Commentary

A Blueprint for Health-care Freedom

This article appeared in the Washington Times on January 25, 2006.

The White House has been dropping hints that the president will make health-care reform the centerpiece of his State of the Union address. The Bush administration’s health care record is, to put it delicately, inconsistent. It has supported efforts to remove government influence over the health care sector, such as health savings accounts (HSAs). On the other hand, the president signed into law the largest expansion of federal power over health care in generations the ill-fated Medicare drug program.

So in an attempt to help the administration straighten up and fly right, here’s my health policy wish list for the State of the Union.

  1. Propose “large HSAs.” Federal tax laws encourage workers to surrender control over their health care to their employer. Among other things, that means that most people lose their health insurance when they leave a job.

    HSAs give some of that control back to workers. Workers and their employer make tax-free contributions into an HSA, which covers out-of-pocket medical expenses. But workers are required to purchase catastrophic coverage, with deductibles in the neighborhood of $1,000 to $5,000. For many, that makes HSAs downright unappealing.

    The president should propose using HSAs to give workers control over all their health-care dollars. First, nearly all workers and employers should be allowed to deposit the entire amount they are now spending on health benefits into a “large HSA.” Then, workers should be allowed (but not required) to use their HSA funds to purchase a health plan of their choosing, from their employer or any other source. Large HSAs would allow a worker to purchase the coverage she wants rather than what politicians or employers think she should have and that stays with her when she leaves her job. Large HSAs would also increase competition among insurers, and make health care more affordable for workers who cannot obtain coverage, either because they are too sick or too poor.
  2. Push hard for interstate commerce in health insurance. A big reason that health insurance is so expensive is over-regulation by the states and the fact that each state forbids you to buy insurance from carriers in another state. The Congressional Budget Office estimates some state regulations increase insurance premiums by as much as 15 percent.

    The Constitution allows Congress to remove such interstate trade barriers. The president already supports legislation (sponsored by Rep. John Shadegg and Sen. Jim DeMint) that would allow individuals and employers to purchase insurance from states where regulatory costs are lower. He should push Congress hard to give purchasers that freedom now.
  3. Avoid further expansions of federal power. There is no shortage of people who argue that health-care markets would work better if only we gave the federal government more power. They want taxpayer dollars to create electronic medical records. Or they want to require health-care providers to furnish price and quality information. Or they want Washington to make decisions that belong to the states, including health insurance regulation (read: “association health plans”) and medical malpractice reform.

    The president should explain that markets will deliver conveniences like electronic medical records and price and quality information just as soon as government stops monkeying with market incentives. And he should explain that expanding federal power at the expense of states is improper, because it limits individual freedom and the states’ ability to experiment.
  4. Clean up the Medicare mess. Finally, it would be nice for the president to acknowledge that the Medicare drug program that took effect this month was a huge mistake. Though the intent was to expand coverage, so far the program has caused many to lose the coverage they had, including some of the poorest and sickest seniors.

    But the worst is yet to come. The Medicare drug plans will soon begin dropping drugs and pharmacies from their plans to keep the sickest seniors away. And the cost of the program, which already looks to be twice the sticker price, will continue to outstrip projections. At a minimum, the president should commit to reforming Medicare. The program’s fiscal outlook is six times worse than Social Security’s, and the president himself is responsible for a large part of Medicare’s troubles. Absent reform, Medicare will require a tax increase equal to one-quarter of wages. It’s time for the president to start thinking about his legacy, and whether he wants that type of tax increase to be a part of it.
Michael F. Cannon is director of health policy studies at the Cato Institute and author of “Healthy Competition: What’s Holding Back Health Care and How to Free It.”