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Rising Health Costs, and How to Lower Them Without Rationing Care

11:00 AM, Mar 20, 2011 • By JEFFREY H. ANDERSON
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Ever wonder why health costs have risen so fast? Jim Capretta offered a thorough and informative answer to that question during recent congressional testimony before the House Budget Committee. Here’s the short answer: Federal programs and tax policy have created a situation where — whether their health care is covered through employer-provided insurance, Medicare, or Medicaid — most people have little incentive or opportunity to shop for value, to pursue the highest-quality care at the lowest-possible prices. Correspondingly, health care providers have little incentive to provide value. 

Rising Health Costs, and How to Lower Them Without Rationing Care

Thus, prices rise — much faster in government-run health care programs than otherwise. And they would rise even faster under Obamacare, which would exacerbate these problems, entrench the government as an inefficient and inflexible middleman (while also entrenching the role of insurers, whose product would now be something that all Americans would be ordered to buy), and leave people with far less control over their own health care dollars even than they have today. 

Former Congressional Budget Office Director Alice Rivlin also testified at the hearing. Along with Rep. Paul Ryan, she has co-authored the Ryan-Rivlin proposal, which offers a real solution for our entitlement woes. At the end of her testimony, Rivlin, a Democrat, told Republicans, “I urge you to be bold in developing your FY 2012 Budget Resolution.” She also suggested phasing in entitlement reforms “much sooner” even than Ryan-Rivlin has proposed, which means phasing in such reforms much sooner than ten years from now.   

For three reasons, Republicans would be wise to heed Rivlin’s advice — not only about reforming entitlements but also about phasing in such reforms sooner rather than later. First, it is the right policy: We are already spending more on mandatory programs than we are collecting in total federal revenues, and it simply doesn’t make sense to wait. Second, it would enable Republicans to show real budgetary savings over ten years, rather than forcing them to explain to Tea Party voters why — even with the inclusion of meaningful entitlement reform — their budget doesn’t look so different from President Obama’s over a 10-year period. Three, it would help avoid giving the (false) impression that those who would be grandfathered, rather than enrolled in the newly reformed programs, would somehow be getting a better deal.

Beyond entitlement reforms, Republicans also need to make good on their promise to offer a replacement for Obamacare. A three-part proposal would fit the bill. 

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