Putting The Peso On A Short Leash

Let's hear it for markets! Health-care costs for U.S. business actually fell last year for the first time in two decades. For the naysayers who said it could never be done without heavy government intervention, the 1.1% decline is proof that competition can work miracles, even in the field of medicine. Congress should take note of Corporate America's bold medical-care overhaul and quit trying to just tinker with Medicare and Medicaid, government health-care programs for the elderly and poor.

A dramatic shift away from fee-for-service to managed care by employees of America's largest companies is behind the drop in medical-care costs. In 1994, a 21% jump in enrollment for health maintenance organizations and preferred provider organizations resulted in nearly two-thirds of all eligible employees signing on to managed-care plans. Just five years ago, health-care increases were running at nearly 20% for many big companies. Last year, for corporations employing 500 or more people, costs actually dropped 1.9%.

The same can't be said for smaller businesses. Companies with 10 to 500 employees saw their health costs rise 6.5% last year--and very small businesses undoubtedly fared even worse. Clearly, small-business owners lack the market clout of their big-business brethren to demand lower costs for managed care. The No.1 priority for the National Federation of Independent Business should be figuring out a way to pool health care for its members.

But even 6.5% pales in comparison to the 9%-plus annual spending hikes attributed to Medicare and Medicaid. Right now, both programs offer the most extensive--and expensive--fee-for-service options available anywhere in the country. Simply shifting people in Medicare to managed care could save as much as $250 billion over the next seven years. Doing the same for Medicaid saves up to $150 billion, for a total of $400 billion. That goes a long way toward balancing the budget.

Both the Republicans and Democrats should screw up their political guts and tell those on Medicare and Medicaid that they can no longer have a medical system that is more luxurious than that of most other taxpayers. Choice is narrowing for everyone, including the elderly.

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