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Encourage consumer choice

Price and quality transparency should guide thinking on health-care reform.

By Liya Palagashvili

If successful, today's health-care reform efforts will entail a sharp turn away from consumer-centered health. We should therefore be honest about what government-designed health care will mean to each of us: a continued trajectory of higher costs and greater difficulty in choosing the health coverage that is best for you.

No, I am not advocating that we do nothing. As we all know by now, overall medical spending in the United States is exceptionally high, and millions of Americans lack insurance against major medical emergencies. Issues of cost, access, and quality continue to plague our medical system.

But the current health legislation will take us in the wrong direction. Congress is considering a requirement that everyone purchase a "basic" insurance plan, which could range in services from in vitro fertilization to end-of-life counseling. Does anyone really expect such cradle-to-grave health mandates to save us money?

As an analogy, imagine that the government required all automobile insurance companies to insure not just against serious or catastrophic damage, but also against broken windshield wipers, burned-out headlights, oil and tire changes, and so on. Car insurance would cost us a fortune.

Of course, the same dynamic is at play with health-care insurance, especially when it comes to my generation. For the most part, young people need to insure against the possibility of a medical emergency only. We do not need a broadly defined benefit plan, and forcing us to buy such plans will ensure only that we get stuck overpaying for unnecessary coverage.

There is room for debate about what constitutes the correct amount of government involvement in health-care financing and delivery, but we can say with confidence that the current structure has led to price obfuscation. Most of us simply do not know the true cost of the health care that we consume, nor do we use price and quality information to choose a provider.

Quite clearly, the current reform would worsen this problem and minimize the incentives for healthy behavior. In the case of car insurance, the incentive for safe driving is that you will pay less money each month. Yet if Congress passes health-care legislation that prescribes benefit levels and pricing, you and your unhealthy coworker or neighbor will pay the same premium.

What would be the effects of forcing healthy people to subsidize the care of those who have made conscious decisions to overconsume food, alcohol, tobacco, or illegal drugs? One short-term effect would be outrage, some of which we have already seen. But the long-term effects on our nation's health would be positively detrimental. It would be like telling someone she could crash her car as many times as she wanted, and that the cost of her insurance would never increase.

Some Americans are less worried about the long-term consequences and point to Canada and Britain as models for reform. But the evidence in those countries is mixed, at best. Canadians regularly come to the United States in order to avoid waiting for care, and the British have even designated a word used to describe waiting in line to receive health care: queuing. That is a polite way of saying that at any given time, approximately one million people are on a waiting list at a British hospital.

Perhaps more important, government-run health care makes no guarantees about cost efficiencies. Across the pond, the International Monetary Fund recently urged Britain to charge for health care and raise the retirement age in order to alleviate debt. And in the United States, the Congressional Budget Office projections indicate that more government involvement in health care equates to higher, not lower, overall spending.

This is not to say our current system is without fault. But as part of the solution, we need to recalibrate the balance between competition and government regulation in order to encourage consumer choice. As examples, we should look to other types of insurance and other sectors of the economy, where consumer decision-making is informed by price and quality transparency.

Unfortunately, the current legislation would shift health-care power even further away from patients and providers. As for whether we allow that, the choice is up to us.