me, [the] basic health care debate is, `Why is it that most
Americans have to get their health care through their employers in
the first place?'"
Representative Bill Thomas
Chairman, Subcommittee on Health,
House Committee on Ways and Means
leadership of both parties in Congress has unveiled proposals that
are said to address public concerns about managed care. The
Democratic leadership has defined the terms of the debate with
plans that would rely on government bureaucrats and trial lawyers
to protect the interests of patients. The Republican proposals make
tentative efforts to advance market solutions, yet they also rely
heavily on regulation.
Unfortunately for frustrated Americans,
these "patient protection" proposals miss the point. The central
problem today is that working Americans and their families do not
own their health plans and thus do not have the final say as
customers in health care decisions: Their employers do. Until that
changes--which would require that Congress end the tax bias against
family choice and ownership of health plans--no amount of new
regulation or lawsuits will solve the problem of plans that ignore
Costly mandates and even more regulation
of health insurance will not give families the ability to vote with
their feet and leave a health plan that they do not like. In the
end, families will still be trapped in a health plan their employer
chose for them, with government-defined benefits they may neither
want nor need. The proposals now before Congress virtually
guarantee that Congress will be back year after year debating the
next "worthy" category of health services private plans will be
forced to provide.
The Real Problem: Consumers Cannot
is missing from both Democratic and Republican health care
proposals is an accurate diagnosis of the source of Americans'
frustration and concern about their health coverage and why they
lack the ability to do anything about it. Families feel powerless
to force managed care plans to respond to their needs. But why is
the marketplace failing consumers? It is doing so because today's
insurance marketplace is so badly distorted by the tax code that
health plans have little incentive to respond to or be held
accountable for a patient's needs.
Americans get their health coverage through their place of work,
and the employer selects and owns the plans made available to
employees. This happens because today's tax code gives tax breaks
to employees on the value of their health plan, but only if their
employer purchases it. This leads to a perverse situation in which
employers, not families, are making crucial decisions about the
type of health plan and benefits their employees receive. The
health plan is accountable to the purchaser (the employer), whose
primary interest usually is cost control, rather than the consumer,
who wants quality. As Ron Pollack, Director of Families USA and a
supporter of the Democrats' managed care bill, recently observed,
"Most of us get our health coverage from an employer, and our
employers increasingly are saying `here's one plan and it's the
only plan and you do not have a choice' so you can't, in effect,
vote with your feet and thereby drive quality."
example, a family of four earning $30,000 a year receives a tax
break equal to $680 on $3,000 worth of employer-provided health
insurance. Yet, if this same family tried to purchase coverage on
its own, it would receive no tax relief at all. This is why a
majority of Americans with private health coverage receive it from
their employers and why the majority of Americans who work for
employers who do not offer health coverage are uninsured.
policy virtually guarantees frustration and powerlessness. It
should be changed so that people who want to buy their health
insurance on their own--perhaps through their union or
church--should be able to do so without tax penalty. The best way
to achieve this is to end the current tax exclusion on
employer-provided health benefits and replace it with an individual
refundable tax credit to use to purchase health insurance.
Representatives Bill Thomas (R-CA), chairman of the Health
Subcommittee of the House Ways and Means Committee, and
subcommittee member Jim McCrery (R-LA) are developing a proposal
that would do just that.
A Failed Health Care Strategy
current batch of legislation is just one more example of the
disturbing pattern that even conservatives have accepted on health
care issues. Some conservatives in Congress do not like meddling in
the marketplace with regulation, but feel it is the short-term
price of satisfying the public's concerns and avoiding even worse
legislation. Others have shown a willingness to accept more
regulation of health insurance as long as it includes some
expansion of medical savings accounts (MSAs). So when costly
mandates on health insurers are offered, a few "free-market"
provisions are added so that supporters can claim that the bill
reflects conservative values.
pattern was played out two years ago. At that time, a bill
popularly known as the Kennedy-Kassebaum bill enjoyed only lukewarm
support from conservatives in Congress. This bill imposed, for the
first time, unprecedented federal restrictions on private health
insurance. Rather than "patient protections," the buzzwords in
those days were health coverage "portability" and "accessibility."
The bill had a doubtful future when first proposed. Yet, in the
interest of doing something on health care, conservatives added an
MSA and a couple of other tax provisions. The bill was passed and
signed into law, and is now the law of the land.
did America really get from the Kennedy-Kassebaum bill? On the
positive side, the self-employed now can deduct a portion of their
health insurance costs. Purchasers of long-term care insurance also
may claim a deduction. But on the other side, the General
Accounting Office (GAO) reports that individual insurance premiums
have increased anywhere from 140 percent to 600 percent in some
states because of requirements in this new law. And the number
of uninsured working Americans has not fallen--the central aim of
the bill--but continues to grow.
about the MSA pilot program that clinched the deal? According to
the only official Internal Revenue Service report on the subject,
as of June 1997 only 22,000 policies had been sold out of a
possible 750,000. In addition, a GAO survey of insurers has
revealed several flaws in the MSA law that discourage growth in
lawmakers are faced with pressure from constituents to protect them
from their health plan. In many respects, House and Senate
Republicans have responded by taking one step forward only to take
two steps back. The proposals contain some good ideas like
voluntary purchasing cooperatives called HealthMarts, physician
medical malpractice reform, and strengthening of health plan
accountability rules. But these improvements will be of little or
no value unless Congress takes the decisive step of giving
individuals, rather than employers or the government, more control
over health care decision making.
