[Congressional Record Volume 140, Number 86 (Thursday, June 30, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                 MARKETS WILL CONTROL HEALTH CARE COSTS

                                 ______


                        HON. MICHAEL A. ANDREWS

                                of texas

                    in the house of representatives

                        Wednesday, June 29, 1994

  Mr. ANDREWS of Texas. Mr. Speaker, too often, Washington policymakers 
attack a problem with complex and convoluted approaches instead of 
correcting the errors that caused the problem in the first place. 
Sometimes solving a problem isn't in devising intricate strategies, but 
in stopping what you keep doing wrong.
  That's where we are on the issue of containing health care costs. 
Skyrocketing costs are the root cause of 32 million uninsured Americans 
and why nearly a quarter of our annual spending goes to health care. 
Obviously, ending this cost growth is essential to reform.
  The problem is how do you bring those costs down? Our current debate 
divides into two camps: Those who think Washington should set rigid 
price controls, and those who think Government should create an 
environment that allows the consumer to control the cost.
  Simply put, either the citizenry or the Government will have the 
primary responsibility for controlling costs. Despite the Government's 
abysmal history in saving taxpayers' money and an even worse record in 
managing finances, President Clinton has resisted making a choice 
between the two. Instead, he's tried stirring them together--although 
his recipe calls for more Government in the mix--and has created a 
concoction with little chance of success.
  Nothing better illustrates this than the premium caps--a form of 
price controls on insurance premiums--to be implemented under the 
President's health plan. According to White House calculations, 
premiums would have to fall by 2 percent in 1 year for the plan to 
work. Unfortunately, markets just do not work that way. General 
inflation, which has steadily declined over the last decade, has never 
fallen in such a sudden manner. At least not without harsh economic 
consequences.
  If markets don't succeed in achieving this accelerated goal, then the 
only option would be to turn to the Government. But as history has 
taught us, Government cost ceilings quickly become the goal--not the 
inhibitor--of price increases. For example, if the Government dictates 
that neither you, nor your competitors, can charge more than a dollar 
for a service, what incentive is there for you to charge 80 cents?--
Hint: none.
  So once we start down this path, the only logical response to any 
bumps in the road will be more burdensome Government regulations. Say a 
health plan under the premium caps is operating at a loss.
  They'd have to reduce key services to stay afloat, right? But the 
sure outcry of customers losing benefits would cause the Government to 
regulate how the plans deliver care. We're right back to the kind of 
Government micromanagement that the President says he wants to avoid.
  A better way is for the Government to give consumers the tools and 
incentives they need to get better value for their health care dollar. 
That means an alternative to premium caps: a tax cap. Right now, the 
Government provides an unlimited subsidy to the health care industry by 
giving tax deductions to businesses for whatever the cost of their 
health plans--no matter how expensive those plans are. The direct cost 
of this subsidy is $40 billion each year. The indirect cost is billions 
more since the subsidy insulates individuals and businesses from the 
true cost of health care.
  Even worse, the current tax structure for health care costs is 
shamefully regressive. The health care tax expenditure is five times 
greater for the top 20 percent of richest families in this country than 
for the poorest 20 percent.
  The best way to achieve the goals of cost containment and tax equity 
would be to first cap the deduction to the price of the most cost 
effective--and, therefore, least expensive--plan in a region. This 
approach would give a great advantage to any health plan that could 
provide the same benefits package, but beat its competitor's price. 
Consumers wishing to spend more for a health care plan they would be 
free to do so--but with their own money. They would still get a 
deduction up to the cost of the benchmark plan.
  Second, if we're going to make health plans more competitive, we 
should give individuals a greater stake in the responsibilities and 
benefits of this new market. More exactly, we should shift the 
deductibility of health care premiums from businesses to individual 
citizens--including the self-employed. Today, the Tax Code limits that 
deduction only to amounts over 7.5 percent of adjusted gross income. 
This expansion of the tax deduction up to the cost of the benchmark 
plan will greatly increase the incentive to have health care coverage. 
This ``carrot'' approach has a much better chance of success than the 
``stick'' of both an employer and individual mandates, and points us 
directly to the goal of universal coverage.
  To be sure they are getting the best value for their dollar, 
consumers need a way to decide which plan provides the best care at the 
best price. They can get this information through health plan report 
cards that will provide outcomes data, comparative price structures, 
etc. on plan available to them, with the promise that the least 
expensive plan meets quality standards. I am convinced that the best 
decisions for controlling health care spending are made at the kitchen 
tables of a million American homes, not at a committee table in 
Washington.
  So why shouldn't President Clinton adopt a tax cap when it embodies 
so many of the principles--that is, individual responsibility and 
empowerment, progressivity, and less Government regulation--he espoused 
while running for election? Perhaps part of the problem comes from 
flawed data the White House relied upon to chose a premium cap over a 
tax cap. Figures supplied by the Congressional Budget Office [CBO], 
have presented an unfavorable view of market-based reforms because they 
use an econometric model built on current market conditions to estimate 
cost savings. But those models won't be accurate, since a managed 
competition approach so fundamentally changes the market that the old 
conditions no longer apply.
    
    
  Such duplicity by CBO has raised serious questions in Washington. It 
seems the CBO will credit significant savings only to those health 
proposals that use Government price controls. But they cannot score the 
political potential for delaying budget deadlines for which the 
administration and Congress are well known. Outside the Washington 
beltway, health professionals know to look skeptically at such 
pronouncements of savings. If price controls were put in place, 
hospital closings and downsizings would be inevitable. Right now, one-
third of this Nation's hospital beds lie empty every day. What Member 
of Congress would not become an advocate against the price controls 
when hospitals in his or her district start closing?
  No empirical evidence exists to prove that price controls will work. 
Similarly, a recent analysis by Mathematica, a well-respected New York 
research firm, shows that a wide range of results are possible from 
minimal savings to substantial savings. We shouldn't count our medical 
savings before we have them.
  However, the conflict between the economic and political theories 
does preclude at least the possibility of common ground. So, while the 
President's Task Force on Health Reform lacks a consistent policy on 
cost control, he has laid some ground where the seeds of a compromise 
could sprout.
  Let us be realistic. There is little likelihood that a system 
designed on the principles of managed competition will work perfectly. 
Not only does it require active management by the Government, 
consumers, and health care industry leaders, but radically overhauling 
the health care system is so large a proposition that there could be 
unpredictable results. So we would make contingencies for controlling 
health care cost--like more drastic Government intervention--if aspects 
of the plan are unsuccessful.
  Congress always has the option of instituting premium caps if the 
initial results are worse than we expected. Yet, if we get the 
philosophy right, then whatever adjustments we make later on will give 
us the best chance of sustaining reform.
  But why build a system of managed competition, if you don't take it 
for a test drive? The President's own elaborate system of alliances, a 
national health board, and a new rules for the marketplace do not make 
sense unless competition takes place.
  The question is if we drive our own, or squeeze onto the bus. I am 
hopeful that President Clinton, and my congressional colleagues, will 
see the logic of this argument.

                          ____________________