Sen. John Kerry views the sharp decline in the number of Americans with job-based health insurance as a problem to be fixed. President Bush sees it as a signal for change.
The way the two presidential candidates would solve the problem highlighted in recent a Census Bureau report on the uninsured gives voters a clear choice between their different philosophies of individual or collective control over health insurance.
Mr. Bush says he wants to cultivate an ownership society where consumers would have more options in how they obtain health insurance. Ownership brings ?security, and dignity, and independence,? he said in his acceptance speech in New York last month.
Mr. Kerry would add millions more Americans to the rolls of government-run entitlement programs and underpin job-based coverage where consumers have limited control over coverage decisions.
Mr. Bush has offered a new set of health initiatives consistent with his vision of an ownership society, and nowhere is ownership needed more than in health care. Most of the intractable problems in the U.S. health care system are rooted, not in too little government spending, but in the lack of a properly functioning market.
Finding new solutions means looking at how we are subsidizing health insurance today. Workers get a generous tax subsidy ? worth $186 billion this year ? if the employer writes the check for the policy.
To show how bizarre this system is, imagine that the U.S. tax system allowed a deduction for home mortgage interest only if your employer made your house payment.
Employers would decide where you would live and how many bedrooms and bathrooms you could have. You and your fellow workers would demand bigger houses and would be angry when your employer refused. Worst of all, you would lose your home if you lost your job. And pity the poor workers whose employers couldn?t afford to buy them houses.
This sounds crazy, but that?s how we subsidize health insurance for 175 million Americans.
The tax subsidies hide the cost of the policy and the full costs of health services from consumers, creating a dysfunctional market that drives up both spending and the number of uninsured. Worse, employers in the business of making widgets are making health coverage choices that could have life and death consequences for workers and their families.
Mr. Bush?s proposals would give consumers new incentives to own their health insurance.
? He would build on the most transformative piece of health care legislation enacted on his watch ? Health Savings Accounts, which work much like 401(k)s. HSAs allow individuals and employers to put aside money tax free to pay for routine health costs. Whatever people don?t spend can be rolled over year to year and saved for future needs. The account is owned by the individual and is portable from job to job.
Because small employers struggle hardest to provide health insurance, Mr. Bush would help them establish HSAs for their workers. Employers would get a rebate of up to $200 for individuals and $500 for families if they make HSA deposits for employees ? subsidies that are visible, portable, and budgetable.
? In addition, the president would build on his earlier proposal of providing refundable tax credits to the uninsured by giving them the option of splitting the subsidy, putting part of it aside to purchase a high-deductible health insurance policy and depositing part into an HSA. Uninsured families could get a $1,000 contribution to their HSA, with a $2,000 refundable credit to help purchase a high-deductible health plan.
? He also proposes allowing individuals to deduct the cost of the health insurance they must buy to accompany their HSA. But buying the policy is a problem in many states. States like New York and New Jersey have so over-regulated their health insurance markets that an average policy is prohibitively expensive.
President Bush would set up competition by allowing people to buy health insurance across state lines. Some health insurance policies in New Jersey cost $3,800 or more a month, largely because the state says people can wait until after they get sick to buy insurance and still pay the same premiums as others who have been paying all along.
This drives up the costs, as do an excessive number of mandates on what the insurance must cover. Citizens have two choices: either pay the price or do without. Allowing people to buy insurance across states lines gives them a third option ? to look for a better deal in Pennsylvania, Delaware, or elsewhere.
The president?s proposals help people begin to differentiate between paying for routine health costs and catastrophic expenses. Too often, people think of health insurance as offering a $10 doctor?s visit and a $15 fee for prescriptions. But when people are seriously ill or injured, what they really need is help in paying huge medical bills.
People don?t buy homeowners insurance to have the front door painted; they buy it to repair the damage from a fire or a major storm. Health insurance should work the same way. Mr. Bush?s proposals provide new incentives for people to buy real insurance while still providing a cushion of funds to pay for routine expenses.
About five percent of Americans buy their own health insurance policies. Last year, they paid an average of about $1,800 a year for individual coverage and $3,300 for a family policy ? about one-third the cost of employer coverage.
Mr. Bush is banking that people will shop for more economical high-deductible policies and that more Americans will be able to buy coverage as a result. Making costs more visible also will encourage consumers to make more efficient use of health care services, especially when they can participate in the savings.
Not all of Mr. Bush?s health initiative is based upon expanding the free market: Like Mr. Kerry, Mr. Bush would ?launch an aggressive, billion-dollar effort to enroll children? into Medicaid and the State Children?s Health Insurance Program (SCHIP).
Both Kerry and Bush would offer some form of refundable tax credits for health insurance, both would encourage greater adoption of information technologies in the health sector, and both would create new purchasing pool options for individuals and businesses.
But the differences in cost and in vision are striking. Joseph Antos of the American Enterprise Institute and a team of analysts found that the Kerry plan would cost taxpayers $1.5 trillion over 10 years, providing insurance to 27 million more Americans. The Bush plan would cost $129 billion and would cover 7 million.
Mr. Kerry would end HSAs while expanding Medicaid and SCHIP dramatically. He also would virtually eliminate the role of private insurance by creating a new subsidy for employers in which the government would pick up most health costs above $30,000 for any worker in exchange for companies agreeing to cover all of their workers.
Tying health insurance to the workplace is out of step with the economy. Using billions of dollars in taxpayer money to patch together a system that was adequate, at best, for the last century looks to the past. But allowing more individual ownership of health insurance looks to the future of a mobile, flexible workforce and allows competition to expand choices and lower costs.
Swing voters trying to decide between President Bush and Sen. Kerry need look no further than their health reform plans to decide which direction they choose.
Grace-Marie Turner is president of the Galen Institute, a research organization in Alexandria, VA, focusing on free-market health policy ideas.