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To the editors.

Florence Hamlish Levinsohn failed to identify the most important villain responsible for escalating health care costs in her August 21, 1992, cover story, "Doctors for National Health." Government policies are greatly responsible for unnecessarily high health care spending in the U.S.

Medicare regulation, insurance mandates, supply restrictions, price controls, and occupational licensing all increase health care costs. Insurance mandates alone have been estimated to cost insurance buyers $60 billion. FDA delays in approving new drugs, sometimes over ten years, increase treatment costs and cause unnecessary deaths.

Current tax laws increase health care spending by treating employer-paid health insurance premiums as business expenses rather than employee compensation, thereby excluding premiums from all federal and state payroll taxes. This policy dramatically reduces the effective cost of health insurance, encouraging employers to provide employees with low-deductible, low-copayment policies.

Low-deductible and low-copayment insurance policies raise health spending because the administrative costs of such policies are very high (it costs as much as $50 to process a $50 claim), and because people covered by such policies have no incentive to weigh the cost of services against the benefits, encouraging overuse and price insensitivity.

National health insurance would not reduce health care spending. Many of the reasons health care spending in the U.S. is higher than in other countries arise from factors beyond the control of the health care industry. These factors would not be affected by a change to national health insurance. Suicide, homicide, AIDS, teenage pregnancy, and drug abuse in the U.S. are high by historical standards and compared to other nations. American doctors make a greater commitment to saving premature and at-risk babies and extending the life of the elderly than do doctors in other nations. Americans favor an "aggressive" philosophy of health care, relying on expensive drugs, surgery, and therapies that save lives and speed recoveries.

Canada, which has national health insurance, was less able than the U.S. to control health care spending between 1967 and 1987; per capita spending rose 4.58 percent per year in Canada vs 4.38 percent in the U.S. Ms. Levinsohn mentions "there are occasional waits for nonemergency treatment, especially treatment that relies on high technology, which is not as widely available in Canada as it is in the United States." Waiting lists for health care in Canada in 1989-1990 caused by national health insurance include: coronary artery surgery, 23.7 weeks; other open heart surgery, 21.4 weeks; removal of varicose veins, 36.1 weeks; cataract removal, 18.2 weeks; and hernia repair, 24.6 weeks.

Rather than Americans flocking to Canada for "free" health care services, Canadians are beating a path to the U.S. to pay for immediate health care or for treatments totally unavailable in their provinces. And who are these "experts" who say "the U.S. has far more technology than it needs"? Surely not someone who could have the damage to his or her heart valve assessed by having a transesophageal echocardiogram.

Let's take a look at the costs of the "Canadian cure": national health insurance according to a Labor Department study is estimated at $66 billion; the National Center for Policy Analysis estimates it will cost $339 billion. The U.S. Chamber of Commerce estimates up to 3.5 million jobs will disappear with national health insurance.

Most of America's uninsured are voluntarily uninsured: young, healthy single people in their 20s and early 30s who (1) have little or no risk of major health problems, and (2) are willing to take the risk rather than pay insurance premiums. Only 5 percent of the U.S. population is persistently uninsured, and only 1 percent genuinely uninsurable. Why nationalize an entire industry for so few?

As Ms. Levinsohn's minority numbers of American doctors are advocating the "Canadian cure" for improving health care in the U.S., Canadian policy makers and citizens are looking to reprivatize their failing system. And here in the U.S., Medical Care Savings Accounts legislation is being proposed.

Medical savings accounts (MSA) allow a health care sponsor to provide, in lieu of the standard medical plan, high deductible coverage coupled with a grant of cash, placed in a medical savings account, to enrollees to allow them to cover all or a portion of the deductible amount. During the course of the year, money in the account could only be used to purchase medical care. After the year is over, any money left in the account could be rolled over to cover medical needs in future years or withdrawn.

The combination of a high deductible and an MSA gives a health plan enrollee a direct financial incentive to avoid unnecessary utilization of health care services while protecting the enrollee against the cost of the high deductible if care is genuinely needed. The MSA might reduce the administrative costs of the health care system by reducing the number of interactions between health care providers and insurance companies.

In order to make the MSA an attractive option to employees and employers, tax-favored treatment has to be provided for funds deposited in an MSA and used to pay for health care services. Without such tax-favored treatment, the MSA is less valuable to the enrollee than an equivalent spent by the employers on a health insurance policy.

Americans will spend $817 billion on health care this year. $160 billion of that goes for administrative costs (Consumer Reports, July 1992). The Medical Cost Containment Act of 1992, the one with MSAs, will dramatically reduce administrative costs, and dramatically reduce health care spending by providing a real incentive for people to spend wisely. It won't raise taxes. It won't hurt small businesses.

While MSAs won't help those currently unemployed, they will help those who work and the businesses that employ them. The government safety nets of Medicare and various state programs will continue to exist for the unemployed. And the costs of medical care to those depending on government will be reduced significantly with no decrease in the quality of health care services which is experienced in Canada. I'm confident that Ms. Levinsohn's "Doctors for National Health" would be more inclined to support MSAs if offered this alternative.

Dyanne Petersen

Health Care Policy Analyst

Heartland Institute

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