Good News and Bad

In the whirlwind of news this week about the Bush Administration’s health policy initiatives, a few highlights:

  • President Bush twice emphasized his plan “to give uninsured workers credits to help buy health coverage” in his State of the Union Speech on Tuesday, making the issue a top domestic policy priority. The White House and allies on Capitol Hill believe they have a winning idea to extend private health insurance to millions more Americans who are shut out of the system. The president will put $89 billion in his budget for the credits.

  • The Bush plan also would loosen the choking regulations on Medical Savings Accounts and make the accounts available to millions more Americans. And he would end the indefensible use-it-or-lose-it provision for job-based health spending accounts and allow workers to roll over up to $500 a year tax free. This is all good.

  • Then the president turned to Medicare, saying he wants Congress to help him “give seniors a sound and modern Medicare system that includes coverage for prescription drugs.” Well and good, until the White House released the details.

    The White House plan would give waivers and extra money to states to expand drug-only coverage to seniors and the disabled through Medicaid, the joint federal-state health care program for the poor. The White House plan does not advance the president’s stated goal of a Medicare system with an integrated drug benefit. The Medicaid expansion will add to the massive problems states are having with Medicaid expenses that are gobbling up their budgets. And it will put millions of seniors into an entitlement program that is developing many of the restrictions and price controls that burden all other government-controlled health programs. Medicaid expansion moves away, not toward, market-based reform.

  • And finally, the president said again he wants a patients’ bill of rights enacted this year. Joe Antos of AEI has provided us with a new Bureau of Labor Statistics report that reveals the burden employers are facing with rising benefit costs. These data clearly show what a bad idea the PBOR bill would be, especially now.

    The BLS says that for the last five years, wages and salaries have risen at a consistent rate of about 3.5% a year. Benefit costs rose at a slightly lower rate of 2 to 2?% a year from 1996-98. But in the last two years, the rate of increase in benefit costs has more than doubled, to more than 5% a year.

    Clearly, benefit costs are outstripping wage and salary costs. This is not the time to impose more costs on employers with an expensive patients’ bill of rights. It’s also no wonder that companies are finding defined contribution plans for health coverage increasingly attractive.

We provide links below to the source documents from the White House and the Department of Health and Human Services as well as the BLS.

Grace-Marie Turner

President’s State of the Union address:
HHS press release on the President’s budget:
White House fact sheet on strengthening Medicare:
BLS employment cost index:

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

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