The Real Patient Protection Is Patient Power

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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 meanspiritedor cheap or indifferent to the needs of their workers. They will have noother option, because they will no longer be able to afford the escalatingcosts. The Congressional Budget Office estimates that either of theproposals will add 4.8 percent to an employer's premium in a year whenhealth care costs are already increasing between 8 and 15 percent for mostemployers. Employers will also be forced to cope with a whole new set ofadministrative responsibilities that aren't counted as part of the premiumincrease.

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

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

Medical Savings Accounts (MSAs) are a relatively new idea that was approvedby Congress three years ago. MSAs allow workers to choose a low-costinsurance plan and put the money they save into an account to pay directlyfor health services not covered by the insurance plan. It's a good idea,but Congress made MSAs available only to employers with 50 employees orfewer and weighted down the accounts with so many complicated rules thatvery few employers can understand how the plans work. So most of youreading this probably do not have an MSA. It's a shame, because if you didyou would have a source of money to pay for your health care if you findyourself 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. Rightnow, if your employer buys health coverage for you, you get the benefitsabsolutely free of state and federal income and payroll taxes, withoutlimit. But if you must pay for your own health insurance, you get no taxbreak at all. Every penny is paid with after-tax dollars, which means mostpeople 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 whoget coverage through their jobs, the effective cost of coverage would be cutnearly in half, allowing many millions of the currently uninsured to gethealth insurance.

Access to MSAs and tax fairness would create a safety net for those whoseemployers do not provide coverage or who are going to drop employees'coverage if and when the "patient protections" become law. In fact, both ofthose ideas begin to break the dependency between the worker and the bosswhen it comes to health insurance. Furthermore, MSAs and tax equitytogether 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 thecustomers;
  • Making employees more aware of the cost consequences of their lifestyleand consumer spending decisions;
  • Solving the problem of employer exemption from state contract and tortlaw, 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 HMOwho doesn't want to be.

Congress should have enacted these provisions before considering new lawsthat may force some employers to drop coverage. In fact, if Congress hadenacted these safety-net provisions first, it may have discovered there wasno longer a need to attach more regulation onto employer benefit plans.Workers would have been empowered to make their own decisions, and there isno greater patient protection than patient power.

Greg Scandlen

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