Governor Rendell’s Healthcare Misdiagnosis

As healthcare costs continue to rise faster than consumers’ ability to pay, it is clear that we need to alter how we pay for healthcare. Recently, Governor Rendell unveiled a far-reaching healthcare reform proposal. However, while some of the cost savings mechanisms in the Governor’s plan merit consideration, the core of his proposal only addresses the symptoms, not the causes, of rising healthcare costs.

We face two divergent paths in transforming how we deliver and pay for healthcare in Pennsylvania and the United States. One path calls for a greater role for government in funding and regulating healthcare, the other path uses the marketplace to drive innovation and constrain costs by empowering consumers to choose and take responsibility for their healthcare. Unfortunately, Governor Rendell’s “Prescription for Pennsylvania” chooses the path of more bureaucratic government and ignores important market-oriented reforms.

The main thrust of the Governor’s proposal—“Cover All Pennsylvanians”—is a colossal mistake. The three aspects of this plan—expanding the government-run adultBasic program to individual and business purchasers, phasing-in mandates for individuals to purchase insurance, and fining businesses that don’t provide healthcare—will hinder any opportunity to make healthcare less expensive or health insurance more affordable. Instead of private-sector, consumer-driven solutions, Governor Rendell thrusts citizens one step closer to a single-payer health insurance monopoly paid for by taxpayers.

First, instead of expanding the adultBasic government health insurance program, we should make it easier for individuals and small businesses to purchase healthcare through private insurers. Governor Rendell should look to expand insurance pools for small businesses and individuals (including families combining contributions from multiple employers). He should include tax incentives for individual purchasers of health insurance and provide the same tax benefits to those who pay cash for healthcare as those who buy insurance.

Second, by targeting uninsured individuals, the Governor has misdiagnosed the problem, and offered the wrong prescription. About one-half of all uninsured adults are 18-34 years old who choose not to purchase insurance primarily because they are healthy and will not likely utilize their coverage. They would prefer to “self-insure” and keep their money in their pockets. Mandating that any citizen purchase insurance won’t reduce healthcare costs—in fact, it will only drive up the cost of health insurance just as mandatory auto insurance has increased premiums. Instead, we should reduce the cost of health insurance by allowing individuals to purchase high-deductible insurance plans and expanding incentives for Health Savings Accounts, which will help create more transparency in healthcare prices. These reforms would provide greater access to health insurance for the uninsured without further driving up health insurance costs.

Finally, instead of requiring employers to provide healthcare benefits or face a hefty fine by the government, we need to give businesses and employees more options to purchase health insurance. Another tax on businesses will do nothing to reduce the costs of healthcare. However, market-based reforms such as health insurance portability and allowing people to purchase insurance from out-of-state insurers will give more choices to consumers and increase competition among insurance providers. The result of which will be lower costs and greater options.

Lawmakers who recognize the harm of further “governmentizing” our delivery of healthcare in Pennsylvania would be wise to look to reforms that strike at the root of our healthcare cost problem including:

• Giving individuals the same tax benefits for purchasing health insurance as businesses;
• Allowing individuals and small businesses to 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;
• Providing health insurance portability;
• Reducing insurance coverage mandates; and
• Enacting tort reforms, including reasonable limits on non-economic damage lawsuit awards.

Until Pennsylvania begins giving individuals—not government—more responsibility for choosing and paying for healthcare, healthcare costs will continue to rise and the burden on taxpayers will only increase.

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Nathan A. Benefield is Director of Policy Research with the Commonwealth Foundation, an independent, nonprofit public policy research and educational institute based in Harrisburg.