State of the Union 2006: The Health Care Initiatives

Report Health Care Reform

State of the Union 2006: The Health Care Initiatives

January 31, 2006 2 min read

In his State of the Union address, President George W. Bush addressed the issue of rising health care costs. He focused on strengthening health savings accounts (HSAs), promoting health insurance portability, improving electronic medical records, and reforming medical liability. If Congress builds on the President's proposals, Americans stand to benefit.

 

Leveling the Playing Field

Today, Americans receive unlimited tax relief for the purchase of health insurance through their employers. However, when employers do not offer health care coverage as part of their compensation packages, then their employees get nothing in the form of tax breaks or assistance for the purchase of health insurance. Americans purchasing individual health insurance outside of the workplace must pay for coverage with after-tax dollars, which could add as much as 40 percent on top of the cost of the premium and on top of other costs incurred in the administration, marketing, and regulation of individual health plans. For this reason, many who do not receive health insurance through their employers are unable to afford coverage in the individual market. The President proposes to level the playing field between large employers and small businesses and individuals who purchase HSAs.

 

Leveling the playing field for the purchase of health insurance would make the health insurance market fairer than it is today, especially for individuals and families. However, it is vitally important that the tax code remain neutral with respect to the type of health care coverage an individual chooses to purchase. Providing tax relief only to those who purchase a high deductible health plan would perpetuate the unfair tax treatment of health insurance-tilting the tax preference to high deductible health insurance plans over other health insurance products in the marketplace. Those without employer-based coverage who choose to purchase a traditional health insurance product, such as a health maintenance organization (HMO), a preferred provider organization (PPO), or a standard fee-for-service plan, would receive no tax relief for their choice. If Congress wants to level the playing field in the health insurance market, it must extend any tax relief to all types of health insurance purchased outside the workplace.  

 

Promoting Portability

In today's workforce, fewer workers obtain health care coverage from one employer throughout their entire careers. No longer does a worker join a company at age 18 and stay with that employer until retirement. Under today's system, every time workers leave, change, or lose their jobs, they also lose their health care coverage. This has unintended consequences. For example, employers have less incentive to invest in the health of their workforce through preventive care programs if they believe workers will not be with them when the benefits pay off. Employees are forced to accept breaks in coverage and service providers; this inhibits continuity of care. The lack of health insurance portability is a major problem of today's health care system, and the President's efforts are aimed at fixing it.

 

The best way to create real portability of health insurance for workers is to allow them to purchase, and thus own, their own health insurance plans. Instead of depending on their employers to choose the plan that is best for them, individuals should be able to select and purchase a health insurance plan that best suits their needs. Congress could encourage this by enacting health care tax credits for individuals and families to purchase the health plan of their choice.  

 

Conclusion

The President's new initiatives, and how they interact with other, long-standing Administration proposals, will be fleshed out further in the release of the President's budget. If Congress takes these initiatives and builds upon the best of them, Americans could experience real progress on health care.

 

Robert E. Moffit, Ph.D., is Director of, and Nina Owcharenko is Senior Policy Analyst in, The Center for Health Policy Studies at The Heritage Foundation.

Authors

Nina Owcharenko Schaefer
Nina Owcharenko Schaefer

Director, Center for Health and Welfare Policy

Robert E. Moffit
Robert Moffit

Senior Research Fellow, Center for Health and Welfare Policy