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A Prescription for 2008 By: Jamie Glazov
FrontPageMagazine.com | Monday, May 14, 2007

Frontpage Interview’s guest today is Sven Robert Larson, a public policy researcher specializing in health policy, social security, the welfare state and economic freedom. He works for free-market think tanks. He has taught economics at colleges in the U.S., Denmark and Sweden and earned his Ph.D. at Roskilde University in Denmark. He is the author of the new book, Prescription for 2008: What the Next President Needs to Know About Health Reform. Visit his website at healthreform2008.com. Contact him at owner@healthreform2008.com.


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FP: Sven Larson, welcome to Frontpage Interview.


Larson: Thank you for inviting me.


FP: What inspired you to write this book?


Larson: The nightmare of seeing president Hillary Clinton create HillaryCare. I point out in my book that the Democrats will rally around universal, single-payer health insurance –HillaryCare – and make it their top issue in the election. Interestingly, on March 24, three days after the book was published, Hillary Clinton spoke at a meeting at University of Nevada, Las Vegas and said that she is more determined than ever to create a socialized health care system. And she wants voters to make that the number one issue in 2008.


Most of my Republican friends still do not believe that she will do this. Many of them were in the fight against HillaryCare back in the early ‘90s. They seem to think that we should not have to fight this battle again. Unfortunately, that is not their call. If Hillary wants HillaryCare she is going to pursue it. With my book I am trying to give Republicans some ideas on how to get back in the debate, how to counter the standard arguments that single-payer advocates use.


FP: Can you crystallize for us the weaknesses in the single payer model? And the alternatives we have for it?


Larson: There are three distinct weaknesses to a single-payer model: it is costly, inefficient and unethical.


As to the cost, I estimate in my book that a single-payer system would cost an average family with two working parents almost $1,500 per month in health care taxes alone. Add this to all your other taxes. It sounds outrageous, but look at countries with single-payer systems. In Denmark, e.g., an average family pays 41-43 percent in income taxes. They also pay 25 percent in value added tax on everything they buy. Part of that goes to feed their single-payer health care.


That the system is inefficient almost goes without saying. A federal single-payer system would be run by the single largest government bureaucracy in the world. I sometimes hear people criticize the federal government for being too bureaucratic to handle the Katrina disaster. I agree with them, but then they turn around and say that the same federal government should run our entire health care system. That makes no sense. I also show in my book that single-payer systems are 8-12 percent less efficient than market-based health systems.


Single-payer systems are also unethical, and the reason for this is that they come with this big, shiny promise of gold-plated health care to everyone whenever they need it. In reality, the single-payer systems in Canada and Europe suffer from serious health care shortages and waiting lists that would understandably drive Americans crazy. As I report in my book, America has been internationally recognized for not having a waiting list problem, while in single-payer countries the waiting list problems are so serious that people are effectively denied health care. Would you like to wait six months to see an eye doctor? Nine months for knee surgery? A year for hysterectomy? Of course not. But those are the realities in single-payer systems. And since it is a government monopoly, you have no choice but to wait.


FP: So what do you say to those who argue that our system is unethical? They point to the millions of Americans who lack health insurance, etc.


Larson: It is true that millions of Americans do not have insurance because they cannot afford it. That is the broken window in our health care system. But so are waiting lists and supply rationing in single-payer systems, and you do not replace one broken window with another. The uninsured are getting some health care today, although typically too little of it, but we do not make their lives better by giving them the right to health care and when they come to see the doctor they are told to wait for months.


FP: Is there any way to illustrate the effects of a single-payer model on America’s health care system?


Larson: Sure. Suppose we had gone ahead and done what Hillary Clinton wanted in 1994. Her model not only came with all the bureaucracy of a single-payer system, but also a serious cost cap. Therein lies the devil in her model. Suppose we had put her cost containment to work in 1995. By 2035, four decades later, we would be using the medical technology, and the pharmaceutical drugs, of 2020.


Here is another way of illustrating this: if we had put “HillaryCare” to work in 1967, we would today be using med-tech and medicine from the early 1990s. To see what that means, just look at how the survival rate in cancer and other serious diseases are steadily rising, thanks to research that is allowed to cost money. With a tight cost cap on the world’s largest market for medical technology, there would be much less research done.


