Does Health Care Reform Help U.S. Business?

The health care reform law passed last March promises to do more than enough harm to the quality and cost of U.S. health care, as well as the wallets of taxpayers and consumers, without adding its less significant indirect effects on business competitiveness to the economic toll. Many more important factors (not necessarily limited to the latest tweaks of other public policies) determine the competitive fates of American firms in global markets.

But for those keeping score at home, the law at best will keep the health cost curve on its previous trajectory rather than bend it any lower. It further disconnects the consumers and purchasers of health care from the full costs and real value of the health care decisions they face. The health law's purported cost savings and delivery system improvements are a desperate mix of unsustainable provider reimbursement cuts (an old standby), formulaic out-year assumptions (to infinity and beyond), unproven science fair projects, and wishful sightings of health reform unicorns. Much more certain to occur will be various tax and regulatory disincentives that mean slower growth by smaller businesses, reduced labor participation and working hours by lower-wage workers, and less saving and investment by higher-income taxpayers facing new Medicare taxes on their capital income. Other taxes in the law initially imposed on a medley of health industry sectors will eventually be passed through to the pockets of patients and consumers.

The new law should be repealed and replaced--not to boost "competitiveness"--but rather to improve the value of our health care, produce better population health, and free some resources for other important purposes. The building blocks of a new reform strategy should include a transition to defined contribution financing (PDF) for taxpayer subsidies devoted to health care, more targeted protection of vulnerable populations, realigned incentives that reward better decision-making, more effective competition in measuring and reporting relative performance by health care providers, and enhanced insurance portability advantages for those who responsibly seek and maintain continuous insurance coverage.

Thomas P. Miller is a resident fellow at AEI.

Photo Credit: Tom Grill/Corbis

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