Senate does make some progress in this area by proposing 100
percent deductibility for the self-employed, allowing individuals
with company-sponsored flexible spending accounts to roll over a
portion of their funds from year to year, and loosening some of the
restrictions on the marketing of MSAs. But these are tiny steps and
are more than offset by new, costly mandates that may actually make
the private health system worse and cause greater numbers of
Americans to be uninsured.
A Model That Works
number of polls indicate that Americans want something done on
health care and support the current efforts to regulate managed
care. These polls are misleading in some respects. One recent
survey, for example, indicated that over half of Americans'
opinions on managed care are based on secondhand information and
not personal experience. But the poll numbers are
significant for two primary reasons.
First, whether their
opinion is based on personal experience or on media reports,
Americans' distrust of managed care reflects both their concern
about a system of care that they see as putting cost before patient
needs and their sense of being powerless to make a change.
Second, and more
important, these polls show these results because Americans have
not been offered a vision of how to remedy this problem that could
serve as an effective alternative to more government mandates and
is the latter point that highlights the need for lawmakers to
articulate clearly to their constituents why it is they are trapped
in health plans they may not like. They must then provide a road
map to change the current system so that insurers are accountable
to patients, not to employers or the government. The best and
easiest place for Members of Congress to start is by explaining the
popularity of their own health plan, the Federal Employees Health
Benefits Program (FEHBP), and holding it up as a model of a
consumer-driven health insurance marketplace.
Members of Congress, federal workers and
retirees, and their dependents all enjoy a system of health care
that is very different from that enjoyed by the average American--a
system that is based on free-market principles of consumer choice
and competition. The FEHBP allows almost 9 million participants to
make personal choices on an annual basis among a number of
competing private health plans in their area, with over 350 plans
participating in the system nationwide. The price competition
created by allowing people to leave plans they do not like and to
choose a new one has held FEHBP costs down below both
private-sector and other government-run health programs. More
important, it also creates a high level of satisfaction among FEHBP
enrollees that is not matched in the private sector.
Office of Personnel Management (OPM), which manages the FEHBP,
performs customer satisfaction surveys of enrollees. In addition to
looking at overall satisfaction, OPM rates specific areas, such as
choice of doctor and quality of care. Significantly, the surveys
indicate a very high degree of satisfaction with managed care. For
FEHBP health plans offered in the Washington, D.C., area (where the
largest concentration of federal employees is found), 60 percent of
enrollees said they were very satisfied or extremely satisfied with
their health plan. Of those enrolled in HMO plans, 75 percent rated
their choice of doctor, and 84 percent rated the quality of care,
as excellent, very good, or good.
critical difference between how the FEHBP operates compared with
private employer-sponsored health plans is that, rather than being
herded into one or two plans chosen by the employer, federal
employees can choose from among a wide range of plans. The
government makes a fixed contribution; enrollees who want a more
expensive plan pay the additional premium cost out of their own
pocket. The government does not restrict the kinds of plans that
can participate in the system, does not define the benefits that
must be offered to enrollees, and does not use the threat of
litigation as a scare tactic to make health plans perform.
reason that HMOs in the FEHBP are popular is not that patients sue
them or that they operate under dozens of mandates--they do not.
Consumer satisfaction and health plan accountability are achieved
the old-fashioned way: by letting the market work. Federal workers
can choose from among dozens of plans without losing tax breaks or
other benefits because they chose a plan other than the one favored
by their immediate employer.
Congress can avoid repeating the mistakes
of the past and propose a bill that will give frustrated consumers
the same tax benefits if they choose and own their own health plan
and pick a plan from any source. Speaker Newt Gingrich (R-GA),
Representatives Thomas and McCrery, and Senator Don Nickles (R-OK)
have voiced their strong support for tax fairness and
family--rather than employer or government--ownership of health
insurance. Speaker Gingrich recently instructed lawmakers to look
at "how they can give every American the right to take their share
of the tax deductibility and use it so that if you don't like your
HMO, you simply say to your employer, `I want my share of the
insurance money...[and] I'll go buy insurance I like."
"patients' rights" will occur when families are able to leave a
health plan they do not like and choose a new one. Only then will
health plans be truly accountable to the patients they serve. The
legislation now before Congress does not achieve that, and thus is
-- Carrie J. Gavora is a former Health
Care Policy Analyst at The Heritage Foundation.