NCPA - National Center for Policy Analysis

Health Care Reforms Could Make Matters Worse

May 28, 2003

Health care plans proposed by Democratic presidential candidates would use taxpayer dollars or indirect tax subsidies to stimulate yet more spending on health care, says Holman W. Jenkins Jr.

  • Sen. John Kerry and former Gov. Howard Dean would throw more money at existing government programs and more tax incentives at companies so yet more of the country's health spending can be channeled through third-party payers.
  • Rep. Dick Gephardt would require employers to cover all their employees and would flow tax dollars directly to companies for 60 percent of the cost -- effectively making health care government financed.
  • Rep. Dennis Kucinich would nationalize health care with a single payer system, putting government in the position of controlling costs by denying care.

Some Republican proposals would also increase government subsidies.

Health care markets are distorted because employers provide health care in lieu of wages -- something they don't do with respect to other goods or services. This system:

  • Encourages more profligate consumption than if consumers were paying directly from their own pockets with after-tax dollars (more consumption of health care is not the same thing as more health).
  • Gives the fattest subsidy to those in the highest tax bracket -- effectively, affluent households pay $60 for $100 worth of health insurance, while low-income households pay between $85 and $100 for the same insurance.
  • Encourages generous benefits and entraps most of society in a common insurance pool, where covered workers spend as much as they can on health care.

The most daring approach to health care reform, says Jenkins, is "defined contributions," which would give employees a fixed company contribution to their health-care needs and allow them to choose themselves how to spend it.

Source: Holman W. Jenkins Jr., "Weighing (and Ignoring) Candidate Health Plans," Wall Street Journal, May 28, 2003.

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