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Gary Becker: Why He Prefers “No Change” to Health Care Delivery Over the US Health Care Finance Reform Law

Gary Becker, Professor of Economics at the University of Chicago Booth School of Business, wrote an excellent piece on the recently-passed health care finance reform legislation.

Yet when I was recently asked whether I prefer the present healthcare bill to no change in the health delivery system for a decade, I answered “no change”. […] The bill is filled with many complicated, and generally bad, new regulations, higher subsidies, and greater taxes.

He calls out several of the law’s sins, both of omission and commission, including the following. I recently heard Jeremy Siegel, Professor of Finance at The Wharton School of the University of Pennsylvania, mention several of the same points.

  • Little focus on reducing – or even exposing – health care costs leaves the main problem unaddressed
    • The cleanest way to reduce overall costs is for consumers to have more responsibility/control over what’s required for deductibles and co-pays (Becker mentions that Switzerland’s out-of-pocket spending is 30%+ compared to the USA’s 12% – leading to a lower % of GDP spent on health care in Switzerland with similar outcomes)
  • Re-emphasis on employer-provided health insurance drags down the overall economy
    • Tax-deductibility of employer-provided insurance encourages low deductibles and co-pays, leading to higher costs
    • Non-portability of health insurance leads to a much less flexible work force
    • New requirement on small businesses to provide health insurance to employees will necessarily slow job creation and dampen wages

Becker also mentions other serious flaws in the legislation:

  • Non-inclusion of Health Savings Accounts
  • Repeated pipe dream of actually reducing payments to Medicare providers (legislated and scheduled many times over the past years, but always overridden by Congress)
  • Focus on comprehensive-benefit insurance rather than catastrophic coverage

I find his arguments quite disconcertingly convincing. Is there a good economic basis on which to refute them?

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