Cost is the key in health care provision

If John McCain and Barack Obama become the candidates for the U.S. presidency, we may see a subtle, but useful shift in the debate over how health care is provided in America. Both men recognise the key question in health care reform is not coverage, but cost, says Michael Tanner, director of health and welfare studies at the Cato Institute.


  • The United States spends roughly 17 per cent of its gross domestic product on health care, far more than any other country.
  • That expenditure is projected to rise to 20 per cent of GDP by 2015.
  • While that spending has undoubtedly helped buy the highest quality health care in the world, the distribution of costs has clearly made care unaffordable for many businesses and individuals.

    That is not to say that Obama and McCain agree on how to reduce health-care costs. Obama would rely much more on the heavy hand of government:
  • Among other things, he would impose caps on insurance premiums and price controls on drug companies.
  • He would have the government establish national practice standards for doctors.
  • He would create a National Health Insurance Exchange as a sort of clearinghouse to make it easier for businesses and individuals to shop for the best insurance.

    McCain, in contrast, would attempt to promote greater competition among private health insurers:
  • He would allow people to buy insurance plans across state lines, which will help drive down rates.
  • He would try to shift away from the current employment-based insurance system toward a system where individuals purchase and own their own insurance plans, by replacing the current tax break for employer-provided insurance with a refundable $2,500 tax credit for individuals, and $5,000 for families.

    Overall, McCain has the better proposal. Obama's plan, with its heavy reliance on government, leads to the same problems that bedevil universal healthcare systems all over the world: limited patient choices and rationed care. McCain's proposal is much more consumer centred and taps into the best aspects of the free market.

    Source:Michael Tanner, The Cost's the Thing, National Review, March 12, 2008.

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    FMF Policy Bulletin/ 01 April 2008
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