Orange County Register, December 26, 2006
Insurance News Net, December 27, 2006

Editorial series, Part 1 of 5: The state's leaders seem determined to play doctor; will they kill the patient?

California is at a crossroads that will dictate the quality and cost of health care for millions of residents for decades to come. And as so often is the case, as California goes, the rest of the nation may follow.

Even as Americans are encumbered with more oppressive, cumbersome government than ever and are becoming increasingly dependent upon it, California's leaders are weighing decisions that could disastrously accelerate that trend. With each new reliance on government for basics like health care, the Nanny State becomes ever more difficult to reverse.

Republican Gov. Arnold Schwarzenegger and Democrat Assembly Speaker Fabian Nuñez each have identified health care as a top priority for the coming year. There's not much doubt which direction Democrats prefer. The deciding factor is likely to be the governor. Will he, as he has previously indicated, opt for a lessening of government's role and increasing personal responsibility? Or, will he drift leftward, strengthening the government's grip, inevitably diminishing health care quality and availability while escalating its costs?

We urge the governor to take some ancient health care advice. In the words of Hippocrates, "First do no harm." The governor should at the least hold the line against further government regulation and micromanagement of health care. But the temptation to "do something" is omnipresent in Sacramento, where inactivity is viewed as a curse worse than losing an election.

Therefore, if Gov. Schwarzenegger intends to be proactive, we strongly recommend at the least that he be true to the spirit of the economist he regarded as one of his mentors, the late Milton Friedman. He endorsed positive changes to: "bring medical care back to a consensual form, restoring it to a system that is compatible with the basic values of a free-market, free-enterprise society."

Even with increasing federal control of health care issues, many of the changes advocated by Mr. Friedman and others, such as the Pacific Research Institute, are within the capability of state government. But so are disastrous changes that other states already have implemented to the detriment of health care providers and those they serve.

Health care is a complicated issue, over the years made more so by simplistic, one-size-fits-all "solutions" and mind-boggling, convoluted formulas imposed top-down by government bureaucrats and politicians. With an increasingly aging society, Californians' already astronomical health care costs have the potential to grow vastly and ghastly greater.

In the coming days we will present more details of options we hope Gov. Schwarzenegger will steer clear of, and some we hope he adopts. For example:

• Don't expand the pool of Californians eligible for Medi-Cal, and do avoid government-as-insurer schemes. The first tends to crowd private providers out of the market, and the second attempts to replace the market with omniscient government bureaucrats, an oxymoron if ever there was one. Both unhappy options have proved disastrous over the past 40 years.
  
  
• Do provide assistance in premium payments to move people from government coverage to private insurance. For example, eligible parents offered dependent coverage by their employers might receive Medi-Cal assistance to meet their premium payments.
  
  
• Entirely change the state's defined-benefit Medi-Cal system to what the free-market think tank Pacific Research Institute calls "a defined-contribution system." Medi-Cal enrollees would be assigned a "risk-adjusted amount" to purchase private coverage. "Instead of the retrospective, pay-as-you-go payment structure," PRI suggests, "a defined-contribution model would allow [the state]to maintain a more predictable and consistent budget, encourage greater competition and participation among private insurers and give individuals a choice from a menu of competing insurers and plans."
  

By avoiding popular but wrong-headed options and instead employing innovations, California's health care community can be transformed from the current bureaucracy-driven, overly regulated, third-party payment system into a new, flexible, patient-centered system that emphasizes consumer choice and free-market competition.

"On a fundamental level we must shift the health care debate away from its single-minded focus on expanding coverage to the bigger question of how to reduce costs and improve quality," said Michael Tanner, director of health and welfare studies at the libertarian Cato Institute in Washington, D.C. "That will require the introduction of market mechanisms to give consumers more control over and responsibility for their health care decisions."

Tomorrow: We recommend holding the line against costly new coverage mandates.