Showdown at Blair House

Now that the White House has put a health-care plan on the table, Barack Obama says he wants the Republicans to do the same in Thursday's meeting with congressional leaders. Instead, Republicans should show the president where we should be going and what's wrong with what the White House has proposed.

It is disingenuous for Democrats to claim that they don't know what's in the Republican health-reform playbook. House Republicans filed more than 60 health-reform bills last year. Reps. Paul Ryan, Tom Price, and John Boehner filed comprehensive reform bills. A new list of proposals that Republicans support is published nearly every day. On health care, the president's problem with Republicans is not that Republicans have failed to offer policies. His problem is that he doesn't like Republicans' policies.

The president's proposal and the Democrats' rhetoric are full of words like "choice" and "competition," but they really mean command and control. Their approach creates overlapping layers of new laws and regulations intended to anticipate everything that could go wrong and prevent it. Every problem--the uninsured, rising insurance premiums, ineffective and expensive care--is supposedly addressed. Every solution further centralizes power and decision-making in Washington, and none of it comes cheap.

A market approach is no panacea. It does not make promises to immediately solve every problem. But this approach offers a framework for continuing innovation and improvement.

Worse yet, it won't succeed. The problem for social planners is that Americans do not always embrace their leaders' vision of social responsibility, particularly when that vision is at odds with their self-interest. Onerous provisions will be ignored, worked around, or even repealed if public opposition is strong enough.

What will work--in fact, what cannot be avoided--is a reform that levels with the American people about what is possible and what is necessary. The hard truth is that there is no magic bullet that will solve every problem once and for all. Health reform is a process, not a single act of Congress. To set that process into motion, we must first give individuals--not government--more control over health-care decisions.

We need better information about prices, insurance plans, and treatment alternatives. And we need to bear in mind that because health decisions are complicated, most people rely on expert agents--their family doctors, or their employers--to do much of the heavy lifting. These agents need better information and stronger incentives to provide options and advice that are truly in the best interest of the consumer.

Second, we must face the fact that we live in a world of limited resources. For all the talk about "bending the cost curve," politicians on both sides of the aisle spend first and ask questions later. The three big entitlements--Medicare, Medicaid, and Social Security--are on steep spending paths that will only become steeper as the baby boomersretire. The tax break for employer health-insurance coverage is another open-ended entitlement. These programs need to go on a diet.

We could try to disguise the problem with price controls or, eventually, rationing, but these measures are ultimately self-defeating. They drive up demand for services while discouraging supply--a recipe for economic disaster. Instead, subsidies should be capped, with the amounts calibrated to reflect the health needs and ability to pay of beneficiaries. That means forging a new social compact, one that we can actually fulfill.

Third, we must build an accountable health system. Mandates, taxes, and penalties create accountability that flows in only one direction. Individuals and insurers are accountable to the government for adhering to the new rules, but the government is not directly accountable to those it regulates. As a result, bad decisions made in the political arena often persist for years without being corrected.

The alternative is greater reliance on market transactions rather than government rules. When consumers are not forced to buy products they do not want, an overpriced or inferior product will not sell, which is a clear signal to the supplier to make improvements.

Market-based health reform provides the tools by which the health system can become more effective, more efficient, and more responsive to patient needs. It relies on financial incentives rather than central direction, and it recognizes that a one-size-fits-all approach will not work in a country as diverse as ours.

A market approach is no panacea. It does not make promises to immediately solve every problem. Consumers are not guaranteed to be perfectly satisfied with the goods they purchase. But this approach offers a framework for continuing innovation and improvement. The market's strength lies in its flexibility and ability to adapt to change. This is the only real prescription for sustainable reform of our health-care system.

Joseph Antos is the Wilson H. Taylor Scholar in Health Care and retirement policy at AEI. Thomas P. Miller is a resident fellow at AEI. Their new report on health care reform, "A Better Prescription," was released on February 23.

Photo: Tom Grill/Corbis

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