Health-care reform needs government

Glenn Hubbard

TEXT OF COMMENTARY

KAI RYSSDAL: John McCain officially accepts the Republican nomination tonight in St. Paul. It's the most formal chance he's had yet to roll out his platform and tell us why he ought to be president. This week we've been asking some prominent Republicans to tell us where they think the party hasn't been doing so well. Commentator and economist Glenn Hubbard chose health care. He says Republicans are wrong to think that reform isn't going to mean some kind of government involvement.


GLENN HUBBARD: Rising health care costs are draining consumers, harming the global competitiveness of American firms, and driving future federal budget deficits.

Can the Republican party succeed by keeping government out of health care? In a word, no.

What we need to do is focus on getting more value for the health care dollar. Republicans propose tax subsidies for health insurance bought through your employer or on your own. This change can reduce wasteful spending by tens of billions of dollars per year.

But these reforms do not mean that government has no role -- subsidizing insurance for low-income individuals is obviously still important.

And there is a big missing piece: If we move toward more individual markets, what about high-cost individuals? What about the chronically ill? Insurance markets provide good protection for unforeseen medical expenses. But they don't work well for persistently high-cost patients. Will market reforms leave them behind? And if reforms keep them in private insurance pools, must they raise the cost for everyone else?

The simple answer is no. But, we need to spend more federal dollars to jump-start reform.

Here's how: We should give subsidies to chronically ill individuals so they can purchase private insurance.

The subsidy would provide partial coverage to an eligible person once health expenses exceeded a specified multiple of that person's area-average expenses.

That cost is still substantial -- at least $5 billion per year to begin. But the cost is an essential downpayment if we want market reforms.

If we pay this cost, the chronically ill will not be left behind by market-oriented health care reform. And insurance costs will fall for many Americans, so more households will be able to afford insurance.

Championing market reforms in health care to reduce costs to households and the government sounds good. But making the GOP's reform work will require a strong government role. In particular, some smart upfront additional spending on the chronically ill may be just what the doctor ordered.

RYSSDAL: Glenn Hubbard is the dean of the business school at Columbia University. He used to run the Council of Economic Advisers for President Bush.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...