CF Responds to Democratic Party Chairman on RendellCare

TJ Rooney
Democratic State Committee
300 North 2nd Street
8th Floor
Harrisburg, PA 17101

Dear TJ:

I am writing in response to your personal letter to me (which I have yet to receive, but came across it online as a news release to media outlets).

In fantastic Orwellian fashion, you attempt to characterize Gov. Rendell’s plans to expand a government program that will likely cost taxpayers billions as “the polar opposite of a ‘government-run’ system.” Fortunately, the people of Pennsylvania are wise enough to understand that MORE government cannot equal LESS government.

The polar opposite of Rendell’s government-run solution would be to embrace the market-oriented reforms put forth by the Commonwealth Foundation, including

Giving individuals the same tax benefits for purchasing health insurance as businesses;
Allowing individuals and small businesses to better pool resources to purchase private insurance;
Expanding Health Savings Accounts and access to high-deductible insurance plans;
Making healthcare prices more transparent for consumers;
Permitting individuals and businesses to purchase insurance outside Pennsylvania;
Reducing insurance coverage mandates, and
Enacting tort reforms, including reasonable limits on non-economic damage lawsuit awards that increase healthcare costs.

Unfortunately, Rendell’s “Cover All Pennsylvanians” embraces none of these proven healthcare cost reducing prescriptions. Instead, he calls for a dramatic expansion of the government’s Adult Basic program to hundreds of thousands of new enrollees. While the Governor has not put a price tag on this government-run program, we know he plans to pay for it by higher taxes on employers and individuals. The state would then use the money to buy insurance for the new enrollees. How exactly, does this differ from a “government-run system”?

Finally, TJ, you suggest that our critique of the Governor’s proposal is because we are somehow “partisans and stakeholders who benefit from the status quo.” You well know that the Commonwealth Foundation is neither a “partisan” nor a “stakeholder”. We challenge all parties and special interests that propose ill-conceived public policies, whether Democrat or Republican, business or labor union. Our position on healthcare reforms is no exception. We have called for a radical transformation of our healthcare system that would anger most of the current stakeholders, as well as the moneyed interests that fund your Party.

While we commend the Governor for wanting to focus on reducing the cost of uncompensated care, as well as several cost-saving components of his plan, our trouble is that the “Prescription for Pennsylvania” fails to strike at the root of our healthcare problems.

We welcome the coming public dialogue about how to best provide the people of Pennsylvania with access to quality healthcare. Of course (as I noted in the commentary currently being published in newspapers across the state and available on our website at www.CommonwealthFoundation.org), our premise is that “[e]xpanding insurance coverage at taxpayers’ expense without first addressing the factors that are driving up healthcare costs will only exacerbate our healthcare problems. Under the governor’s scheme, neither the cost of healthcare nor the cost of insurance will ever become reasonably priced for the average Pennsylvanian.”

Sincerely,

Matthew J. Brouillette
President & CEO

Attachments:

Mr. Rooney’s letter
“Treating the Symptom rather than the Cause” commentary

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PA DEMS: Letter from Party Chairman T.J. Rooney chastising Commonwealth Foundation Executive Director Matthew Brouillette on the Governor’s Prescription for Pennsylvania plan.

Text of Jan. 23 letter.

January 23, 2007

Matthew J. Brouillette
Commonwealth Foundation
225 State Street , Suite 302
Harrisburg, PA 17101

Dear Matt:

I am writing to correct the many misstatements about Governor Rendell’s “Prescription for Pennsylvania” contained in your January 22 commentary. Your characterization of the proposal is so far off base that one has to wonder if you even bothered to read it before you wrote your essay.

In fact, in the very first paragraph, you fundamentally misstate the intent of the proposal and how it will work. It is not a “government-run healthcare program” but rather an effort to lower the costs of health care and health care insurance so the private sector can provide it to more of its employees. That is the polar opposite of a “government-run” system.

The “Prescription for Pennsylvania” attacks the high cost of health care by focusing to reduce unnecessary health care costs and more tightly regulate the insurance industry. By lowering the cost of health care for every business, Pennsylvania will become more competitive and can offer benefits necessary to attract and retain the best workers. We will also lessen the burden uncompensated care places on our hospitals.

Your essay, with its tortured likening of health insurance to auto insurance, also overlooks the costs of the uninsured on taxpayers. If a car breaks down because its owner could not afford preventative maintenance, only the owner is responsible for fixing it. If a person’s health declines and he or she needs intensive care, the community has a moral obligation to help. Clearly, that obligation carries a price tag. Shouldn’t we find a way to prevent or otherwise lessen those costs? Helping individuals and businesses purchase affordable care is, at its heart, exactly what the “Prescription for Pennsylvania” does.

