How to Control Health Care Costs

A continuation of How the U.S. Government Can Increase Health Without Spending More Than a Cent and The Ongoing Ridiculousness of the Health Care Debate.

I tend to look at the problem differently than 'controlling cost' - to me, the problem is more 'How do we get the healthiest population possible at the lowest cost?' (which is related, but different). The New York Times brought out 9 experts to give their ideas. Of those, I believe two of the nine recommendations would work as intended. First, Arnold Kling:

The key to containing health care costs is to reduce spending on medical procedures that have high costs and low benefits. In order to do that, you have to increase the share of spending that is paid for by patients and reduce the share that is paid for by third parties, so that consumers will think twice about high-cost, low-value procedures.

Prof. Kling recognizes that the problem is a demand-side one as much as a supply-side one. My recommendations have been to reduce demand by promoting healthy living and lowering pollution. This is another way of reducing demand.

Secondly, Prof. Herzlinger:

There is a way to raise revenues and also control costs: Congress could simply extend the present tax exclusion of employer-sponsored health insurance to a cash-out of those costs as additional salary that employees could use to buy their own health insurance. This approach would motivate insured employees to treat their health insurance as if they paid for it directly and appeal to taxpayers.

I have always found the tax treatment of health care plans odd. As an employer in Canada, if I give a worker an extra $200 a month in salary, the employee is forced to pay income and payroll taxes on that amount. However, if I give an employee $200 worth of health care insurance, no taxes are paid on that by the employees (provided that certain conditions are met). As an employer, either form of remuneration counts as an expense, so the tax implications for the firm are the same. Thus the tax system is biased in favour of giving employees expensive health care plans.

Overall, though, I find it frustrating that so many of the proposed policies are expensive 'supply side' solutions to what is, at least in part, a demand side problem.