Patient Power: The Cato Institute’s Plan for Health Care Reform

October 4, 1993 • Briefing Paper No. 19

The crisis of soaring health care costs has one fundamental cause: people are usually spending someone else’s money when they purchase health care services. The rise of third‐​party payment has created an incentive structure that makes runaway spending inevitable. Health insurance is now the equivalent of auto insurance that covers fill‐​ups and oil changes.

The Cato Institute’s Patient Power plan for health care reform seeks to put control over spending back in the hands of individual patients. Under the Patient Power plan, people could make deposits to tax‐​free Medical Savings Accounts to finance routine medical expenses. Workers currently covered by employer‐​provided insurance could fund their MSAs by switching from low‐​deductible policies to high‐​deductible catastrophic policies and depositing the premium savings. Furthermore, the Patient Power plan would eliminate the arbitrary discrimination of today’s tax system and allow all Americans, regardless of employment status, to claim tax benefits for purchasing catastrophic insurance and making deposits to Medical Savings Accounts.

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