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www.lafferhealthcarereport.org

Contact: ErikaGonzalez August4,2009

512/7944717 FORIMMEDIATERELEASE

egonzalez@webershandwick.com

LAFFER:CURRENTHEALTHCAREPROPOSALSINCREASECOSTS,MEDICALPRICEINFLATION,

ANDLEAVE30MILLIONUNINSURED

Renownedeconomistemphasizesneedforpatientcenteredreformsthatprovideincentivesto

consumersandmedicalproviders

NEWYORKCITYThehealthcarereformplanspendingintheU.S.Congresswouldcausemoreharm

thangood,accordingtoastudyreleasedtodaybyinternationallyrenownedeconomistDr.ArthurLaffer.

HealthcarereformalongthelinesproposedbyPresidentObamaandcurrentlypendinginCongress

wouldrender

U.S.

citizens

poorer

and

their

federal

and

state

governments

sorely

pressed

for

revenues,

Laffersaid. Butjustasimportant,thesereformsarenotacosteffectivewaytoexpandhealth

insurancecoverage,oneoftheprimarygoalsofreform.

AccordingtoDr.Laffer,legislationthatprovidedanadditional$1trillioninfederalhealthcarespending

wouldincreasehealthcarecostsandmedicalpriceinflation,slowournationaleconomy,andstillleave

30millionAmericansuninsured.

InhispaperfortheTexasPublicPolicyFoundation,ThePrognosisforNationalHealthInsurance

(www.LafferHealthCareReport.org),Dr.LafferurgesCongresstoworktowardasolutionthatwillnot

penalizethe70percentofAmericanswhocurrentlyarehappywiththeirhealthcarearrangements,and

thatwill

not

increase

the

federal

deficit

while

only

reducing

the

number

of

uninsured

Americans

by

roughlyonethird.Instead,Lafferemphasizestheneedforpatientcenteredreform.

ThestudyindicatesthatreformsneedtofocusonreducingcostsbyclosingwhatDr.Lafferhascoined

thehealthcarewedgeaseparationofeffortandrewardbywhichapatientunderstandsthetrue

costsoftheirhealthcareandisthereforedriventobemoreefficientinhisorherspending.This

separationisactuallythereasonhealthcarecostsareskyrocketing,accordingtoDr.Laffer.

Whenthegovernmentspendsmoneyonhealthcare,thepatientdoesnot,saysDr.Laffer.The

patientisthenseparatedfromthetransactioninthesensethatcostsarenolongerhisconcern.Health

carereformshouldbebasedonpoliciesthatdiminishthiswedgeratherthanincreaseit.

Healthcarecostshaverisenoverthepast50years,whilethepatientsoutofpocketcontributionhasplummeted:halfofallmedicalexpendituresin1950werepaidbypatientsintheformofoutofpocket

expenses;todayonly10percentofexpendituresarepaidthesameway.

Dr.LaffersresearchconcludedthatthecurrentproposalsbeingdiscussedinWashingtonwould:

raisetotalfederalgovernmentexpendituresby5.6percentmorethanotherwise,adding$285.6billiontothefederaldeficitin2019;

increasenationalhealthcareexpendituresbyanadditional8.9percent; raisemedicalpriceinflation5.2percentabovewhatitwouldhavebeenotherwise; slowU.S. economic growth in 2019 by 4.9 percent less than the baseline scenario of doing

nothing;

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increase the current net present value of funding health care reform based on PresidentObamasprioritiesby$1.3trillion(duetohighermedicalinflationandexpenditures),or$4,354

foreveryman,woman,andchildintheU.S.;and

stillonlyinsureaboutonethirdofthosecurrentlywithoutinsuranceatacostofapproximately$62,500pernewpersoninsured.

Dr.Laffer

says

there

are

many

solutions

available

to

better

the

health

care

system

without

destroying

whatalreadyisgoodinthesystem.Thepathtotruehealthcarereformisthroughpatientcentered

solutions,whichemphasizethepatientdoctorrelationshipandworktoshrinkthewedgebyallowing

patientsanddoctorstomakemoreeffectiveandeconomicalhealthcarechoices.Thesesolutions

include:

Provideforindividualownershipofinsurancepoliciesthetaxdeductionthatallowsemployerstoownyourinsuranceshouldinsteadbegiventotheindividual;

BetterleverageHealthSavingsAccounts(HSAs)HSAsempowerindividualstomonitortheirhealthcarecostsandcreateincentivesforindividualstouseonlythoseservicesthatare

necessary;

Allow

interstate

purchasing

of

insurance

policies

in

some

states

are

more

affordable

because

theyincludefewerbellsandwhistles; consumersshouldbeempoweredtodecidewhich

benefitstheyneedandwhatpricestheyarewillingtopay;

Reducethenumberofmandatedbenefitsinsurersarerequiredtocoverempoweringconsumerstochoosewhichbenefitstheyneedisonlyeffectiveifinsurersareabletofillthese

needs;

ReallocatethemajorityofMedicaidspendingintosimplevouchersforlowincomeindividualstopurchasetheirowninsuranceanincomebasedslidingscalevoucherprogramwould

eliminatemuchofthemassivebureaucracythatisneededtoimplementtodayscomplexand

burdensomeMedicaidsystemandproduceconsiderablecostsavings;

Eliminateunnecessaryscopeofpracticelawsandallownonphysicianhealthcareprofessionalstopracticetotheextentoftheireducationandtrainingretailclinicshave

shownthatincreasingtheproviderpoolsafelyincreasescompetitionandaccesstocareandempowersthepatienttodecidefromwhomtheyreceivetheircare;and

Reformtortliabilitylawsdefensivemedicineneedlesslydrivesupmedicalcostsandcreatesanadversarialrelationshipbetweendoctorsandpatients.

Thefullreportmaybedownloadedatwww.LafferHealthCareReport.org.Startingnextweek,

informationwillbeaddedthatdetailstheimpactoftheproposedlegislationtoseveralkeystates.

Dr.ArthurLafferprovideseconomicresearchandconsultingtoinstitutionalassetmanagers,pension

funds,financialinstitutions,policyresearchorganizationsandcorporations.Heisthecreatorofthe

LafferCurve,aninnovationthatearnedhimthedistinctionastheFatherofSupplySideEconomics.

Hewas

amember

of

President

Reagans

Economic

Policy

Advisory

Board

for

both

of

his

terms.

TheTexasPublicPolicyFoundationisanonprofit,freemarketresearchinstitutebasedinAustin.More

informationontheFoundationcanbefoundatwww.texaspolicy.com.

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