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Solution To The Health Care Problem in the U.S.?
February 26, 2006 1:33 AM

This article by Roger Lowenstein about David Cutler, a Harvard economist, came out in the New York Times last year, and it's a provocative one. In it, Cutler argues for a mix of free-market solutions and a single-payer system covering all Americans. He feels that by rewarding doctors to do a better job, in the long run, patients - and the economy - will be better off.

In this article, Cutler does not deny that America buys more health care than it needs - he estimates that 20% of spending is unnecessary. But this fact is not abnormal. In fact, since 1960, costs in six of the G-7 countries have risen, on average, by 4.9 percent, and America is right in the middle of the pack with a 5.1 percent rise annually. Basically, improved technologies lower costs but increase spending since, for instance, more people have their gall bladders removed because laparoscopic surgery is less invasive. Cutler wants us to focus more on the benefits of all this new technology vs. the costs, something that hasn't been done before: "Most of economics is about the cost of things," he says. "There has been little effort to figure out what the benefits are. That's often more difficult. How do you value clean air, lower crime or improved health?"

Cutler believes that most health-care spending is actually good. Spending has been rising, he says, because it delivers positive, and measurable, economic value, and because it can do more things that Americans want. Therefore, Cutler says, we should focus on improving the quality of care rather than on reducing our consumption of it. Rather than pay less, he wants to pay more wisely -- to encourage health-care providers to do more of what they should and less of what is wasteful.

And his plan, in a nutshell, is two-fold:

First, he proposes a variant of the voucher system. Let the government finance people's -- everyone's -- health care, with tax credits to be spent on private providers or insurers. But vouchers would only broaden the system, not improve it. To accomplish the latter, Cutler wants insurers, both public and private, to redesign the way doctors and hospitals are compensated, to give them an incentive to compete on quality.

And in this paragraph, you find the nexus where the left meets the right:

Vouchers are a leap for a Democrat, but the idea is popular with conservatives. Bush has also proposed tax credits, though on a smaller scale and for only the uninsured. Stuart Butler of the Heritage Foundation prefers Cutler's universal model. Butler points out that the government already subsidizes people in corporate plans, who do not have to declare their employers' contributions as income. This is a huge break: it costs the United States Treasury more than the mortgage deduction. It is also distributed, illogically, only to people whose employers provide a subsidy. As Cutler declared in his book, ''Health insurance is not something that is made better by tying it to employment.'' Even the A.M.A. has come around and favors having the government finance universal access.

Read the whole article and start asking your representative about the "Cutler Health Insurance Plan."

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