Let's Call the Whole Thing Off
"To bring down healthcare costs, we need to change the incentives that govern spending. Right now, $5 out of every $6 of health-care spending is paid for by someone other than the person receiving care—insurance companies, employers, or the government. Individuals are insulated from the reality of what their decisions cost. This breeds overutilization of low-value health care and runaway spending.
To reduce the growth of costs, individuals must take greater responsibility for their health care, and health insurers and health-care providers must face the competitive forces of the market. Three policy changes will go a long way to achieving these objectives: 1) eliminate the tax code's bias that favors health insurance over out-of-pocket spending; 2) remove state-government barriers to purchasing and providing health services; and 3) reform medical malpractice laws.
These three policies offer advantages over the president's plan. Instead of raising health-care costs, they fundamentally change incentives among individuals, insurers, and providers to gradually slow the growth in costs by reducing inefficient demand without sacrificing quality and innovation. Instead of radically changing health care overnight, they take an incremental approach, respecting the tremendous uncertainty surrounding the effectiveness of different approaches to rein in costs.
The president's plan is failing because it does not speak to the concerns of the majority of Americans. Instead of addressing the high and rising costs of care, it proposes mandates, invasive regulation, and unaffordable new entitlements. This will not bring health-care costs down—it will only make this problem worse.
Our recommendation: scrap it and start over."
MP: The chart above shows the declining share of out-of-pocket payments for total health care spending, according to the Department of Health and Human Services, and it's even worse than the $5 out of $6 the authors report in the WSJ. It's actually closer to $8 out of every $9 of healthcare spending that is paid by someone other than the person receiving care, i.e. with OPM (other people's money), since out-of-pocket payments covered only 11.88% of total health care spending in 2008.