Two senior fellows at the Hoover Institution and a visiting scholar at the American Enterprise Institute have collaborated to produce a second edition of their book, Healthy, Wealthy, and Wise: Five Steps to a Better Health Care System (Hoover Institution Press Publication, 2011; 161 pp). The book offers some alternative ideas to the current health reform law, and focuses specifically on slowing the growth rate of healthcare expenditure and increasing coverage. Here are some representative quotes and claims from the book:
- "In our view, the argument for increased public intervention is seriously flawed. ...[T]he unintended consequences of a handful of longstanding public policies are in large part responsible for the problems of the health care system. These policies share a common feature: they fail to promote cost-conscious behavior and competition. ... The central goal of health reform must be to change these flawed policies." (p2)
- "The objective of raising copayments should also be applied to the Medicaid program. The low incomes of medicaid beneficiaries, of course, limit the extent to which this can be done. However, this constraint can be addressed by providing beneficiaries with additional cash assistance to offset the financial impact of higher copayments. The cash assistance would be a fixed amount that would be allowed to vary depending on the person's health status." (p52)
- "On the whole, [PPACA] moves insurance regulation in the wrong direction. Most important, its community-rating provisions, as we previously noted, will raise insurance premiums and reduce insurance coverage. Its limits on cost-sharing and medical loss ratios have the effect of enshrining into law the very features of health insurance at the root of the market's fundamental problem: incentives for generous coverage without regard to the moral hazard it creates." (p55)
- "[W]e propose that HHS improve its efforts to encourage use of generally recommended treatments through the development and dissemination of guidelines, keeping in mind that while guidelines can help practicing physicians make use of the most recent scientific research, blind adherence to them runs the risk of one-size-fits-all medicine." (p67)
- "We must ... fundamentally redesign [Medicare and Medicaid]. Medicare should be transformed into a program that gives beneficiaries a risk-adjusted payment with which to purchase coverage in a regulated marketplace. ... Medicaid should be transformed into a block grant to the states." (p104)
Healthy, Wealthy, and Wise presents a five-part plan for addressing the nation's healthcare woes. In short, their recommendations are: 1) equalize the taxation of health expenditures by instituting full deductibility; 2) deregulate insurance markets and redesign Medicare and Medicaid; 3) encourage the development and dissemination of healthcare guidelines; 4) increase controls on anticompetitive behavior; and 5) reform the medical liability reform by imposing a national cap on noneconomic damages.
The book offers some market-style alternatives to what we have today, but nothing that is radical or particularly inspiring. For instance, the authors' calls to deregulate insurance markets and redesign Medicare and Medicaid are well-intended, but the specific changes they recommend still grant too much power and legitimacy to those institutions. Likewise, their call to equalize the taxation of health expenditures is along the right idea, but they do not at all make it clear that implementing this change by offering full deductibility is the most market-based way to go about it (e.g., interest groups would lobby to get their services made eligible just as they lobby the states today to get included in coverage mandates).
Then there are the proposals that are not based upon free-market principles at all. For instance, the authors support and want to encourage enforcement of antitrust laws that block hospital mergers and other voluntary associations between people. Adding to the confusion, this bad proposal is lumped together—under the banner of "controlling anticompetitive behavior"—with the recommendation to curb licensure laws in medical education, which is a good idea.
Healthy, Wealthy, and Wise is a worthwhile read for policy analysts who want to take a closer look at a few incremental ideas that may be good and achievable in the current political climate. It is not a book for the general reader who is looking for a vision of healthcare in a free market, or for big-picture ideas about how to change the culture.
John Cogan, Glenn Hubbard, and Daniel Kessler