Why is paying for health care such a mess in America? And why is it so hard to fix? The answer is because of something called cross-subsidies.
A cross-subsidy is when the government forces a business to undercharge one group it wants to help, but then allows that business to overcharge another group in order to make up the difference.
Cross-subsidies are a tempting way to hide tax and spend in the short run, but they are harmful over years and far less efficient than forthright taxing and spending.
Direct and On Budget Subsidization
The government should directly subsidize health care for the poor and elderly at market prices, on-budget and raise taxes to pay for it. It should leave markets free to compete ruthlessly for the rest of our business.
Lowering Health Bilss
The taxes would be unpopular, but when health bills go down we all would more than make it up.