November 14, 2002

November 14, 2002 | Commentary on Health Care

ED111402:  Give Credit Where It's Due

It appears high on nearly every wish list President Bush has mentioned for the next Congress: health-care legislation. Why? Because lawmakers can't wait much longer before they do something about the growing number of Americans who lack health insurance.

The latest figures from the U.S. Census show that about 1.2 million people lost their health insurance last year, bringing the grand total without coverage to about 41.2 million. This raises an obvious question: Why?

Is it because we're a cold, unfeeling people who refuse to give Canada-style socialized medicine a chance? No. To a large extent, it's because -- despite the unprecedented mobility of the American work force -- health insurance remains tied to our jobs. Employees get unlimited tax relief for the purchase of health insurance but only as long as they are buying into the plans their employers provided their employers.

The results aren't hard to predict. Control over the type of coverage most of us get is completely out of our hands. You're stuck with what you get. Employers choose the plan, the provider, the co-pay, the deductible and the benefits. Oh, you can go buy your own plan, but you must a) pay for it yourself and b) forego the tax break enjoyed by workers who stick with their employer's plan. How many of us can afford to do that?

The Census report said the decline could be traced "almost entirely" to a drop in employer-sponsored coverage and that the "most substantial drop" was among small businesses. Naturally, some lawmakers believe this means we should rely more heavily on government programs or mandate that employers carry coverage.

But the government-run programs don't fare so well themselves. Currently, 41 states are planning cuts to their Medicaid programs. Various states have proposed everything from limiting access to prescription drugs to further reducing already-low reimbursements to providers to cutting enrollment. Adding 40 million people to Medicaid probably will mean more cost-cutting and greater rationing of care. It certainly won't help the insured or the indigent who rely on the program.

And forcing employers, especially small-business owners, to carry coverage isn't the solution. In tough financial times, too many of them must choose between cutting back on health benefits and going out of business. If coverage is mandated, employers in financial straits will have to choose between closing down and laying off workers. "Mandated coverage" won't help people who don't even have a job.

Why not let individuals control their own coverage? This would foster continuity and let workers choose the plans that best fit their needs and the needs of their families, as well as protect them against gaps in coverage when they change or lose their jobs. (Today, the average 32-year-old has changed jobs seven times already, with more changes to come.) Workers should rest secure that they and their families will be covered no matter what their job status.

President Bush has proposed a plan to do just this. His plan calls for tax credits for those not covered by their employers -- up to $3,000 for families and $1,000 for individuals, to cover as much as 90 percent of average health-insurance costs. The credit would be upfront, so individuals could apply it when premiums are due, and it would be refundable, so even those who owe no taxes would be eligible.

Critics claim that policies offered to individuals are hard to find and too expensive to be covered by the tax credits. But policies in the individual market have become far more available and affordable in recent years. (A family of four, for example, can go on the Internet and buy a Blue Cross/Blue Shield plan that includes prescription drugs for about $220 a month.)

Americans deserve control over their health-care purchases, and tax credits are an affordable way to provide them. Tax credits also give people the opportunity (and incentive) to ensure that costs don't spiral out of control. It's time Congress gave control over health insurance to those who deserve it -- individuals and their families.

Nina Owcharenko is a policy analyst in health care at The Heritage Foundation (www.heritage.org), a Washington-based public policy research institute.

About the Author

Nina Owcharenko Director, Center for Health Policy Studies and Preston A. Wells, Jr. Fellow
Center for Health Policy Studies

Distributed nationally on the Knight-Ridder Tribune wire.