Republicans seem to understand that repeal of President Barack Obama’s health care law is necessary. Unfortunately, many of them seem to think repeal is sufficient as well. It isn’t.
This is why it’s so important that a GOP leader such as House Budget Committee Chairman Rep. Paul Ryan, R-Wis., began presenting a viable plan to replace it, with his speech Tuesday at Stanford’s Hoover Institution.
The big problem afflicting our health care system is skyrocketing costs. The Kaiser Family Foundation reported this week that in 2011, premiums for employer-based health insurance shot up 8 percent for individuals and 9 percent for families over 2010.
As Ryan noted in his speech, “If you look at our debt-and-deficits problem, it really is a health care spending problem.” Health care spending accounts for one out of every four dollars of the U.S. budget (excluding interest payments), and within decades, that number will grow to 45 percent.
Obamacare stands to make things worse by imposing a new layer of subsidies and regulations on top of an already broken system. Obama’s solution to the problem of costs rests with 15 bureaucrats (his Independent Payment Advisory Board) charged with rationing care.
Ryan wants to change the government policies that insulate the health care consumer from nearly all costs, thus distorting incentives for doctors and patients alike. Price signals, a staple of any functioning free market, have been muffled in health care, where third parties (insurers and the government) pay roughly 88 percent of health care costs, up from 52 percent in 1960.
Because patients don’t pay the bills, most of them have no idea how much services cost, let alone what they are worth. This leaves doctors and hospitals in a competitive vacuum where price and value bear little relation to one another.
“Instead of top-down price controls imposed by 15 bureaucrats at IPAB,” Ryan said, “let’s try bottom-up competition driven by 300 million consumers.”
Ryan calls for a uniform tax credit for everyone to purchase health insurance. This would immediately end several problems created by the prevailing employer-based insurance system, which offers fewer options, traps many Americans in jobs they would rather leave, and causes many to overinsure themselves.
For government health care programs, Ryan expanded on the plan he outlined in his House-passed budget, which promotes greater freedom and flexibility than Medicare or Medicaid currently offer.
Ryan’s speech is a start, but he shouldn’t stop there. America is ready for this change now, and Ryan’s colleagues need a detailed plan to rally around.