Two Visions of Health Reform

Health reform is now center stage as President Bush and a broad coalition of interest groups in separate events pledged help to 40 million Americans without health insurance. However, their visions of how to achieve this goal are likely to take them in very different directions.

In a speech at the Medical College of Wisconsin, President Bush painted a vision of “a modern, innovative health care system” that continues to produce the new medicines and medical devices that are among “America’s greatest contributions to mankind.”

A day later, a coalition of 12 business and labor groups, ranging from the AFL-CIO and Families USA to the U.S. Chamber of Commerce and the American Medical Association, came together to say that the U.S. health care system is in crisis and that America’s biggest challenge is extending health coverage to the uninsured. They will spend $10 million on television ads to generate public support.

While they rightly agree that access to health coverage is critically important, several members in this “Covering the Uninsured” coalition, such as Families USA, want to achieve universal coverage through broad expansion of government-run health care programs.

It would be unfortunate if the business groups in the coalition were to be lured into the trap of helping these determined groups to further advance their agenda of vastly expanding government entitlement programs like Medicaid.

The modern medical miracles that distinguish the U.S. health care system rely on a private health care system that provides incentives for innovation.

Government-controlled health care programs everywhere, even Medicare and Medicaid in the United States, are characterized by price controls and restrictions on access to new therapies – killers of incentives for innovation.

Expanding access to health coverage through government-run programs clearly is at odd’s with Mr. Bush’s vision of “a modern, innovative health care system that gives patients more options and fewer orders, strengthens the doctor-patient relationship?and continues to attract the best and the brightest to the medical profession.”

Medicare and Medicaid’s combined 130,000 pages of regulation bury doctors under mountains of paperwork that distract them from patient care and extinguish the incentive for creative, cost-effective medical treatments.

Mr. Bush is providing a new set of incentives to put that control in the hands of citizens to make their own choices in a competitive, free market.

He would allow people to create tax-free “personal health accounts” to purchase routine health care services, without bureaucrats looking over their shoulders, coupled with insurance for bigger bills. He also would allow small businesses to join together to get better prices on health insurance by creating bigger risk pools.

And for the uninsured, he would provide “health credits” of $1,000 for individuals and $3,000 for families to give them tangible help in purchasing private health insurance.

The credits would be refundable if taxpayers owed few or no taxes, and they could be advanceable-meaning people wouldn’t have to wait until they file their taxes to get the funds.

Wharton economist Mark Pauly has produced several studies showing that credits would provide a powerful incentive for the uninsured to purchase health coverage. One study showed that 75% of the uninsured would buy a policy if they received a credit worth 66% of the premium cost.

eHealthInsurance, an on-line health insurance brokerage, produced a study last summer showing that the average premium for individual and family policies purchased through the company ranged from $1,200 to $1,500 a year per person – clearly within the coverage range Pauly cites.

Eighty percent of the uninsured are workers or dependents of workers. To get coverage, they could be shoved into a welfare entitlement program like Medicaid, as Families USA wants, or have the dignity of private health insurance like nearly 180 million Americans with job-based coverage, as Mr. Bush proposes.

If tax credits were enacted, the market for private health insurance would be transformed so that health insurance would become more affordable as people shop for the best deal and buy the coverage that best suits the needs of their families.

The idea of providing health credits has bipartisan backing with bills introduced by Sen. John Breaux (D-LA), Sen. James Jeffords (I-VT), House Majority Leader Dick Armey (R-TX), Ways and Means Committee Chairman Bill Thomas (R-CA), and others.

Mr. Bush’s plan would facilitate a change toward consumer-driven health care that can show the world it is possible to build a system that provides health care for all and still provides the rewards to achieve the promises of tomorrow’s medical miracles.

Grace-Marie Turner is president of the Galen Institute, a not-for-profit public policy research organization that focuses on free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320.

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