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Health Care Reform: The Long-Term Perspective, Cato Cato's Letter

Health Care Reform: The Long-Term Perspective, Cato Cato's Letter

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Published by: Cato Institute on Jun 17, 2010
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 AQuarterly MessageonLiberty Fall2009Volume 7  Number 4
he president and the Democrats are givingthe American people a false choice. Wemust either choose a public plan optionwith all the bells and whistles and all thepromises—cloaked in the rhetoric of: “If you like whatyou’ve got, you can keep it. We just want more choiceand competition. We just want to keep those insurancecompanies honest”—or accept the status quo. They say there are no other options. But they’re wrong. There areother ways to fix the problems in health care.If we do go down the path toward a public option, itwill inevitably, mathematically, actuarially, become a government-run monopoly. When the government isput in the position to compete against the private sec-tor, the government is both the referee and the playerin the same game.
Health Care Reform:The Long-Term PerspectiveHealth Care Reform:The Long-Term Perspective
Congressman Paul Ryan has repre-sented Wisconsin’s First Congression-al District for six terms. He is theranking member of the House Budget Committee and a senior member of  the House Ways and Means Commit-tee. This edition of  
Cato’s Letter
isadapted from a speech Ryan gave at the Cato Institute Conference on Health Care Reform in June.
Cato’s Letter 
FALL 2009
t’s a stacked deck against whichthe private sector cannot com-pete. The private sector has topay taxes. It has to pay for salariesand benefits. The private sectorcan’t dictate to the provider net-work what it’s going to pay. We’rehearing that this public plan optionwill base its payments on Medicare,with maybe a modest increase. Butkeep in mind that Medicare under-pays providers by 20 to 30 percent. Itis simply a question of when, not if,a public plan option, if set in place,completely displaces the private sec-tor. At least under the status quo,you can fire your insurance compa-ny. If the only insurer is the govern-ment, you’re stuck.We believe that we have to go tothe American people with a betterway forward. Sections A through Din Title 1 of the Kennedy bill cost a trillion dollars and buy insurancefor 16 million people. That’s about$62,500 per person over 10 years. And that’s just one piece of one titleof the bill. The Kennedy bill will cost$4 trillion over 10 years. What we’reon the doorstep of doing is creat-ing an entitlement that will rivalMedicare. No matter what kind of package is cobbled together to pay for it in the first 10 years, there is noway it’s ever going to match the ac-tual cost of the new program. This isa huge problem. It is acceleratingthe tipping point in America, wheremore people are dependent uponthe government for their livelihoodthan they are upon themselves.We already have a little over 40percent of Americans who are “neg-ative taxpayers,” people who receivepayments from the government inexcess of their income and payrolltaxes. We’re dangerously close to be-coming a social welfare state similarto Europe. When society goes downthat road, it loses sight of liberty andbecomes more concerned with secu-rity—both economic and otherforms. When a country becomes a social welfare state, its society stag-nates. Standards of living go down.Creativity, innovation, achievement,production, risk—these wash away,leaving high unemployment. Wedon’t want to go down that path.Health care is much more thanhaving insurance and accessto medical care. It is a moralissue. It is an issue about therole of the federal governmentand which trajectory America is going to take. Will we stickwith the American ideal of equalizing opportunity, of pro-tecting our individual rights,or are we going to replace that vision with a European one, wherethe goal of government is to equal-ize the results of people’s lives in-stead of equalizing access to oppor-tunity?This problem can be fixed, not by pushing the market out, but by bringing the market in. One of the
The president andthe Democrats aregiving the Americanpeople a false choice.
FALL 2009
Cato’s Letter 
reasons health care is not doingwell right now, one of the rea-sons health inflation is so high,one of the reasons there are somany distortions in health care,one of the reasons millions of  Americans don’t have access toaffordable insurance, is becausewe’ve displaced the fundamen-tal tenets of a free market. Whatare those tenets? Transparency on price, transparency on quali-ty, and an incentive to act onboth. Currently, you don’tknow what services cost, orwho’s good at providing themand who’s bad. Even if youknow such things, you’re told by your insurance company, HMO, orthe government where and whoyou have to go to to get your care.We don’t want to pick a modelwhere the government will ulti-mately be the single payer. Underthat model, you can contain costs,but it requires rationing care. TheInstitute of Comparative Effective-ness, created in the stimulus pack-age, is the bureaucracy throughwhich that rationing will take place,telling providers, doctors, andphysicians that enlightened bu-reaucrats will decide how best toachieve efficiency and how best todeliver care in America. The only way to quantifiably lower costs is tolimit people’s access to health care.That’s not America. That’s not whowe are. It offends our sense of indi- vidual rights, of freedom and liber-ty and choice.Can we fix the problems inhealth care without going down thispath? Yes. That’s exactly what we areattempting to do with the Patients’Choice Act. The Act recognizes thetax distortion that exists, a distor-tion that helped give rise to ourthird-party payment system. It’swhat helped give rise to the systemthat took the individual out of thegame and took the consumer out of the game. We want to equalize taxtreatment so we get the individualback in the game. We want the indi- vidual to be at least as powerful asthe other players in health care.We’re not saying, like some Democ-rats are, that we should tax healthbenefits and send the money to thegovernment to build a new systemand have new mandates and a new public-plan option. We’re saying:“Let’s equalize tax treatment. Let’stake the tax benefit and delink itfrom the job and reattach it to theworker, so that everybody, regard-less of how they get their health in-surance, receives the benefit.” Whatmakes our bill different from every other on this issue is that the tax
Ifwe do go down thepath toward a publicoption, it will inevitably,mathematically,actuarially, becomea government-runmonopoly.

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