Pro Sweeping Change for Health Reform

It is time for Congress to again tackle sweeping health care reform – sweeping aside bureaucratically-driven programs and ushering in a new era of consumer-driven health care.

Political leaders have been trying for decades to increase the number of Americans with health insurance. Congress has enacted new programs to covered uninsured children, and states have significantly expanded access to health coverage through Medicaid.

Despite these expansions, 41 million Americans lacked health insurance at last count, two million more than a decade ago.

It’s clear that the old solutions aren’t working.

Amazing as it may seem, the one thing that we haven’t tried in our capitalistic economy is a new free-market approach to put consumers in charge of making decisions about their health care.

An in-depth survey called Women’s Voices 2000 showed that women strongly believe they could pick better health plans for their families than the managers in their human resources departments do today.

Yet most Americans who get their health insurance through their jobs don’t have a choice. Either they take what their employer offers or they are on their own.

The reason: As long as the employer writes the check for health insurance, it is tax free both to the workers and the employer. Workers can save thousands of dollars in taxes this way. If they want to buy health insurance on their own, they have to spend after-tax dollars.

There is a better way. If the tax break for health insurance were targeted to individuals, people could become consumers again, shopping for the best value.

That doesn’t mean that people start asking questions about costs when they are wheeled into an emergency room after a car accident. It does mean that they can sit around their kitchen table with their family and decide what insurance protection they want if accidents or illness strike.

Political leaders have micro-managed health care for nearly half a century. Federal, state, and local governments pay 45% of the costs in our $1.4 trillion health sector. And government heavily regulates the 55% paid by the private sector.

This top-down regulatory and financing approach is ill-suited for an information age where people want control over decisions.

President Bush and a tri-partisan group of congressional leaders have proposed a system of refundable tax credits, targeted to lower and middle-income uninsured Americans, to help them purchase private health insurance. Under the Bush proposal, the credits would be worth up to $1,000 for an individual and $3,000 for a family.

Mark Pauly, a respected economist at the University of Pennsylvania, says that a credit covering half to two-thirds of the cost of premiums could cut the number of uninsured in half.

The on-line health insurance brokerage, eHealthInsurance, says that a $1,000 annual credit for health insurance would cover more than half of the average $1,871 cost of a policy the company sold last year.

With tax credits targeted to individuals, new buying groups will be created through churches, professional associations, or other trusted affiliations to offer group rates and more savings.

Individual tax credits would usher in an era of sweeping change in our health care system, providing coverage to millions more Americans. The next step would be to allow those on Medicare and Medicaid more choice, giving them options to choose coverage that suits their needs rather than having Washington decide for them.

This would begin the transition toward a health sector that responds to the needs of patients, not bureaucrats, and that puts the genius of American consumers to work to demand lower costs and the best value for their health care dollars.



Grace-Marie Turner is president of the Galen Institute, a research organization dedicated to free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or at galen@galen.org

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It is time for Congress to again tackle sweeping health care reform – sweeping aside bureaucratically-driven programs and ushering in a new era of consumer-driven health care.

Political leaders have been trying for decades to increase the number of Americans with health insurance. Congress has enacted new programs to covered uninsured children, and states have significantly expanded access to health coverage through Medicaid.

Despite these expansions, 41 million Americans lacked health insurance at last count, two million more than a decade ago.

It’s clear that the old solutions aren’t working.

Amazing as it may seem, the one thing that we haven’t tried in our capitalistic economy is a new free-market approach to put consumers in charge of making decisions about their health care.

An in-depth survey called Women’s Voices 2000 showed that women strongly believe they could pick better health plans for their families than the managers in their human resources departments do today.

Yet most Americans who get their health insurance through their jobs don’t have a choice. Either they take what their employer offers or they are on their own.

The reason: As long as the employer writes the check for health insurance, it is tax free both to the workers and the employer. Workers can save thousands of dollars in taxes this way. If they want to buy health insurance on their own, they have to spend after-tax dollars.

There is a better way. If the tax break for health insurance were targeted to individuals, people could become consumers again, shopping for the best value.

That doesn’t mean that people start asking questions about costs when they are wheeled into an emergency room after a car accident. It does mean that they can sit around their kitchen table with their family and decide what insurance protection they want if accidents or illness strike.

Political leaders have micro-managed health care for nearly half a century. Federal, state, and local governments pay 45% of the costs in our $1.4 trillion health sector. And government heavily regulates the 55% paid by the private sector.

This top-down regulatory and financing approach is ill-suited for an information age where people want control over decisions.

President Bush and a tri-partisan group of congressional leaders have proposed a system of refundable tax credits, targeted to lower and middle-income uninsured Americans, to help them purchase private health insurance. Under the Bush proposal, the credits would be worth up to $1,000 for an individual and $3,000 for a family.

Mark Pauly, a respected economist at the University of Pennsylvania, says that a credit covering half to two-thirds of the cost of premiums could cut the number of uninsured in half.

The on-line health insurance brokerage, eHealthInsurance, says that a $1,000 annual credit for health insurance would cover more than half of the average $1,871 cost of a policy the company sold last year.

With tax credits targeted to individuals, new buying groups will be created through churches, professional associations, or other trusted affiliations to offer group rates and more savings.

Individual tax credits would usher in an era of sweeping change in our health care system, providing coverage to millions more Americans. The next step would be to allow those on Medicare and Medicaid more choice, giving them options to choose coverage that suits their needs rather than having Washington decide for them.

This would begin the transition toward a health sector that responds to the needs of patients, not bureaucrats, and that puts the genius of American consumers to work to demand lower costs and the best value for their health care dollars.



Grace-Marie Turner is president of the Galen Institute, a research organization dedicated to free-market ideas for health reform. She can be reached at P.O. Box 19080, Alexandria, VA 22320, or at galen@galen.org

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About the author