The American Spectator

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(Page 5 of 7)

VI

IF MOVING TOWARD a government-run system isn't a better way to lower costs and increase the number of Americans who have quality health-care coverage, then what is? For Herzlinger, the answer is quite simple: "We do it elsewhere in the economy by letting consumers run loose in the system."

Herzlinger is one of the leading advocates for a consumer-driven approach to health care in which the market for medical services resembles the market for other goods and services, where competition has forced prices to decline and quality to improve.

For instance, in 1948, a 12-inch black and white television would cost more than $4,000 in today's dollars. At Best Buy these days, for just one-fourth of the cost, a consumer can purchase a 50-inch flat-panel color plasma HDTV.

In the current health-care system, there are several reasons why technological progress hasn't had the same results. There is the third-party buyer problem as discussed above, but there is also a lack of transparency. In the rest of the U.S. economy, there is a wealth of information available to shoppers who want to compare prices and quality. When a tourist visits a new city and wants to choose a restaurant, he can pick up a copy of the Zagat guide; websites such as CNET.com and epinions.com, as well as magazines such as Consumer Reports, give Americans the ability to comparison shop; J.D. Power and Associates and Car and Driver allow those looking for an automobile to find a wide range of data, from performance to fuel efficiency. And yet, in the midst of the information age, Americans are forced to make life and death health-care decisions largely in a black box.

"The Maytag sitting in your kitchen I think you know more about than the health-care outcomes at your local hospital," Gratzer says. "I don't think that's because health care is deep, dark, and mysterious, but simply because of the mysterious way we've organized it."

The growth of several online ventures indicates that Americans have a hunger for health care-related information, and that there is the potential for a vibrant consumer market. WebMD Health Corp. owns and operates more than a half-dozen Internet-based sites for health information that attract more than 50 million visitors each month.

Another site, eHealthInsurance.com, which makes it about as easy for consumers to shop for health plans online as it would be for them to purchase airline tickets, has enjoyed tremendous growth in recent years. The revenue of its parent company, eHealth Inc., has rocketed from $16.5 million in 2002 to $88 million in 2007, and the firm recently projected it would be as high as $117 million this year. While this is just a drop in the bucket compared to overall health-care spending in the U.S., its growth suggests that consumers will respond when given the opportunity to compare prices and quality.

"We encourage individuals to think about what they need and then go shopping for it, and the Internet is obviously a powerful place to do that," said Robert S. Hurley, the senior vice president of carrier relations for eHealth. "What we do is bring transparency to the market."

Despite its growth, the company still faces obstacles because of the difficult regulatory environment. The company sells health insurance in 46 states, but not in four states that still have guaranteed issue laws. Hurley said there's "no doubt" that state-imposed mandates drive up the cost of insurance and reduce consumer choice.

Quickly browsing the site shows that in the low-regulation state of Wyoming, a 30-year-old male can choose from 61 plans ranging from a bare-bones policy with a $5,000 deductible that costs $50.82 per month to a plan with zero deductible for $217 a month.

In New York City, only 12 plans are available, ranging from a $136.85 per month policy that only covers hospital services to a comprehensive plan costing a staggering $887.85 a month.

The one silver lining to come out of the otherwise disastrous 2003 Medicare prescription drug bill was the creation of health savings accounts, which allowed individuals to put up to $2,700 (or $5,450 per family) annually into tax-exempt accounts, linked to high-deductible health insurance policies, from which they could pay out-of-pocket medical expenses. The number of Americans enrolled in these types of policies swelled from just over 1 million in March 2005, to over 6.1 million in January of this year, according to a study by America's Health Insurance Plans (AHIP).

Contrary to liberal stereotype, the purchasers of such plans are not limited to the young, healthy and wealthy; the participants are quite diverse. The AHIP study found that 46 percent of those covered were over 40. Meanwhile, according to a 2005 eHealthInsurance study, 45 percent of enrollees in HSA-linked plans earned less than $50,000 per year. Studies have also shown that those with HSAs are more judicious about their medical spending, but still responsible enough to pay for necessary care.

VII

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