The Foundry

Federal Reserve Chairman Ben Bernanke told Congress Monday that health care spending will “rise relentlessly” unless lawmakers overhaul the health care system. As if trying to prove his point, PriceWaterhouseCoopers released a study yesterday showing employer health care costs will increase 9.9% in 2008, more than double the annual rate of inflation.

Liberals will tell you that health care costs can be controlled through more government regulation of the health care industry. For example, Sen. Barack Obama (D-Ill.) says he can save $200 billion in health care spending every year through investing in electronic medical records, more centralized coordination of individual care, and government mandated reduction of unnecessary medical procedures. Problem is, no one with any training in the economics of health care believes that savings will materialize. John Sheils, vice president of the health care consulting firm the Lewin Group, says the savings “are just dramatically overstated.” And MIT health economist Jonathan Gruber calls the numbers “nonsense,” noting that there is “zero credible evidence to support that conclusion.”

Obama is right about one thing, though. In February of this year, he said: “The reason people don’t have health insurance isn’t because they don’t want it, it’s because they can’t afford it.” That is true. But the solution to expensive health insurance is not more government mandates and regulations; it’s less. A major why reason health insurance premiums keep rising is because special interests keep successfully lobbying state legislatures to mandate more and more procedures into all insurance plans. So even though a 25-year-old male has no need for in vitro fertilization and no interest in acupuncture, a state like New Jersey forces him to buy a plan that covers those procedures. The result? That 25-year-old could buy a basic health plan in Kentucky for $960 a year, but the cheapest plan in New Jersey (full of mandates he doesn’t want or need) costs him $5,880. A study for the Health Insurance Association of America found that 20% to 25% of uninsured Americans lack insurance due to benefits mandates.

Another major factor driving up American health care costs is our antiquated tax code. Thanks to advantages slanted toward employers, the current tax code imposes a tax penalty of up to 50% on the cost of an individually owned policy, effectively pricing millions of working families out of coverage. Americans are not forced to all buy the same type of cell phones, and they are not forced to buy their cell phones through their employers. But thanks to oppressive state mandates and World War II era wage controls, that’s how Americans are forced to buy health insurance. Moving to a consumer-centered health care market, where individuals could purchase health insurance on a level playing field with corporations is a much better way to both reduce health care costs and get more Americans the health care they need.

Quick Hits:

• Thanks to the surge, security in Iraq has improved to the point that U.S., European and Asian companies are flooding into the country with $1 billion in foreign investment expected by the end of this year.
• The Taliban captured seven towns just north of Kandahar, the biggest city in southern Afghanistan.
• One of the nation’s largest class-action lawsuit firms agreed to $75 million in fines in exchange for an end to criminal prosecution Monday.
• Republican Study Committee Chairman Jeb Hensarling (R-Tex.) called for hearings into dealings between Countrywide Financial Corp. and Sens. Chris Dodd (D-Conn.) and Kent Conrad (D-N.D.) , who both support a massive federal bailout of the troubled bank.
• According to Rasmussen Reports, 60% of voters believe Supreme Court justices have their own political agendas, while just 23% believe they remain impartial.