Continued: Peter J. Nelson: Government has health-care answers -- but not a solution

Over the past several months, policymakers in St. Paul have been working tirelessly under a legislative mandate to develop solutions to the unremitting annual upsurge in health-care costs -- and to do it while also improving quality and access.

Their work, much of it put to paper in the recommendations of the Health Care Transformation Task Force, correctly identified most of the major cost drivers.

But at that point, they took a wrong turn. They began designing new, presumably more-efficient systems to address each cost driver. Thus, they crafted new systems for paying providers, coordinating care, measuring quality, assessing the efficacy of new technologies, requiring electronic prescriptions and promoting public health.

Legislation to implement these systems is now racing through the Legislature.

Why do I call this a wrong turn? If the provider-payment system is broken, a new payment system should be designed, but it seems odd to rely on our government to be the architect.

We normally don't rely on government for design pointers when efficiency is flagging.

It's not that government planners lack expertise. I went to a number of the meetings at which policy experts and lawmakers discussed these ideas and, frankly, I was impressed. The discourse revealed that lawmakers knew the issues and were serious about finding solutions. The trouble is that they rarely allow their designs to be subject to the competitive forces that winnow the bad and reward the good within private markets.

For example, the task force recommends establishing a health-insurance exchange to sell individual and small-group insurance products -- but if voluntary use fails, then "use of the Exchange may need to be mandated." In other words, if alternative outlets for insurance remain more attractive -- i.e., more competitive -- the state may ban them!

Before relinquishing control to government planners, let me pose a question that can lead us toward a more cost-efficient system: Why have private initiatives failed in this context?

The cost drivers addressed by the task force relate primarily to private choices and private business practices. For example, inactivity, overeating and smoking are private lifestyle decisions. And health plans and providers privately agree to specific payment methods. When it comes to reducing costs, people and businesses generally do a bang-up job at finding solutions.

We live in a land of entrepreneurs who make handsome livings by hunting down inefficiencies. How is it that billions of dollars wasted by poor health habits and inefficient systems can escape their preying eyes?

Correctly answer that question, and you may well solve the cost riddle confounding today's health-care system.

I believe the answer begins with the near absence of health-plan consumerism. Very few people shop for their health plans. Instead, they rely on their employers or the government to pick their plans.

Consequently, individual consumers do not exert pressure on health plans to lower costs. That job is left to businesses and the government, which exert far less pressure because they do not work under the constraints of a family budget. Without direct pressure from consumers, entrepreneurs are not motivated to attack our cost problems.

Of course, the answer is not limited to unleashing individual consumers upon the health-plan market. Numerous other obstacles block entrepreneurial efforts. For instance, both state and federal mandates hinder efforts to tailor health benefits to individual needs. In addition, Minnesota restricts for-profit companies from running hospitals or managed-care health plans. And federal laws limit physician ownership of health-care facilities.

All that is to say, a number of laws block avenues that entrepreneurs might take to reduce costs.

To be fair, some of the task force's recommendations represent positive steps that the government can take. As usual, good ideas mingle with the bad. The aforementioned exchange would encourage health-plan consumerism, but this and other ideas are overwhelmed by efforts to inject government planning.

If we truly want better health care at a lower price, shouldn't we depend on the proven track record of America's entrepreneurs rather than that of the government's central planners?

Peter J. Nelson is a policy fellow with Center of the American Experiment in Minneapolis.