Curing Health Care with Choice
Last week's "Covering the Uninsured Week" brought a slew of ideas
from across the health care policy spectrum. Politicians and
activists offered a variety of solutions to help reduce the
troubling number of Americans without health insurance (about 43
million people, roughly one out of every seven). Unfortunately,
their proposals are just more of the same.
They either offer a piecemeal approach that would make only minor
adjustments to current policy, or they rely on the existing,
fractured health care system to promise change. Either way, they
leave untouched the root of the problem: the continued absence of
personal choice and control of health care options.
Two forms of health care - employer-sponsored insurance and public
health insurance - dominate today's health-care system. In both
cases, individuals have little to no choice in deciding and
controlling the care and services they receive. Facing skyrocketing
health care costs, today's employers offer fewer choices of
health-care plans to their employees, while requiring employees to
manage a larger share of the costs. In the small-business
community, employers are reconsidering whether they should even
offer health care to their workers at all.
In the public programs, government-controlled health insurance
faces similar problems. States continue to struggle with
hemorrhaging Medicaid costs. Besides putting stress on other state
functions, such as education and transportation, it erodes access
and quality of care for the dependent populations.
The House of Representatives recently took the aforementioned
piecemeal route. The most promising of the initiatives it approved
would change Flexible Spending Accounts (FSAs). It would allow
individuals to carry over up to $500 in their FSAs each year. These
accounts, offered through an employer, let employees put pre-tax
dollars into accounts that can be tapped for medical expenses not
covered by insurance.
Currently, though, any funds left over at the end of the year are
forfeited to the employer. This requirement wrongly implies that
these funds are not the employee's and gives individuals no
incentive to save for future health-care expenses. Ideally,
employees should be able to carry over all unused funds and/or be
allowed to withdraw and pay taxes on them. But the FSA policy
changes that passed in the House are a start, and they would offer
greater personal control over health-care spending.
While some consumer-directed efforts are emerging within the
employer-sponsored health-care system, what is really needed is a
more aggressive and comprehensive approach to reform. One that
offers a fresh perspective that would revolutionize the health-care
system. A system based on personal choice and freedom.
There are two fundamental changes that are needed to take place in
order to jump-start a health care revolution:
1. Fix the tax treatment of health care. The tax code provides
unlimited tax relief for the purchase of health insurance, but only
through the workplace. As it turns out, lower-wage workers,
particularly those in small firms, get less tax relief than
high-wage workers. And if an individual goes outside the place of
work to buy a health plan, he or she must do so with after-tax
dollars, which often makes the cost of a plan prohibitive.
Ideally, current tax exclusion for employer-based health care
should be replaced with a national system of refundable health care
tax credits, with more help going to those with need it the most.
In the short term, offering low-income individuals and families a
health care tax credit would enable them to obtain their own health
care coverage, regardless of their place of work or work status.
President Bush has advocated such an approach.
2. Design a consumer-friendly marketplace. In order for
individuals to become more involved consumers of health care, there
needs to be a marketplace where individuals are able to select from
a wide variety of plans that best meet their individual needs. By
allowing individuals to pick and choose the plans of their choice,
the plans will become responsible to the individual for quality,
value and satisfaction.
Unfortunately, some states have over-regulated their markets,
making coverage less accessible and less affordable. So the first
step for policy-makers should be to encourage states to fix their
markets to better serve consumers.
"Covering the Uninsured Week" is over, but the problem remains.
And while politicians deserve some applause for trying to deal with
it, the solutions they've offered so far don't go far enough.
Half-measures relieve some symptoms for a while - but they can
never really cure.
is a senior policy analyst in the Center for Health Policy Studies
at The Heritage Foundation.
First appeared on FoxNews.com