View all Articles
Commentary By David Gratzer

Pricey Placebos

ON one point, at least, all Democratic presidential candidates agree: Health care is a big issue. But if the ideas released in their major proposals so far are any indication, Democrats are offering more of the same - for more money. Republicans should take the chance to propose a real alternative.

With millions lacking insurance, it's no surprise that politicians talk about helping the uninsured. But picking a winning issue and making intelligent proposals are two different matters.

First, we need to understand why 21 to 41 million Americans lack insurance. The bulk of the uninsured work in small businesses, which account for almost a third of the private-sector workforce. But it is very expensive for small firms to offer health policies to their employees. Actuarial predictions are difficult for such small groups, making insurance difficult to price and costly to administer: For every dollar a small employer spends on health insurance, a quarter goes to non-health expenses.

Plus, federal and state governments complicate the small-group insurance market with a seemingly endless list of regulations, premium taxes and mandates. It all makes for a stiff price tag - so stiff that many small employers balk: 54 percent of low-wage workers in firms with fewer than 10 employees have no health coverage.

Another problem: Employees of small businesses switch jobs - a lot. The average tenure at a small firm is only 18 months. But changing jobs often means changing or losing your insurance - and your family doctor.

In other words, employer-sponsored health insurance for employees of small companies serves no one well.

How to address the problems of the uninsured? So far, the candidates forward two ideas: a tax credit for businesses to make offering insurance cheaper (in effect, a subsidy to expand the status quo) and an expansion of programs like Medicare and Medicaid to include small-business workers.

But this is just more of the same.

A tax subsidy, such as Rep. Richard Gephardt proposes, amounts to a $700 billion pledge over the next few years to prop up today's system. But the factors driving up costs will remain, making this a Band-aid at best.

Expanding various government programs - as Vermont ex-Gov. Howard Dean proposes - will only further bureaucratize health care. Government-run health care has proven a disaster in Germany, Britain and a host of other nations. For example, a recent study found that European women with breast cancer are four times more likely than American women to not be diagnosed until after the disease spreads.

The alternative would be to empower individuals: Employees of small companies should have their health-care decisions placed in their own hands. Rather than providing a tax credit to their bosses, let's give it to them.

Most states don't burden individual insurance with as heavy a regulatory hand as they apply to the small-group market; policies, thus, are relatively inexpensive. A robust tax credit could help the uninsured gain coverage.

With individuals purchasing insurance, coverage would follow them from job to job seamlessly.

There is, however, more work to be done than just tax credits. Some states have gone too far in regulating and taxing individual insurance policies; New York is a prime example of this.

"We're very frustrated with New York. Our members simply can't sell an affordable product," comments Victoria Bunce, research and policy director of the Council for Affordable Health Insurance. In an attempt to reduce costs for older New Yorkers, legislators issued various mandates in 1992 including guaranteed issue (insurers must cover whoever applies, regardless of health) and community rating (insurers can't price based on risk). Today, insurance actually costs more for older and younger New Yorkers.

Compare the regulation-heavy Empire State with its neighbor. A 36-year-old Connecticut man can choose from dozens of plans starting at $53 a month. A New Yorker has fewer options, with plans beginning at $281 monthly.

Helping the uninsured means allowing them to afford good insurance. Legislators need to cut red tape. Consumer protection is important but, with insurance, we have too much of it. If New York applied such standards to cars, we'd only be allowed to buy Cadillacs - and many of us couldn't afford that.

Last year, President Bush indicated his support for individual tax credits. With a war and various domestic fires, that idea fell off the agenda. Given the present Democratic proposals, Bush would bolster his chances of reelection by reviving this idea. He must make affordable health insurance a priority for working Americans.

It's not just good politics. It could help millions of Americans.