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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Sunday, May 4, 2008 Health-care plans all start with efficiency By James McCusker At the beginning of this presidential campaign so many long years, months and days ago, political analysts expected Sen. Hillary Rodham Clinton to avoid talking about health care because of her association with a failed effort early in her husband's first term. Eventually she did begin talking about it, though, and she outlined her new plan to address the problems of our health care system. Sens. Barack Obama and John McCain have now followed suit with their own plans. It is so wrong of us to indulge in nostalgia for those times when candidates were silent on this issue, but it is so irresistibly sweet, too. There is merit in talking about health care but political campaigns, especially presidential ones, are not likely to produce solutions that are translated into action. The reason: The political constituencies for a candidate are very different from those facing a president. Under our system it is the Congress that will make the important decisions about the health-care system. Candidates can talk as if the Congress didn't exist, another wrong-but-so-sweet idea, but presidents have to deal with its ever- present reality. That is not to say that the ideas we have seen from the three senators have all been thoroughly impractical or wrong-headed. It is just that even if we could somehow adopt them all, the fundamental problems of health care, the math and economics problems, would still be there. Each of the three plans reflects a different image of what a new health-care system would look like, and a different view of what the federal government's role in it would be. Each, in its own way, is also a radical restructuring of the system. As we might expect, the medical insurance proposals of Clinton and Obama are more similar to each other than they are to McCain's. Both would mandate coverage, using employer-based programs for those with jobs and government programs for everybody else. Clinton's program would require coverage for everybody, while Obama's would require only that all children be covered. Both programs would also involve a greater governmental involvement in setting insurance premiums and eligibility standards. McCain's proposal would alter the tax structure that ties the medical care system to employer-based insurance coverage. His plan would end the health insurance tax deduction for businesses and offer a tax credit of up to $5,000 to individuals who purchase health insurance. The plans are expensive. According to the analysts, Obama's plan would cost about $50 billion to $60 billion, while Clinton's would cost between $100 billion and $110 billion. The costs of McCain's proposal involve both the corporate and individual tax codes and are harder to estimate. Allowing every working American who buys health insurance to subtract $5,000 from his or her annual income tax is bound to create a big hole in Treasury receipts, and how much of it would be offset by higher corporate taxes is anybody's guess at this point. Underlying the proposals are two very different views of the health-care system and its problems. What all three have in common is their belief that health-care costs can be reduced or contained through payment system efficiency. The proposals of Clinton and Obama are based on mandates and look to gain efficiency through regulation, consolidation and the sometimes elusive simplification of a single-payer, Medicarelike system. McCain's proposal, by contrast, is financing individual consumer choice and looks to competitive market forces for its efficiency. Economic theory would naturally favor McCain's plan, and it deserves a careful look. Separating health care from employment is a fundamentally sound idea and would raise the overall efficiency of the system, no matter where we take it from there. But there is also no doubt that the market system's efficiency has limitations when it comes to providing health care for all, and that is part of the problem we face. Health care is expensive and getting more so, no matter who is paying the bill. It certainly wouldn't hurt to inject some efficiency into the system, from whichever source your political persuasion suggests, but that will do little or nothing in the longer term to stanch the flow of increased costs. We have some hard decisions about health care to make in this country, about how much and for whom, about what each of us is entitled to, and how our ability to pay, both individually and collectively as the economy as a whole, fits into the picture. We cannot mandate efficiency, and competition cannot lower costs when higher standards compel more expensive treatment. Now if that doesn't make us nostalgic for those days when we weren't talking about health care, I don't know what will. James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.

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