Yes, Mr. President: A Free Market Can Fix Health Care (Policy Analysis)

Studies from the Cato Institute | Contributor

In March 2009, President Barack Obama said,

“If there is a way of getting this done where we’re

driving down costs and people are getting health

insurance at an affordable rate, and have choice

of doctor, have flexibility in terms of their plans,

and we could do that entirely through the market,

I’d be happy to do it that way.” This paper

explains how letting workers control their health

care dollars and tearing down regulatory barriers

to competition would control costs, expand

choice, improve health care quality, and make

health coverage more secure.

First, Congress should give Medicare enrollees

a voucher and the freedom to choose any health

plan on the market. Vouchers would be means-tested,

would contain Medicare spending, and are

the only way to protect seniors from government

rationing.

Second, to give workers control over their health

care dollars, Congress should reform the tax treatment

of health care with “large” health savings

accounts. Large HSAs would reduce the number of

uninsured Americans, would free workers to purchase

secure health coverage from any source, and

would effectively give workers a $9.7 trillion tax cut

without increasing the federal budget deficit.

Third, Congress should break up state monopolies

on insurance and clinician licensing. Allowing

consumers to purchase health insurance

licensed by other states could cover one-third of

the uninsured without any new taxes or government

subsidies.

Finally, Congress should reform Medicaid and

the State Children’s Health Insurance Program

the way it reformed welfare in 1996. Block-granting

those programs would reduce the deficit and

encourage states to target resources to the truly

needy.

The great advantage of a free market is that

innovation and more prudent decisionmaking

means that fewer patients will fall through the

cracks.

In March 2009, President Barack Obama said,

“If there is a way of getting this done where we’re

driving down costs and people are getting health

insurance at an affordable rate, and have choice

of doctor, have flexibility in terms of their plans,

and we could do that entirely through the market,

I’d be happy to do it that way.” This paper

explains how letting workers control their health

care dollars and tearing down regulatory barriers

to competition would control costs, expand

choice, improve health care quality, and make

health coverage more secure.

First, Congress should give Medicare enrollees

a voucher and the freedom to choose any health

plan on the market. Vouchers would be means-tested,

would contain Medicare spending, and are

the only way to protect seniors from government

rationing.

Second, to give workers control over their health

care dollars, Congress should reform the tax treatment

of health care with “large” health savings

accounts. Large HSAs would reduce the number of

uninsured Americans, would free workers to purchase

secure health coverage from any source, and

would effectively give workers a $9.7 trillion tax cut

without increasing the federal budget deficit.

Third, Congress should break up state monopolies

on insurance and clinician licensing. Allowing

consumers to purchase health insurance

licensed by other states could cover one-third of

the uninsured without any new taxes or government

subsidies.

Finally, Congress should reform Medicaid and

the State Children’s Health Insurance Program

the way it reformed welfare in 1996. Block-granting

those programs would reduce the deficit and

encourage states to target resources to the truly

needy.

The great advantage of a free market is that

innovation and more prudent decisionmaking

means that fewer patients will fall through the

cracks.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.

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