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The health-care wedge is an economic term that reflects the difference between what health-care costs the specific provider and what the patient actually pays. When health care is subsidized, no one should be surprised that people demand more of it and that the costs to produce it increase. Mr. Obama’s health-care plan does nothing to address the gap between the price paid and the price received. Instead, it’s like a negative tax: Costs rise and people demand more than they need.

…. Thus, health-care reform should be based on policies that diminish the health-care wedge rather than increase it. Mr. Obama’s reform principles—a public health-insurance option, mandated minimum coverage, mandated coverage of pre-existing conditions, and required purchase of health insurance—only increase the size of the wedge and thus health-care costs.

Dr. Laffer’s research concluded that the current proposals being discussed in Washington would:

• raise total federal government expenditures by 5.6 percent more than otherwise, adding $285.6 billion to the federal deficit in 2019;
• increase national health care expenditures by an additional 8.9 percent;
• raise medical price inflation 5.2 percent above what it would have been otherwise;
• slow U.S. economic growth in 2019 by 4.9 percent less than the baseline scenario of doing nothing;
• increase the current net present value of funding health care reform based on President Obama’s priorities by $1.3 trillion (due to higher medical inflation and expenditures), or $ 4,354 for every man, woman, and child in the U.S.; and
• still only insure about one-third of those currently without insurance – at a cost of approximately $62,500 per new person insured.

Dr. Laffer says there are many solutions available to better the health care system without destroying what already is good in the system….These solutions include:

• Provide for individual ownership of insurance policies – the tax deduction that allows employers to own your insurance should instead be given to the individual;
• Better leverage Health Savings Accounts (HSAs) – HSAs empower individuals to monitor their health care costs and create incentives for individuals to use only those services that are necessary;
• Allow interstate purchasing of insurance – policies in some states are more affordable because they include fewer bells and whistles; consumers should be empowered to decide which benefits they need and what prices they are willing to pay;
• Reduce the number of mandated benefits insurers are required to cover – empowering consumers to choose which benefits they need is only effective if insurers are able to fill these needs;
• Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance – an income-based sliding scale voucher program would eliminate much of the massive bureaucracy that is needed to implement today’s complex and burdensome Medicaid system and produce considerable cost savings;
• Eliminate unnecessary scope-of-practice laws and allow non-physician health care professionals to practice to the extent of their education and training – retail clinics have shown that increasing the provider pool safely increases competition and access to care and empowers the patient to decide from whom they receive their care; and
• Reform tort liability laws – defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients.

/blockquote>Jo Egelhoff, FoxPolitics.net

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COMMENTS

Compelling arguments...were it not for the fact that Laffer is the laughingstock of the economics profession. His entire career demonstrates that you can make wrong predictions again and again...as long as you please the money in the room.

Marcus (Wed Aug 05 23:47:38 2009)

Laughing stock? No, that would be Paul Krugman. When it comes to economic idiocy, he takes it to a new level. Here is a fellow that says that one of the most resource rich countries in the world is doomed to live in poverty, WITHOUT addressing the lack of rule of law, and lack of protection of property rights as major contributing factors.

The Nobel prize has been considerably degraded with the awards to Gore and Krugman, and risks becoming a laughing stock itself.

(BTW, I never did buy into the Laffer Curve. I do NOT think maximizing goverNMEnt income is a good thing.)

Ken Van Doren (Thu Aug 06 08:58:36 2009)

Setting aside the "maximizing revenue to the government" issue, the Laffer curve is simply a way of showing that more tax does not translate into more revenue.

I only wish the economically uneducated politicians in Madison and Washington D.C. could actually understand such a simply illustration.

Jay Oestreich (Thu Aug 06 14:32:29 2009)

How about forgetting the middlemen for everyday things, which indeed make up the bulk of healthcare dollars spent. How about allowing drs to advertise their fees, and truly compete? How about allowing ERs to kick out the people that don't belong there, and instead, send them to their family dr, where they belong?

Good grief, when my mom was a kid, a neighborhood man somehow shot a hole in his jugular with a BB gun. His friend plugged the hole with his hand, they walked to the town dr, who repaired the hole right there! Nowadays, it'd be an ambulance or flight, an ER, then a vascular surgeon, blood trannsusions, etc, etc. THIS is what middlemen (insuranmce companies OR govt.) lead
to!


emily matthews (Fri Aug 07 16:21:26 2009)

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