, yet it still teeters on the edge of insolvency. The Affordable Care Act will greatly expand these transfers. These laws demand that younger, healthier Americans overpay for insurance so that older, sicker (and often wealthier) Americans can underpay. Programs must be structured to assure long-term viability and must not impoverish the young to pay for the old.
  • Health insurance does not equal health care.

Source: Robert Graboyes, "The American Health Care System Principles for Successful Reform," Mercatus Center, October 14, 2013.


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