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Government undermines health care quality, while choice promotes it

October 16, 2023

With Health Care Quality Week upon us, a few reminders are in order. First, the U.S. health sector improves health care quality around the world. Even so, government intervention reduces quality here at home. And making quality health care universal requires reforms that let individuals make their own health decisions.

The U.S. health sector leads all other nations in medical innovation. Those quality improvements make health care more universal around the world—even in countries that supposedly already had universal health care.

Consider sofosbuvir (brand name: Sovaldi), an “almost universal cure of chronic hepatitis C” with cure rates of 84-96 percent. One study found sofosbuvir reduces all-cause mortality among hepatitis C patients by a whopping 50 percent.

Before the U.S. health sector introduced sofosbuvir in 2014, hepatitis-C patients around the world suffered and died for want of a cure. Since 2014, the U.S. health sector has been filling that gap in every nation’s health system.

Even so, a high degree of government control relative to other developed nations suppresses quality here at home.

Organisation for Economic Cooperation and Development (OECD) data show that in the United States, government directly or indirectly controls 85 percent of health spending. That’s the 8th-highest share among OECD nations. It’s higher than Canada (71 percent) and the United Kingdom (82 percent)—which have explicitly socialized health systems—and just two percentage points behind highest-ranking Germany. As a share of GDP, compulsory health spending in the United States (14 percent) exceeds total health spending in every other OECD nation (highest: 13 percent).

Government uses that control to encourage low-quality health insurance that makes the problem of preexisting conditions worse.

The average worker changes jobs 13 times by age 56. In Recovery: A Guide to Reforming the U.S. Health Sector, I provide data showing that patients with employer-sponsored coverage who are in poor health are significantly more likely to end up uninsured—i.e., with a preexisting condition—than similar patients who purchase coverage themselves.

Still, 55 percent of U.S. residents continue to enroll in low-quality coverage that vanishes when they change jobs. Why? If workers don’t purchase employer-sponsored health insurance, government penalizes them with lower after-tax earnings.

Meanwhile, government health programs literally pay producers not to improve quality.

For at least two decades, the Medicare Payment Advisory Commission has warned that in traditional Medicare, “providers are paid even more when quality is worse, such as when complications occur as the result of error.” One study found that when patients experience post-operative complications, Medicare ends up doubling hospitals’ net revenues from $1,880 to $3,629. Medicare rules reward private insurers for skimping on care to the sick.

Medicare’s quality-improvement efforts consistently fail to improve quality. A study of Medicare’s Hospital Value-Based Purchasing program found that “in no subgroups of hospitals was HVBP associated with better outcomes, including poor performers at baseline.” Medicare’s attempt to reduce unnecessary hospital readmissions likewise had zero effect on patient outcomes.

To reward all dimensions of quality, consumers must be free to make their own health decisions.

Congress should free workers to control the $1 trillion of their earnings that employers now use to purchase low-quality coverage. Letting workers control that money—in new savings vehicles that keep the best parts and discard the worst parts of tax-free health savings accounts—would constitute a massive and progressive tax cut. Workers would be free to remain in their employer plans but would gain the freedom to put that money toward higher-quality coverage.

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A traditionally Democratic idea would improve quality for Medicare enrollees. Medicare already contains a government-run “public option” that competes against private insurers. Yet the playing field is anything but level. Countless unnecessary rules push enrollees in one direction or the other.

“Public option” principles require eliminating those distortions. That means subsidizing Medicare enrollees with cash and trusting them to spend it, like Social Security does. Giving poorer and sicker enrollees larger “Medicare checks” than healthy and wealthy enrollees would enable all to afford a basic health plan. Any restrictions on how enrollees spend their Medicare checks would violate public-option principles by favoring one type of health plan over another.

Enrollees could then select plans that reward high-quality care. Also important, price-conscious consumers—rather than government price-fixing—would determine how much to reward pharmaceutical innovation.

There’s no Democratic or Republican way to promote quality. There is only what works, and that’s letting consumers reward quality by making their own health decisions.

Michael F. Cannon is director of health policy studies at the Cato Institute. His new book is Recovery: A Guide to Reforming the U.S. Health Sector (Cato Institute, 2023).

Orange County Register

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Government undermines health care quality, while choice promotes it

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