Townhall.com, Sept. 13, 2007

In 1912, Theodore Roosevelt considered "mandatory universal health insurance" a high domestic priority. Critics at the time, including physicians, pharmacists, insurers and businesses, deemed mandatory health insurance authoritarian -- and even un-American. Even in those days of low-cost, low-tech medicine, Americans feared the consequences of a government requirement to buy government-designed health insurance: loss of choice, rising costs, and a resulting burden on economic activity.

Nevertheless, history repeats itself: FDR, Truman, and Nixon had similar health care dreams. Forcing health insurance on Americans, however, doesn't fix health insurance.

California Governor Arnold Schwarzenegger (L) tours the emergency room at Scripps Mercy Hospital San Diego, with Dr. Valerie Norton, chief of emergency medicine (C), and Chris Van Gorder, president and CEO of Scripps Health (R), at Scripps Mercy Hospital San Diego April 17, 2007 to promote his plan to extend health insurance coverage to the uninsured. REUTERS/Laura Embry/Pool (UNITED STATES)

We can truly narrow the chasm between failed dreams and a real future of improved American health care if we allow free markets to work where government has failed.

Unique in the developed world, our idiosyncratic health care system is centered on job-based health insurance, which came about with wage controls at the onset of WWII. The practice was solidified in 1945 when the War Labor Board ruled that employers could not change or cancel group insurance plans during a contract period, and finally when Congress amended the Internal Revenue Code in 1954 to exempt job-based health coverage from taxable income. Most Americans are effectively tied to employer health insurance today, and recent polling shows that seventy-four percent of Americans would support a law requiring employers to offer it.

But this method of providing health insurance does not provide security: job-based health insurance is now crumbling under the weight of rising costs.

Supporters of a health insurance mandate lament the number of uninsured, but many more Americans are overinsured beneficiaries of employer-provided care. Research shows that since employees don't directly pay anywhere near the full cost of their health care, they use more health services than they need.

Meanwhile, all uninsured, including the self-employed, the unemployed, and the employees of small businesses who can't afford health insurance must still pay the taxes that subsidize insurance for the employed, worth an estimated $200 billion today. President Bush's proposed tax deduction for all Americans with health plans will likely eliminate this tax bias and stimulate the individual health insurance market. U.S. Senator Ron Wyden's proposal would eliminate job-based health insurance, and simply give employees a bigger paycheck to choose their own health care.

The tax bias in favor of employer-sponsored health care is not all that needs to change. Individual health insurance plans are still loaded with 14 to 63 benefits dictated by governments. A total of 1900 benefit mandates nationwide increase the cost of health coverage from 20 to 50 percent, depending on the state. Benefits in your state might include alcoholism treatment, acupuncture, hair prostheses, morbid obesity treatment, or "port-wine stain removal" to remove vascular birthmarks.

Today's health insurance has evolved from protection against risk to pre-paying most health services, parting ways with "insurance" traditionally defined.

First, medical technology became more advanced, making health insurance increasingly essential to pay for more costly medical care. After WWII, Blue Cross and Blue Shield were the first to create an insurance model where insurance covered all medical care, some effects of which are evident in today's health insurance proposals. It also excluded deductibles and co-payments, and all patients were charged the same price, no matter what age, sex, or health status. A very small percentage of Americans actually enrolled -- it wasn't until the introduction of Medicare almost twenty years later that the use of health care went up significantly; out-of-pocket payments decreased from 50 percent in 1960 to 13 percent by 2005.

But insurance cannot pool risk unless insurers are allowed to price the risk through underwriting. The law allows this for car insurance, property insurance, and life insurance -- all of which have become more competitive and lower cost than in the past. When the law forbids this for health insurance, it becomes much more expensive.

Critics allege that the consumer-directed health care (CDH) effort treats health care as a price-based commodity like a television or shoes, but this greatly undervalues the importance of cost. Health care costs are at the heart of our problem, and as costs continue to soar, health care becomes less available, not universal. Americans need CDH to free them from our antiquated employer-provided system, create price transparency, incentivize providers to compete for their specific health needs, and thus, lower costs.

Definity Health, a UnitedHealth Group company, studied the impact of consumer-directed health care plans on its own members. Results were impressive: enrollees experienced 25 percent fewer hospitalizations and 12 percent fewer emergency room visits over two years, but they also sought more preventive care than beneficiaries with traditional health care plans. CDH plans reduced costs over all during the first year by 5 to 12 percent.

We deserve a broader spectrum of price-transparent, affordable health insurance plans, with subsidies for the poor and the chronically ill. Then, today's hand-me-down motto, "mandatory universal health insurance" won't be necessary. Health is important enough to embrace the real challenge, not of mandating health insurance, but really fixing it for all Americans.