Baylor University Economists Call For Different Tack On Health Care Insurance

Aug. 28, 2009
News Photo 4752Baylor University economists Earl Grinols and James Henderson lay out a universal health care plan in their new book Health Care for Us All: Getting More for Our Investment, published by Cambridge University Press.

New Book Recommends Robust Competition, Homogeneous Risk Pooling, Targeted Intervention

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Two professors at Baylor University's Hankamer School of Business lay out a universal health care plan in their new book Health Care for Us All: Getting More for Our Investment, published by Cambridge University Press, that does not create a government entitlement program or threaten in any way the insurance coverage or health care of Americans who currently have coverage.

First and foremost, say the professors, public health care arrangements should respect the features of American health care that are the best in the world.

"Health care and health insurance are best provided through robust competition in private markets," said Dr. Earl Grinols, Distinguished Professor of Economics at Baylor and co-author of the book. "To keep costs down, the only known reliable self-regulating mechanism requires competition, such as requiring health care providers to publicly post their prices and charge all consumers who buy the same service on the same terms at the same price, so consumers could shop for services."

Most people who are uninsured do not purchase coverage because of high premiums. Homogeneous risk pooling with premiums based on age and sex would lower the price of health insurance to the group with the highest rate of uninsurance - the young and healthy. The authors say that current Congressional proposals are counterproductive because they ignore economic principles and have already been shown in many places they have been tried not to work.

The economists recommend an intervention plan that includes income subsidies that would be available to everyone, but would primarily go to the hard to insure -- the five to 10 million who don't have insurance due to low earnings or previous medical conditions.

"Rather than redesigning the nation's entire health care industry," said co-author Dr. James Henderson, The Ben Williams Professor of Economics at Baylor, "we should do more for the smaller group of people who genuinely need help. A targeted intervention plan allows us to be more effective without collateral damage to the health care arrangements of the rest of us. Insurance reform and pro-competitive reforms that we identify will reduce costs for all of us while expanding coverage to the 37 million Americans who are uninsured."

Grinols and Henderson urge lawmakers to recognize and take actions based on the relevant economic principles, resulting in a solution that will be viable in perpetuity. In their book, they provide guiding concepts and explanations of their reasoning, as well as detailed equations.

About the Authors

Dr. Earl Grinols was a Senior Economist on the Council of Economic Advisers for President Reagan and an International Economist for the Department of the Treasury during the Ford administration. He served two terms as the president of the Association for Christian Economists.

Dr. James Henderson is the academic director for Baylor's MBA Healthcare Administration program. He consults for several major corporations.

About Baylor Business

Baylor University's Hankamer School of Business holds to a visionary standard of excellence whereby integrity stands shoulder to shoulder with analytic and strategic strengths to build leaders, not simply careers. In addition to state-of-the-art skill development in the functional areas of business -- accounting, economics, finance, marketing, information systems, management and others -- students develop ethics skills that yield credibility and true leadership potential in today's organizations.

NOTE TO JOURNALISTS: Copies of the book are available for your review.

Contact: Frank Raczkiewicz, (254) 710-1964

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