April 28, 2006 | WebMemo on Health Care
Health care urgently needs congressional attention. In an effort to highlight its health care initiatives, the Senate, and the House of Representatives later this year, will devote a part of its calendar to health care legislation. The Senate efforts should be judged by the substance of the policy. In order to make meaningful changes that would benefit individuals, the Senate should consider policies that promote personal control over health care dollars, expand consumer choice and competition, and reduce health care regulations.
Key Tests for any Health Policy
There are key tests that will determine whether or not the Senate's legislative initiatives are serious changes in health policy or simple, and largely inconsequential, tweaks to the status quo. Specifically:
A New Health Agenda
Several policy initiatives meet these key tests. The creation of an individual tax credit program would eliminate the current inequities in the federal tax code and enable individuals to buy and own their own health care policies. Giving individuals and families the right to purchase a health plan of their choice, even if that plan is domiciled in another state, would expand consumer choice. Health savings and flexible spending accounts could be improved by making their use more flexible and consumer friendly. Defined contributions from employers to their employees' health plans should be promoted to enable individuals and families to choose the health benefit packages that best meet their personal needs. The promotion of state level experimentation in health care reform would give state officials greater flexibility and access to federal resources in expanding and improving coverage.
If senators are serious about meaningful change, proposals that take serious strides toward a patient-centered, consumer-driven health care system would make a difference.
Major Items for a Senate Health Agenda
Members of the Senate, as part of their commitment to change during "Health Week," should make the following federal policy changes:
At the very least, the Senate should create a parallel system of tax relief for individuals and families who do not, or cannot, get health insurance through the workplace. There are a variety of designs for health care tax credits. For example, an individual health care tax credit could be a flat credit that is available to all regardless of income, or the credit could be tailored further to target lower-income working individuals and families.
A targeted health care tax credit, focused on lower-income working people, would not disrupt the current employer-sponsored health care system. It would give individuals who do not fit into that model a viable alternative for affordable health care coverage. In any case, the Senate should take this first step to ending the discrimination in the tax code that penalizes lower-income working families.
Some Members of Congress want to resolve this problem by adding yet another layer of regulation on an already overregulated health insurance market. A better idea is free market competition. Instead of trying to standardize health care regulation among the states, Congress should spur competition among the states and allow individuals to purchase affordable health care coverage from other states. This approach has two advantages. First, it would retain the primacy of state authority over health insurance law and regulation, thus respecting the principles of federalism. Second, it would allow individuals to select from a broad assortment of health care products and choose the product that meets their financial and health care needs. Senator Jim DeMint (R-SC) has sponsored the Health Care Choice Act (S.1015), which would accomplish these objectives. This legislation focuses solely on allowing interstate commerce in individual insurance; but it could be expanded to allow the purchase of group health insurance across state lines.
At the very least, the Senate could make improvements to basic HSA design. There are two options. First, individuals should be allowed to use the HSA to pay for the health insurance premiums, which they cannot do today. Sen. John Ensign (R-NV) and Sen. Michael DeWine (R-OH) have proposed the Affordability in The Individual Market Act (S. 2554), which would allow individuals and families to use HSA accounts to pay health plan premiums. Second, the contribution levels in the HSAs should be increased to match total out-of-pocket expenses, not just the deductible. Senator George Allen (R-VA) has introduced S. 2424, which would increase the contribution amounts. Finally, changes should be made to better coordinate HSAs with other accounts, specifically Health Reimbursement Arrangements (HRAs). For example, individuals and families should be able to fold HRA balances into their health savings accounts.
Senators should give employers another option by allowing them to contribute directly to a worker's personal health care plan. While some employers may not be able to afford to sponsor a full benefit package, they may be willing to provide a financial contribution to help their employees purchase their own health care plan. Legislation that clarifies that such a contribution does not qualify the individual plan as a group plan would facilitate this coverage, while avoiding costly and burdensome regulation on the business.
Sen. George Voinovich (R-OH) and Sen. Jeff Bingaman (D-NM) are proposing "The Health Partnership Act," which would establish a grant approach to encourage states to carry out "a broad range of strategies" to increase coverage, improve quality and the efficiency of health care spending.
The Senate's "Health Week" provides an opportunity to change federal health policy substantially. The Senate should focus on legislation that improves the lives of ordinary Americans, and consider legislation that increases personal control over health care dollars, expands consumer choice and competition in the health insurance markets, and results in a net deregulation of the health care system. Policy options include individual health care tax credits, interstate commerce in health insurance, and the promotion of state experimentation.
If Congress continues to refrain from enacting meaningful health care legislation, Americans should turn to their governors and state legislatures for help in redesigning health insurance markets to make health insurance more affordable and expand the control of individuals and families over their health care dollars.