Congress will soon unveil legislation to reform the health care
system. The policies outlined by President Obama during his
campaign and those being discussed in Congress would centralize
control over the health care system in Washington.
The chief danger of this approach is that it would directly
interfere in the personal health care decisions of Americans. There
is a much better alternative: a system that recognizes diversity
across the states and differences in individual health care needs
A Consensus on the Problems
There is little disagreement that the current health care system
needs an overhaul. Today, health care costs continue to rise while
people have fewer choices and are less secure that the coverage
they have today will be there tomorrow. The U.S. spends over $2.4
trillion on health care (almost 17 percent of GDP), and the
government accounts for almost one-half of all health care
Premiums continue to rise in the private sector. Employer-based
family coverage has increased from an average of $6,438 in 2000 to
$12,680 in 2008. The government health programs are not
faring much better. According to recent CMS Actuary calculations,
Medicare and Medicaid spent $818 billion in 2008 and are projected
to reach $1.7 trillion by 2018.
Americans are also facing fewer choices. Today, 85 percent of
all employers offer only one health plan for their employees.
Similar restrictions on personal choice face enrollees in
government programs. In Medicaid, 23 percent are not accepting new
Medicaid patients, and 18 percent are accepting only some. In
Medicare, serious legislative efforts are underway that will likely
chip away at seniors' access to the private plans they want in
Finally, Americans feel less secure about the future of their
health care coverage. With the economic recession, Americans
recognize they are one paycheck away from losing their health care
coverage. Fifteen percent of Americans are without coverage. The
uninsured are not a homogeneous group, but they tend to be
disproportionately young, a member of a minority group, and working
for small firms.
Most important, while the percentage of those without coverage
remains constant, the individuals are not the same. As a matter of
fact, 45 percent of uninsured are uninsured for less than four
months; only 16 percent are uninsured for more than 18 months. This
churning in the health insurance markets, and the lack of
portability, is almost entirely the result of outdated government
Two Competing Health Care Visions
There is also general agreement on the outcomes Americans are
looking for in any health care reform proposal: affordability,
accessibility, portability, and quality. But there is less
agreement on policy path for reform.
On one side, there are those who believe that centralizing power
in Washington is the best approach to achieve serious and
long-lasting health care reform. Their policy prescriptions call
for federalizing and heavily regulating health insurance. Proposals
for a new public health plan and a federal health insurance
exchange, as well as an individual mandate to purchase a
government-approved package of benefits, clarify their intent:
Washington control over health care financing and delivery.
The result, regardless of stated intentions to the contrary, is
that the Congress would ultimately be in charge of health care
decisions. It would result in a massive one-size-fits-all
government system, and it would depend on flawed financing schemes,
new mandates, and higher taxes to pay for it.
On the other side, there are those who believe that individuals
and families should be the key decision-makers in health care and
that they should control the flow of health care dollars in a
reformed system. They are concerned that a centralized system of
federal decision-making would:
- Diminish individuals' control over their personal health care
- Directly undermine state autonomy and authority in health
policy, undercutting both innovation and experimentation to expand
coverage and deliver quality care, especially for the poorest and
most vulnerable of our citizens;
- Generate and perpetuate unsustainable federal spending;
- Ultimately, in the face of serious budget crises, lead to
government rationing of care and services.
Key Elements for a Workable
Members of Congress serious about improving the health care
system must find a way to bridge the gap between these two
competing visions. There are three critical elements that could
bring about a workable solution for lasting health care reform.
1. Tax Equity. The cornerstone of any serious health care
reform proposal must address the tax treatment of health insurance.
Today, individuals who purchase coverage through their place of
work receive an unlimited tax break on the value of their health
care benefits. However, those who purchase coverage on their own
receive no comparable tax break.
There is broad bipartisan agreement, especially among health
care economists and experts, that the current tax treatment of
employer-based coverage is inequitable and regressive. Ideally,
Congress should replace the current tax exclusion with a system of
universal tax credits. Moreover, as a general principle, Congress
should provide tax relief for those who purchase coverage on their
own and redirect other health care spending to help low-income
individuals and families purchase private health insurance
2. State-Based Reform. The health care challenges vary
greatly across the country. Some states face high health care
costs, while others face high rates of uninsurance. And, rural
states face different challenges than urban states.
Instead of depending on a federal one-size-fits-all solution,
Congress should embrace a federal-state partnership that would
preserve diversity in the states. The states' role would be to
devise the best ways to achieve common national goals--for example,
to establish a mechanism for portability. This is in sharp contrast
to other state-based approaches where the federal government sets
explicit requirements and imposes on the states the onerous task of
administering its federal reform. These types of partnerships are
little more than a backdoor way to a one-size-fits-all federal
3. Sound Financing. The U.S. spends over $2.4 trillion on
health care. Instead of spending an additional $1.6 trillion on a
plan financed by tax increases and unproven savings from Medicare
and Medicaid that may never materialize, Congress should
restructure and redirect existing health care spending to
make it more effective. To address long-term health care costs,
Congress must focus on fundamental reform of the tax treatment of
health insurance and entitlements. At the very least, Congress
should require that savings be realized before appropriating them
to any expansions.
Creating a Lasting Health Care
Members of Congress have a choice: Either they can support
efforts that expand Washington's control of the health care system,
or they can allow the states to develop solutions that will
transfer direct control of health care dollars and personal health
care decisions back to individuals and families. The choice should
not be that hard.
Owcharenko is Deputy Director of the Center for Health Policy
Studies at The Heritage Foundation.
While the financing system for
Advantage is flawed, some approaches to address these changes would
have a negative impact on the highly popular plans. See Robert E.
Moffit, "The Success of Advantage Plans: What Seniors
Should Know," Heritage Foundation Backgrounder No. 2142,
June 13, 2008, at http://www.heritage.org