Making patients consumers shopping for good deals will lower the cost of medicine!

Best way to lower the cost of medicine: Let the patient become a consumer! Consumers are smart and shop for good deals. I like good deals!

Your health at stake

Obama, Romney & reform

By MICHAEL TANNER

Few election issues will have as much impact on our lives as what will happen to America’s health-care system. After all, health care represents a sixth of the US economy and employs more than 11.5 million workers. And to patients, it represents matters of life and death, involving some of the most important and personal decisions a person can make.

Yet it has often seemed like an afterthought in the campaign. Health-care reform is the signature accomplishment of President Obama’s first term, but barely rates a mention in most of his speeches. Mitt Romney generally includes a ritual promise to repeal ObamaCare, but almost never discusses what he’d replace it with. In fact, both candidates have serious problems with the issue. The ObamaCare law remains extremely unpopular with voters — who oppose it 52-42 in the most recent Rasmussen poll, for example. And Romney labors under the weight of his own Massachusetts health-care plan, so very like ObamaCare. At the least, it makes any Romney discussion of the issue too painfully complex for campaign sound bites.
Still, you can see some clear differences in how the two would approach the issue.

If Obama is re-elected, ObamaCare will be fully implemented. The changes so far have been relatively popular — for instance, letting children stay on their parents’ policies until age 26, or beginning to close the “doughnut hole” for Medicare prescription-drug costs. These reforms have hidden costs, but mostly just that: hidden.

But Jan. 1 will bring a host of new ObamaCare taxes on medical devices, insurance plans and prescription drugs, as well as on investment incomes for higher earners. In 2014, the individual and employer mandates kick in. The Congressional Budget Office suggests that as many as 6 million Americans will get hit with the mandate’s penalty or tax. And many businesses may choose to drop coverage for their workers, dumping them into the new government-run insurance exchanges.

Romney’s promise to repeal ObamaCare will be hard to fulfill unless Republicans also win control of the Senate on Nov. 6. If not, expect years of political skirmishing, with Republicans trying to pick off the law’s most unpopular provisions one at a time.

But a President Romney would have a great deal of power over how much — or how little — money is spent to implement the law. For example, he’s highly unlikely to spend $303 million to hire 4,500 new IRS agents to police the mandate.

What would Romney replace ObamaCare with? His centerpiece is likely to be giving people a tax break for buying insurance on their own, rather than through their employer. That simple step for equality would make health insurance personal and portable, controlled by the individual rather than government or an employer.

Romney believes that letting workers take charge of their own health policies would make them more involved shoppers, demanding better quality and a lower price, and ultimately driving down the cost of insurance. At the same time, he hopes that by making insurance more affordable, he’d expand the number of people who buy it.

We can also expect a President Romney to push for legislation enabling consumers to purchase health insurance across state lines — breaking up the cartels that allow just two insurers, GHI and Empire Blue Cross, to control half of the New York state market.

He’d also deal with the issue of preexisting conditions by guaranteeing eligibility to people who maintain continuous coverage, while helping to finance high-risk pools for others.

The differences are also stark on Medicare. Both Obama and Romney understand that the now-projected level of Medicare spending is unsustainable. The program ran a $300 billion shortfall last year, and faces total future shortfalls of $42.8 trillion to $88.9 trillion, depending on which estimate you believe.

Obama aims to reduce this spending from the top down. Starting in 2017, the 15 unelected bureaucrats of the Independent Payment Advisory Board would have the authority to order reductions in payments to doctors, hospitals and nursing homes. Only a vote of both the House and Senate can overturn IPAB’s package of cuts — and Congress must accept or reject it in total.

The president insists these are only cuts to providers, but reducing reimbursements will most likely lead to more physicians refusing to see Medicare patients, and possibly some hospitals closing.

On the other hand, Romney aims to reduce costs from the bottom up by empowering Medicare beneficiaries. He’d leave Medicare unchanged for current recipients, even repealing $716 billion in cuts over the next 10 years that are part of ObamaCare. But he’d give younger workers a choice between continuing in the current Medicare program and enrolling in a new “premium support” model.

Under the second option, insurers would bid for the right to participate under Medicare. Plans would have to include certain minimum benefits and accept all applicants, regardless of age or health. Retirees would get a government payment equal to the cost of the second-least-expensive plan in their area. If seniors chose a lower-cost plan, they could keep the difference. But if they choose a more expensive plan, they’ll have to pay the extra beyond what the government pays.

The hope is that, as with Romney’s proposal for health insurance generally, the combination of competition and consumer cost-sharing would help hold down costs — for consumers and taxpayers.

Details aside, their approach to health-care reform reflects the candidates’ general governing philosophy. Obama supports an activist government, managing the system from the top down. Romney favors a more market-oriented approach, with individual consumers having more choice, but also more responsibility.

Regardless of who wins Nov. 6, our health-care system is going to look very different in the future.

Michael Tanner is a Cato Institute senior fellow.