Views Worth Considering on Healthcare Reform

I think that the views expressed here by Keith Hennessey are more worthy of consideration than the views of either House Democrats or House Republicans:

The president is correct that health care reform is essential to a strong economy. He accurately identifies the underlying problem as extraordinary growth in health spending, leading to slower wage growth, too many uninsured and unsustainable government spending. He is correct that reform needs to “bend the cost curve” downward to stop families, employers and governments from chasing their own tails. Unfortunately, the legislation being developed in Congress moves in the opposite direction.

After the vice president admitted the administration had misread the economy, the president said administration officials, instead, had incomplete information — but yet they would not have done anything different in the too-slow stimulus. We need to prevent a recurrence of the stimulus mistake on health care.

The position that House Republicans are seemingly taking, opposing any kind of reform, is untenable. In my view they should be getting behind some minimally acceptable alternative and supporting it with all their hearts and souls. Nothing will come of nothing.

The House Democrats are equally wrong:

Congressional Democrats propose partially offsetting short-term spending increases by cutting Medicare payments to providers. We need these spending cuts to solve the fiscal imbalance in current entitlement programs. If they are, instead, pilfered to offset an entitlement expansion, then the only long-run solution left to address Medicare and Medicaid spending is higher taxes.

Democrats are arguing among themselves about which taxes to raise to cover the rest of the short-term spending increase. Union pressure is taking repeal of the tax exclusion for employer-provided insurance
off the table, leaving Democrats to debate the relative merits of tax increases on high-income individuals and successful small-business owners, capital gains, donations to charities and soda pop. In addition, states would be allowed to tax health insurance premiums up to 3 percent to pay for new bureaucracies.

Since each of these taxes would grow as fast as the economy, while the new spending will grow much faster, the long-term result will be both higher deficits and an ever-increasing tax burden.

We need more dramatic reform. Congress should start by replacing the current tax treatment of health insurance with a standard deduction or a flat tax credit like that in the Ryan-Coburn bill.

While I agree with Mr. Hennessey that more dramatic reform is necessary, I don’t completely agree with him on the nature of the reform.

It’s far too late to get government out of healthcare. That ship sailed with the passage of the Pure Food and Drug Act of 1906 and was completely scuttled with the enactment of Medicare and Medicaid more than 40 years ago. The alternative that’s left is prudent stewardship and, unfortunately, prudence is in very short supply.

All of the reasons that Medicare was enacted are as true today as they were in 1965. Very few of us are or will be fortunate enough to be healthy enough in our old age that we won’t need healthcare or to save enough that we can pay for the healthcare we’ll need after we’re too old to work. We need to achieve a balance between frugality and profligacy rather than pretending the need doesn’t exist.

So, means test Medicare? Sure. More thoughtful oversight of Medicare? Of course. Eliminate it or starve it? I don’t believe that would be prudent.