Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, October 21, 1994                   TAG: 9412210028
SECTION: EDITORIAL                    PAGE: A14   EDITION: METRO 
SOURCE: 
DATELINE:                                 LENGTH: Medium

INCENTIVES

Oh, a few lawmakers simply pronounce the health-care system in good health (end of story!). But candidates in this part of the real world seem to agree the next Congress will again address reform.

The complexity and ambition of the Clinton plan and the array of competing legislation, written to take the "ouch" out for various, sometimes conflicting, interests, helped prevent public consensus from solidifying behind any one approach to reform.

But consensus has remained constant on one point: Something must change if Americans are not to become serfs bound to jobs with health-care insurance they dare not relinquish, but that eats up ever bigger chunks of their compensation - and their time.

Yes, the high tab is devouring time, too. Lucky workers, those with employer-provided health benefits, face more overtime to save companies the cost of hiring additional employees with benefits. Unlucky workers run from part-time job to part-time job, each without health coverage. And let's not forget the time-killing job of filling out insurance forms.

Lawmakers who blocked reforms, mumbling about market forces righting what is wrong with the nation's health-care delivery system, might benefit from a quick review of an article in a recent issue of Virginia Issues and Answers, a public-policy magazine published by Virginia Tech. In it, Elliot K. Wicks, senior fellow at the Institute for Health Policy Solutions in Washington, summarizes three of the major causes behind the rise in health-care costs from 6 percent of gross domestic product in 1961 to 14 percent in 1994.

Wicks points to the incentives for waste built into the current system, the lack of knowledge by consumers, and technology. Insurance companies have moved away from community ratings, which put everyone in a community in the same risk pool, to competing for healthy customers - pooling low-risk groups and offering them lower rates. Unfortunately, that has left high-risk individuals and small employers with a few high-risk workers with very high, often unaffordable premiums.

Then, for those able to get coverage, insurance generally pays for whatever is deemed medically necessary - by the physicians, with the concurrence of their patients. Money is little or no object for either provider or consumer.

Patients not only lack the incentive to keep costs down, they lack the knowledge needed to behave like informed consumers, notes Wicks.

A third factor is the constant development of new technology - at very high cost. Third-party financing and the incentives that encourage the use of medical services create a market for increasingly sophisticated technologies without regard for cost. There are not similar incentives to develop technologies that would lower costs.

Wicks says two approaches can help bring some cost-benefit reasonableness to health care: regulatory intervention and managed competition. No mention was made of the more creative approach of Sen. Bob Dole et al.: Debate the use of the word "crisis" in "health-care crisis" till it's time to go home.