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Commentary By David Gratzer

First, Do No Harm

Governor Schwarzenegger's health insurance plan is premised on a false assumption about the uninsured.

Universal coverage is, once again, the new big idea in health care. In mid-January the AARP and the service employees' union teamed up with the Business Roundtable to demand affordable, quality care for all. Massachusetts is implementing reforms aimed at covering everyone. In a dozen more states legislators are considering large-scale efforts to expand insurance. Even President Bush is talking about a sweeping tax reform package that would help millions of self-employed individuals pay for health care.

Of all the new proposals, the most ambitious, and likely most influential, comes from California Governor Arnold Schwarzenegger. That's a scary prospect. The governor has based his plan, heavy on government expansion and interference, on a faulty diagnosis of the uninsured. If politicians really want to achieve "affordable, accessible and equitable" health care, as the governor suggests, they will need to consider less government intervention, not more.

The governor advocates a massive expansion of Medicaid and other government programs. He wants to regulate not only how insurance companies sell their policies but also how much they should spend on patient care. He proposes a host of new taxes and spending, ultimatums to force businesses and individuals to buy insurance and a raft of new regulations. Some ideas, like the new fees he wants to impose on physicians, have already provoked angry objections. Yet practically everyone praises the governor for his vision of universal coverage.

The uninsured are depicted in popular culture as lost and forgotten--the single mother in the emergency room struggling to make ends meet for her three children. But the uninsured are a heterogeneous group. Drawing on Census Bureau data, the Blue Cross Blue Shield Association found in a 2003 report that a third of the uninsured have family incomes of more than $50,000 a year, and for 16% of the uninsured, incomes exceed $75,000 a year. A Health Affairs study on nonpoor uninsured Californians pegs their average annual health spending at $200 per person. Many people have done the math and have decided not to get coverage. In addition, a third of the uninsured already qualify for Medicaid or some other type of program. Of the remaining third, many are without insurance for only a brief period, usually less than a year.

To be sure, there are 8 million Americans who slip through the cracks, unable to get coverage. But that's far fewer than the commonly quoted disaster figure of 46 million.

What needs to be done? The governor should start by ending the universal-coverage obsession so common in political circles. That includes his plan to cover children in public programs, even kids in families with incomes as high as $60,000 a year.

He should propose a two-pronged plan. First, he should make health insurance more affordable. For decades, state legislators have demanded increased coverage for various services, including in vitro fertilization, clinical trials and visits with chiropractors, social workers and acupuncturists. Only six states have more mandates than California. A small business in Los Angeles can't buy no-frills health insurance. Coverage mandates must be scrapped. And Schwarzenegger should work to make health care itself less expensive. Get rid of laws that protect providers from competition and create cartels of hospitals and other institutions.

Health savings accounts, authorized by Congress in 2003, should be popularized. Give millions of state employees this option. Level the tax playing field by giving individuals the same tax deductions (on state returns) that employers get when buying health insurance, since the federal tax code presently favors the latter group.

California should focus government aid on those who need help. Nationally, roughly $35 billion is already spent on the uninsured, but the money funds a labyrinth of bureaucracies and programs. Instead, government should provide vouchers to cover part of the cost of private insurance.

How many of these recommendations are contained in the governor's plan? Exactly one: greater tax fairness for people who don't get health insurance on the job. The rest of the plan is quite unhealthful.

This piece originally appeared in Forbes

This piece originally appeared in Forbes