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Containing health costs in a consumer-based model.
1Heritage Foundation, Washington, DC.
Health Care Financing Review. Annual Supplement
|December 10, 1990
Summary
Consumer choice can control healthcare costs. Current tax policies create incentives for higher spending, but reforming these policies can empower consumers to reduce healthcare expenses effectively.
Area of Science:
- Health Economics
- Public Policy
Background:
- Current healthcare systems often assume consumer choice is ineffective for cost control.
- Existing tax treatment of healthcare encourages increased consumer spending and cost escalation.
Purpose of the Study:
- To challenge the assumption that consumer choice cannot control healthcare costs.
- To propose a framework for leveraging consumer choice for cost containment.
Main Methods:
- Analysis of the impact of tax treatment on consumer incentives in healthcare.
- Economic modeling of potential reforms to tax policies related to health insurance and out-of-pocket medical expenses.
Main Results:
- The invalidity of the assumption that consumer choice cannot achieve healthcare cost control.
- Identification of perverse consumer incentives driven by current tax policies.
- Demonstration that reformed tax treatment can foster an efficient system where consumer choice restrains costs.
Conclusions:
- Reforming tax treatment of health insurance and out-of-pocket medical costs is key.
- Consumer choice can be a powerful tool for healthcare cost restraint.
- An efficient and universal healthcare system can be designed utilizing consumer choice.