Commentary

The Real Patient Protection Is Patient Power

By Greg Scandlen
July 23, 1999
It’s not easy to make predictions about politics, economics or health care. But one prediction can be guaranteed: No matter which party’s version of the “Patients’ Bill of Rights” passes in Congress, some employers are going to drop their employee health coverage. Their employees will join the growing ranks of the uninsured, now numbering 43 million.

Those employers will drop their coverage not because they are meanspirited or cheap or indifferent to the needs of their workers. They will have no other option, because they will no longer be able to afford the escalating costs. The Congressional Budget Office estimates that either of the proposals will add 4.8 percent to an employer’s premium in a year when health care costs are already increasing between 8 and 15 percent for most employers. Employers will also be forced to cope with a whole new set of administrative responsibilities that aren’t counted as part of the premium increase.

We can’t know how many employers will drop health care or how many workers will be affected. These exact numbers will depend on hammering out a lot of little details in the legislation. And Congress may decide it’s worth it — that the benefits of adding new regulations outweigh the costs of having more people uninsured. But that isn’t very comforting if you are one of those people about to lose your health insurance.

But comforting the uninsured is not a very high priority for Congress. If it were, Congress would have expanded Medical Savings Accounts and extended the same tax breaks to the uninsured that big corporations already get.

Medical Savings Accounts (MSAs) are a relatively new idea that was approved by Congress three years ago. MSAs allow workers to choose a low-cost insurance plan and put the money they save into an account to pay directly for health services not covered by the insurance plan. It’s a good idea, but Congress made MSAs available only to employers with 50 employees or fewer and weighted down the accounts with so many complicated rules that very few employers can understand how the plans work. So most of you reading this probably do not have an MSA. It’s a shame, because if you did you would have a source of money to pay for your health care if you find yourself out of work or if your employer has to drop your coverage.

Congress should allow every American who wants an MSA the chance to get one. Congress could also help the uninsured through greater tax fairness. Right now, if your employer buys health coverage for you, you get the benefits absolutely free of state and federal income and payroll taxes, without limit. But if you must pay for your own health insurance, you get no tax break at all. Every penny is paid with after-tax dollars, which means most people have to earn about $7,000 just to pay for a $4,000 insurance policy. If workers without job-based insurance were treated the same as workers who get coverage through their jobs, the effective cost of coverage would be cut nearly in half, allowing many millions of the currently uninsured to get health insurance.

Access to MSAs and tax fairness would create a safety net for those whose employers do not provide coverage or who are going to drop employees’ coverage if and when the “patient protections” become law. In fact, both of those ideas begin to break the dependency between the worker and the boss when it comes to health insurance. Furthermore, MSAs and tax equity together have a lot of beneficial effects, including

  • Allowing workers to choose their own health plans;
  • Forcing health plans to serve workers better, since the workers are the customers;
  • Making employees more aware of the cost consequences of their lifestyle and consumer spending decisions;
  • Solving the problem of employer exemption from state contract and tort law, since the workers are buying individual plans;
  • Fixing the problem of “job lock,” since the plans are completely portable; and
  • Ending the backlash against managed care, since no one has to be in an HMO who doesn’t want to be.

Congress should have enacted these provisions before considering new laws that may force some employers to drop coverage. In fact, if Congress had enacted these safety-net provisions first, it may have discovered there was no longer a need to attach more regulation onto employer benefit plans. Workers would have been empowered to make their own decisions, and there is no greater patient protection than patient power.

Greg Scandlen is a fellow in health policy at the Cato Institute.