Republicans wondering what to do after they have exhausted the ideas in their “Contract with America” might take a page out of Bill Clinton’s playbook and look again at health care reform. Of course, reviving Mr. Clinton’s confusing and heavily bureaucratic approach to health care would be politically suicidal.
Fortunately, neither Republicans, nor market-oriented Democrats, need take that tack. An effective, achievable and easily understood approach to health care reform is now available.
During the first two years of Mr. Clinton’s presidency, the public was confused about health care primarily because Mr. Clinton set the terms of debate. Discussion reflected his various proposals: employer mandates, a national health board, regional alliances, premium taxes, income based subsidies, penalties for seeking private care and a vast array of new regulations. The Rube Goldberg complexity of his scheme left even supporters baffled. Not surprisingly, the public rejected his approach.
Two Simple Reforms
Yet the unpopularity of the Clinton plan does not mean that the new Congress should ignore the health care issue altogether. Instead, the failure of the Clinton plan, and the President’s recent acknowledgement that “we bit off more than we could chew,” offers Congress an opportunity to redefine the debate on terms that expose government intervention as the cause, not the cure, of America’s health care ailments. By emphasizing “two simple reforms” in particular GOP leaders and conservative Democratic allies can debunk claims of a “health care crisis” and create enthusiasm for real reform.
It’s important to diagnose the real cause of the current problems in the health care industry. Though most Americans describe themselves as satisfied with their care, many commonly express concern about rising costs and losing access to treatment because of a job loss. Yet both of these problems derive, not from too little government intervention in the health care market, but actually from too much.
Consider first why the current system does not ensure portability. Today employers own the health plans of most working age Americans. If a worker loses his job, he also loses his health insurance.
Yet there is no reason that employers have to own the health plans of their employees. Employers don’t own their employees’ car insurance, or home owner’s insurance, or their life insurance. Why must they own their employees’ health care insurance? Why can’t we own our own plans and take them with us wherever we go?
The answer is: the tax code. Government tax regulations allow employers to purchase insurance for employees with pre-tax dollars. Individuals, however, have to purchase a personal policy with after-tax dollars. Individuals can buy their own policies, but their money doesn’t go nearly as far. Thus, employers buy insurance for employees and employees get more insurance for their money. But they don’t get portability.
This situation can be easily remedied. Congress simply needs to change the provision in the tax code that gives employers a buyer’s advantage over employees. Let everyone-employers, employees, self-employed and unemployed-buy their insurance with pre-tax dollars. Simple, effective and safe. No quasi-socialist bureaucracy required.
Government intervention in the health care market is also responsible for rising costs. The same distortions in the tax code that prevent portability also encourage consumers to over-insure and employers to use insurance instead of higher salaries as a means of compensation.
Most of us pay through our employers for low-deductible third-party health insurance. We often buy more insurance than we need, and are charged more than is necessary, because someone else is paying-or, at least, appears to be.
We pay for insurance plans that cover not only medical emergencies, but also routine procedures, check-ups and diagnostic tests. For most of us this constitutes a waste of insurance dollars. Imagine insuring a car for oil changes and tune-ups. Such insurance would be very expensive because of the high probability of a claim.
We all could save money, therefore, by buying less insurance-by purchasing high deductible plans and establishing tax-free Medical Savings accounts for smaller medical expenses. Most high ($2500) deductible plans cost consumers about 6/100ths of penny in premiums for each dollar of coverage. Yet low deductible plans cost many times that amount for otherwise equivalent coverage.
Allowing individuals to establish tax-free “Medisave” accounts, and employers to contribute to them, would save not only insurance costs for consumers, it also would save insurance companies and doctors paperwork-estimated at about $8 per claim in the industry. It also would encourage more competitive pricing within the medical profession, thus lowering costs.
Fixing What’s Broken
These two reforms-equalizing the tax code and allowing Medisave accounts-would go a long way toward solving the health care “crisis.” Neither of these reforms are difficult to enact. Moreover, they are easy to explain to voters, especially if comparisons are drawn to other types of insurance.
Of course, other reforms could be enacted as well: tort reform to bring malpractice claims under control, tax incentives to encourage uninsured people to buy, and insurance reform to remove some impediments to coverage of pre-existing conditions.
Yet none of these changes in our system would require employer mandates, national health boards, price controls, or the regulatory overkill of the failed Mitchell-Gephart-Clinton approach. Republicans and free-market oriented Democrats need to make sure that voters understand how much could be done to fix our health care system by enhancing, rather than inhibiting, consumer freedom. If they don’t, health care reform in its old bureaucratic guise is sure to rise again.
Copyright © 1995 Stephen C. Meyer. All rights reserved. International copyright secured.