The Guest Blog

Tony Fratto: One Step Forward, Three Steps Back on Health Care

If this morning's reporting is accurate, one germ of a good idea has found its way into the health care debate under way in Congress: the creation of national health insurance policies administered by private companies -- and, presumably, available across state lines.

One of the greatest flaws in our current health care system -- an inefficiency that leads to higher costs and limited competition -- is the inability to buy insurance policies across state lines. Combined with differing individual state mandates for coverage of tests and procedures, costs have run out of control for many Americans unlucky enough to live in certain states.

Stethescope and money

Economists have long understood that a national market for insurance would result in lower premium prices. And the only way to create that national market is by making basic, standard health insurance plans available everywhere.

Among other reforms, to truly make that market work it's also necessary to eliminate the inequity in the tax treatment between health insurance purchased by individuals and employer-provided health plans. There is no reason to preserve this unequal tax treatment -- except as a sap to labor unions who want to maintain a collective bargaining chip. Democrats, predictably, are loathe to accept this common sense reform.

Congressional Democrats instead are intent on ensuring that inefficient and costly entitlement programs grow.

Recognizing that the passage of a plan to create a government insurance company -- the so-called "public option" -- is unlikely, they've now set their sights on expanding the existing, costly, inefficient entitlement programs -- Medicaid, Medicare, and the SCHIP (the health entitlement for children).

SCHIP, intended for coverage of poor children, has already been expanded into middle class families, and legislation under consideration will vastly expand Medicaid coverage -- expansions that will stagger already strained state budgets. And now the Senate is reportedly considering a plan to expand Medicare to Americans as young as 55 years old.

The crisis in health care costs, for both individuals and governments begins with these entitlement programs. That congressional Democrats are settling on expanding these programs, rather than creating true markets to drive down costs and provide better options for Americans, is all the evidence needed that this debate is not about reforming health care -- it's about growing the role of government.

The debate over health care should go on. Given more time, we may be able to get consensus on making at least one good idea work, and to reconsider some smart reforms this bill ignores.

Tony Fratto is a CNBC on-air contributor and most recently served as Deputy Assistant to the President and Deputy Press Secretary for the Bush Administration.