President Obama’s claim that health care costs are growing so fast that “doing nothing is not an option” would be a little more believable if he could point to a country that has been able to “bend the curve” on health care spending.
Health care reform advocates constantly remind us that all the other industrialized nations spend less that the U.S. on health care, both in the aggregate and on a per-person basis. But that’s not because those countries are more efficient. Most simply limit the amount of funds available to the system.
The problem with those arbitrary health care spending caps is that they are usually much lower than the economically desirable level. And so there is constant upward pressure to raise the cap.
Germany—one of the oft cited models for U.S. reform—is experiencing that pressure. Created by Bismarck in 1883, it’s the oldest publicly sponsored model.
Workers there contribute 8 percent of their income to their health coverage, and employers chip in another 7 percent. That’s 15 percent of a worker’s total income, which isn’t cheap. And it’s not enough.
For all the praise heaped on it, Germany is in the midst of its own health care reform debate, similar to ours except the newly formed government is trying to move in the opposite direction of the U.S.—toward more freedom and competition.
According to a recent Wall Street Journal news story, the new, conservative government intends to:
· Give health insurers more room to compete and to vary the packages and premiums;
· Shift from income based to flat-rate based premiums; and
· “Unshackle” health insurance costs from labor costs.
All good changes.
To be sure, Germany’s system is more controlled and bureaucratic than ours, but Germans are apparently trying to change that. So if the U.S. is going to look to Germany as a model for health care reform, let’s look to the new German model, not the old one.
In fact, with just a few affordable tweaks, we’re there. And then we could be the model for German reform.
Today’s TaxByte was written by IPI resident scholar, Dr. Merrill Matthews