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Controlling Health Care Costs

By Matthew Yglesias on November 14, 2010 at 4:28 pm

"Controlling Health Care Costs"

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Tim Pawlenty’s got a Union Leader op-ed that I guess is supposed to illustrate his resumé as a Presidential contender. But amidst all the fulminations, we get to the point that anytime people decide to stop playing stupid political stunts and start talking about real issues, the differences in our politics narrow considerably:

For example, when it came to state employees and their health care, we gave individuals more freedom and responsibility to decide how to spend their own money. What does that mean? To reverse the trend of soaring health care costs in Minnesota, we gave our state employees financial incentives to select high-quality, low-cost health care. With some of their own skin in the game, the vast majority of employees chose more efficient providers. As a result, over the last five years we’ve seen low, and in some years no, premium increases.

Contrast that with President Obama’s approach to health care reform. It drags health care into Washington, D.C., expanding bureaucracy, mandates, entitlements and government subsidies. It does nothing to control costs. And once again, the government will serve up the allure of endless consumption and a magically disappearing bill. But we know nothing is truly free.

Now in fact that Affordable Care Act does a lot of different things. One thing it does, however, is impose a tax on unusually expensive health care plans. It also indexes the threshold for what counts as a very expensive plan to the overall rate of inflation, meaning that over time a larger and larger share of plans will be subject to the tax. What’s the impact of that? Well it creates financial incentives, over time, for employees to select lower cost health plans that put more of their own skin in the game. That’s Barack Obama’s main idea about how you can lower the rate of growth of health care costs, and it’s also Tim Pawlenty’s idea.

That’s not to say no important disagreements exist in politics. When Obama put this idea forward, he got significant pushback from labor unions and the ACA wound up including a version of the tax that’s much scaled back from the initial proposal. And Pawlenty’s version of this idea thrusts the entire burden of adjustment onto employees of the Minnesota state government, letting the general class of “people who have very fancy health plans because they’re rich” escape unscathed. Insurance companies and health care providers call health care costs “income” and they don’t want to see it reduced and they argue, not entirely unreasonably, that high health care profits drive innovation.

So there’s plenty to disagree about here. And the sooner the country starts having a real discussion about those real points of interest instead of the fake discussion about a made-up version of the Obama administration’s proposals, the better off we’ll be.

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