FP: What are the weaknesses of the alternatives to the single-payer system?


Larson: The alternative to a single-payer system is one that relies largely on a free health care market. Its foremost weakness is that is does not guarantee everybody health care. This may seem deeply unethical. After all, who can live without health care? But we have not monopolized food supply, or clothes, which are also essential for our survival. Instead we have a system in place for those who cannot feed themselves, and we have Medicaid for the same purposes.


A free market system is superior to a government health monopoly, but only if it is allowed to work unfettered by government regulations. Those regulations restrict competition and allow insurance companies to monopolize markets. The result is higher premiums and more uninsured.


FP: What exactly is the Romney model?


Larson: It is the model for health care reform that Governor Romney implemented in Massachusetts in 2006. It creates a relatively free market for health insurance and relies on competition between insurance providers to keep costs down. A health insurance buyer can go to the state-run market place, called the “Connector” and shop for a plan that fits his needs and his budget. The model is creative and has potential.


FP: What are its weaknesses?


Larson: My biggest problem with it is that it does not allow insurance buyers to shop nationwide for insurance. Each policy offered through the Connector has to comply with the state's coverage mandates. Those mandates cost money and lock people in to buying their policy in Massachusetts only. This allows a small group of insurance providers to effectively monopolize the state's insurance market.


Another weakness is that the state mandates that everyone has insurance. Then it promises to subsidize insurance for all those who cannot afford it. If you do not think that you cannot afford insurance, you can just call the state and demand a subsidy. What will the state do? Dole out the subsidy of course. Anything else would be ridiculous. In my book I estimate the cost of these subsidies to be $5 billion, as opposed to the $1 billion that the state of Massachusetts expected. We are already seeing tendencies of these excess costs, as demand for subsidies have exceeded expectations.


FP: So what key reforms need to be made to it to make it a credible platform?


Larson: Actually, the Romney model is better tuned for national health care reform, than reform at the state level. It would create a national market for health insurance, so that you could buy insurance anywhere in the country, regardless of where you live and where the insurance policy is issued. That way the model creates a working free market literally from day one, which is good for cost containment.


One thing that must be changed if we take the Romney model national is the insurance mandate. It makes no sense to force people to buy anything in the first place, and the health insurance mandate is, as I explained, the trigger of the cost explosion in the Romney model. If we implement the rest of the model, and delay the insurance mandate two years, then there will likely not be any need for it. People will find affordable insurance through the national market.


Another undesirable feature of the Romney model is its not-so-subtly hinted price control. The state of Massachusetts has said that it “expects” insurance plans offered through the Connector to cost no more than $200 per month for a regular family. That is less than 25 percent of the national average today. If the state sees its costs for health insurance subsidies skyrocket, this $200 target could be used as a reason for price control. That would be very unfortunate, since it destroys the free market you have created. In a national version there must be an explicit ban on government price control.


FP: In your book you estimate the tax costs of a federal single-payer system, and also in different states. The numbers are very high and assume that the systems would be funded by income taxes. But would not the real tax base be businesses?


Larson: The usual suggestion is either a payroll tax, as with Social Security, or some sort of business tax. But in either case we are the ones who end up paying the tax anyway. A payroll tax is paid by us in the form of lower wages. A business tax is transferred to us in the form of higher prices – or we lose our jobs because businesses want to keep costs down. My estimates are meant to show how much of the total cost each family will have to carry. It may be in the form of higher income taxes, lower wages, higher sales or property taxes. My estimates show what total tax burden our government will have to put on our shoulders to foot the bill for their single-payer system.


FP: Sven Larson, thank you for joining Frontpage Interview.


Larson: Thank you, my pleasure.

Jamie Glazov is Frontpage Magazine's editor. He holds a Ph.D. in History with a specialty in Russian, U.S. and Canadian foreign policy. He is the author of Canadian Policy Toward Khrushchev’s Soviet Union and is the co-editor (with David Horowitz) of The Hate America Left. He edited and wrote the introduction to David Horowitz’s Left Illusions. His new book is United in Hate: The Left's Romance with Tyranny and Terror. To see his previous symposiums, interviews and articles Click Here. Email him at jglazov@rogers.com.

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