I understand that partisans and stakeholders who benefit from the status quo will attack the Governor’s “Prescription for Pennsylvania”. But I had hoped they would do so honestly. Your piece does not and that is a disservice to the people of Pennsylvania and your supporters.

Sincerely,

TJ Rooney

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Treating the Symptom Rather than the Cause
Matthew J. Brouillette
01.22.07

Governor Rendell wants to expand health insurance to 767,000 uninsured Pennsylvanians by increasing taxes on employers and tobacco users, to name just a few. The full costs have yet to be quantified, but they are sure to be underestimated from the get-go, like all other government-run healthcare programs.

Setting aside the multi-billion dollar price tag that will accompany “Cover All Pennsylvanians,” expanding taxpayer-subsidized healthcare insurance fails to address the reasons why people don’t have insurance coverage in the first place. First, according to the U.S. Census Bureau, about 517,000 uninsured Pennsylvanians are between ages 18-34. Understandably, this relatively healthy demographic is neither interested nor willing to pay for an expensive insurance program that they do not intend to utilize.

Second, the reason health insurance is so pricey is because healthcare itself is expensive. But the high cost of healthcare is primarily due to the health insurance model of how we pay for healthcare. Indeed, the health insurance system bears much of the responsibility for helping create a healthcare system that is expensive, inefficient, bureaucratic, and error-prone.

Unfortunately for both healthcare consumers and taxpayers in Pennsylvania, Governor Rendell’s solution to the problem—subsidizing and ultimately mandating health insurance coverage—is not a solution at all. Indeed, such a scheme will only serve to exacerbate the problems in our healthcare system.

So what is the solution? First, we need to rethink the role of health insurance. Instead of being a pre-payment plan for future healthcare services we may or may not use, health insurance coverage should be restored to the same function in our lives as home or auto insurance. We should utilize health insurance for catastrophic purposes, not daily maintenance.

Think about it. We don’t purchase auto insurance to cover our oil changes or adding washer fluid. We buy it to protect us from major, unintended and unforeseen accidents. Auto owners pay for the regular upkeep and maintenance of their cars. We don’t fill up with gas and send an invoice to GEICO or Progressive…or the taxpayers. If we did, we wouldn’t care about how much a tank of gas costs. Herein lies the problem.

The fact that our auto insurance doesn’t operate like our health insurance is what keeps prices competitive and relatively low for basic services. It also keeps premiums for catastrophic coverage reasonable because they are adjusted to our expected claims. If you’re a good driver, you get price breaks. If you’re a habitual speeder, you pay more. For the most part, unlike your health insurance, your auto insurance premium is not affected by how bad of a driver your neighbor is.

Health insurance should be designed and utilized in the same manner. But it’s not. Our health insurance operates like a pre-payment plan for the medical equivalent of filling up with gas or purchasing new tires, as well as when we ruin our car in an accident. The result is that we don’t pay much attention to the price of medical services. Nor do we care. Yet this is precisely what has caused the hyper-inflation of healthcare costs, and by extension, the expensive nature of basic health insurance…and why many people choose to go without.

If lawmakers allowed health insurance to operate in a manner similar to auto insurance (currently it can’t because of government regulations, restrictions, and myriad other interventions in the healthcare marketplace), we would put Pennsylvanians back in the driver seat. As a direct consumer of healthcare, we would better control costs by better managing our basic services because we—not some third-party payer, either an insurance company or taxpayers—would pay for our simple healthcare expenses. We need to think in terms of personal responsibilities when considering health insurance matters.

Governor Rendell’s proposal does nothing to interject these necessary incentives into our current healthcare system. Under his scheme, consumers would continue to have little concern about the actual costs of medical services. And why should they? They won’t have to pay the bills; someone else will.

This is why the governor’s “Prescription for Pennsylvania” will fail: He is prescribing treatment for the symptom rather than the cause. Expanding insurance coverage at taxpayers’ expense without first addressing the factors that are driving up healthcare costs will only exacerbate our healthcare problems. Under the governor’s scheme, neither the cost of healthcare nor the cost of insurance will ever become reasonably priced for the average Pennsylvanian.

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Matthew J. Brouillette is president and CEO of the Commonwealth Foundation (www.CommonwealthFoundation.org), a public policy research and educational institute located in Harrisburg.