On Wednesday, September 6, The New York Times reported that health insurance premiums "are increasing by 10 percent to 30 percent across the country."  The report noted: "For many smaller companies, which generally face steeper rate increases, 2001 will bring their third annual increase of more than 10 percent."

The Times also noted a new survey by the Employee Benefits Research Institute, which found that if health insurance costs increased by 10%, then 14% of small businesses would drop health coverage for their employees.

Steep increases in health care costs should surprise no one, once it is understood that the U.S. health care system is dominated by third-party payments.  Whether employer-provided health plans or government programs, in the end, when somebody else picks up the tab, neither the health care provider nor the patient possess incentives to be concerned about costs.

Judging by the Medicare prescription drug proposals emanating from both sides of the political aisle, most politicians seem to fail to grasp the roots of this problem.  Each proposes a vast expansion of Medicare to include prescription drug coverage. 

In reality, more government means higher costs.  In the long run, such plans will only lead to higher taxes, price controls and government rationing, with a near-fatal blow struck at the drug companies that produce so many life-saving and life-enhancing drugs.  In addition, these plans will push the nation further down the road of socialized medicine.

For Medicare and our health care system in general, deregulation and allowing all health care consumers to have the choice of tax-free medical savings accounts (MSAs) are the true means to substantive, constructive reform. 

For a more in-depth analysis, please read SBSC's Entrepreneurial Economy report from June 28, 2000 entitled "Fatal Economics: Government Prescriptions for Pharmaceuticals."

Raymond J. Keating
Chief Economist
Small Business Survival Committee
and co-author of
U.S. by the Numbers:
Figuring What's Left, Right, and Wrong with America State by State