Senators Coburn and Burr Argue for Free Markets in Health Care

WASHINGTON, JUNE 22, 2008--Health care in the United States is too expensive and too inefficient, Senators Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) said on June 19 at an AEI briefing on Capitol Hill. This places an unreasonable fiscal burden on future generations and hampers economic competitiveness. They discussed their Senate bill, the Universal Health Care Choice and Access Act (S.1019), which uses market-based tools to solve health care's inherent problems and to provide a much better approach to reform than increased bureaucratic involvement.

Senator Tom Coburn (R-Okla.)

"If you look at the long term projections of both the [Medicare and Medicaid] programs, our kids can't afford them," Senator Coburn warned.  Our current approach is wasteful, he added: "We spend $260 billion a year . . . on tests nobody needs . . . that's 8 percent of the cost of our health care."

While Senator Coburn was pessimistic about the current health care environment, he was optimistic about what reform could do, predicting that "we can have everybody in this country [insured], we can have everybody having access to health care, and we can spend about $700 billion less in a year each year doing it."

Underlying the Coburn-Burr proposal is the direct link between competition and innovation. Senator Coburn claimed that the plan would let "true competitive markets that are allowed to allocate scarce resources, drive down costs, increase quality, and increase performance" operate in the health care sector. This would be accomplished by providing tax credits to individuals to use for purchasing private health insurance and through the creation of a national market for individual insurance coverage. Joseph Antos, a health policy scholar at AEI, also endorsed a market-based approach: "One of the advantages of a market-based system is that you have all of those entities--companies, patients, and providers--looking at the bottom line."

Senator Richard Burr (R-N.C.)

The senators aim not to expand the federal role in health care. Senator Burr concluded that more government involvement will lead to decreased reimbursements to physicians or a decrease in the scope of coverage to patients--or both. As Antos put it, continuing in the current direction of having Medicare and Medicaid "[call] the shots" would be "irresponsible."

The benefits of the bill could be enormous, Senator Coburn said. "It solves the long-term costs and problems associated with Medicare and Medicaid." Furthermore, he added, the bill would not require the need to "raise taxes one penny" to accomplish these ends.

AEI's Thomas P. Miller cautioned that savings projected from fostering nationwide competition in the sale of private health insurance and its regulation may be overstated. He also suggested that offering tax credits would cause a substantial--and costly--initial reduction in the number of uninsured. But if premiums continue to increase faster than the value of the inflation-indexed tax credit, this reduction may subside in the long run. Miller also questioned whether the Coburn-Burr proposal for preventive care relied on too narrow a mix of tools, and he criticized their bill for avoiding direct structural reform of the traditional Medicare fee-for-service program.

--WALTON DUMAS

For more information about this event, visit www.aei.org/event1738/. For more information about AEI's Health Policy Studies program, visit www.aei.org/health/.

Antos addressed S.1019 in a 2007 speech, in which he said that the bill would, among other things, treat health insurance more favorably with respect to taxes, offer Medicare beneficiaries insurance choices they do not have now, and offer lifetime continuity of care. He offered some caveats to the bill but concluded that Coburn "started the ball rolling."

For media inquiries, contact Véronique Rodman at 202.862.4870 or vrodman@aei.org.

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