Dan Calabrese

In today’s Wall Street Journal, three leading thinkers on the subject of health care economics spell out in clear terms why health care costs are rising, and why the only solution is a dramatic change in the way America thinks about health care finance.

Now this won't cost a bit.

John Cogan, Glenn Hubbard and Daniel Kessler – whose respective credentials you’ll find at the end of the piece – make the same case this column has been making for a very long time. The problem is not that not enough people are covered by health insurance. The problem is that too many people are too reliant on health insurance.

As the authors note, $5 out of every $6 spent on health care in this country is spent by someone other than the person receiving the care. That’s a recipe for cost inflation because the people accessing the service have no understanding – and no particular interest, really – in what the care actually costs.

The problem with the current debate on health care reform is that most of the elected officials involved in the discussion think it’s that sixth dollar – the one you have to spend out of your own pocket – that’s the problem. ObamaCare is all about getting more people “covered” and lowering out-of-pocket expenses.

Of course, the federal government encourages Americans to rely on employer-provided health insurance by making it tax-deductible, but not doing the same for any other form of health care spending. The authors argue for expanding tax-deductibility to all forms of health care spending, including individually purchased insurance premiums and out-of-pocket expenses.

My ideal tax code would have no deductions at all, along with extremely low rates, but in the real world we’re living in today, their idea makes sense. It would instantly eliminate a perverse incentive for people’s money to go toward a system that makes them more reliant on others and promotes massive spending on low-value health care.

It would also force health care providers to change the way they operate, and form more of a serious business relationships with their patients as customers. Have you ever gone to get a health care service and actually tried asking the provider to spell out in detail what each item will cost? They look at you like you’ve lost your mind.

“Don’t you have insurance?” they will ask, which is tantamount to saying, “What do you care? You’re not paying for it!”

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It would also have another positive effect, which is provide a new incentive for people to save money. If more of your health care needs to be paid out of your own pocket, you’d better have some money put aside just in case. If you don’t need to spend it, great, you’ve got some savings in place. But either way, more people learning the discipline of savings can only be good in a nation that has gotten itself in a lot of trouble – both collectively and individually – running up credit cards.

Cogan, Hubbard and Kessler are right: ObamaCare is the worst possible approach to health care reform because it does nothing to address the real reasons costs are rising, while adding another massive entitlement that will surely result in soaring federal spending and eventual calls for massive tax increases as the government’s mounting obligations push the nation closer to fiscal insolvency.

But is this politically possible? Obviously Democrats favor individual dependence on government. But even many Republicans seem more concerned about protecting the profits of private-sector health insurers than returning control of spending decisions to the individual.

The entire health care system is a big financial racket. There are lots of players glomming onto it and sucking out whatever money they can. They will protect their place in the system at all costs, and they will find members of the House and Senate to take up their cause.

The type of real reform advocated by our three authors would force a lot of these people to look for other work, which may be the real reason we have never moved toward reforms like this, even when Republicans had control of the levers of government.

Americans hate ObamaCare. The polls on the subject make that clear. They might also hate being told that they should pay more out of their own pockets for their health care. But if they could be shown that they would come out ahead overall, and that the rising costs of health care would be reduced, they just might sign on. And if they did, the only way you can really get health care costs under control might actually have a chance to work.

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