Health Care Reform: Regulation or Patient Choice?

Commentary by Pete du Pont

The biggest public policy debate in Washington right now is over managed health care reform. Democrats, who have been trying to control the health care system since the introduction of the Clinton health care plan are pushing massive new government controls.

Though many Republicans have also supported managed care reform -- indeed, the initial momentum for reform came from a number of Republicans -- they don't want to be nearly as "invasive," to use a medical term. They want to ensure that patients are getting quality care without trying to micromanage the health care system. That's a job for physicians, not politicians.

Remember, it was Congress that created that friend of consumers and respecter of rights, the Internal Revenue Service, almost a century ago. We don't want it doing the same for health care.

However, there are two significant differences between the Democratic and Republican approaches: the Democrats want to enhance the role of ambulance chasers, while the Republicans want to enhance the role of patient choice.

The Democrats intend to achieve their goal by making health plans and employers subject to legal liability. Democrats and the American Medical Association reason that increasing liability will increase the quality of care. All it will actually do is increase the number of lawsuits. Instead of just suing physicians, patients and their trial lawyers will simply include health plans, insurers and employers in the suits.

The Republicans, by contrast, hope to achieve their goal of expanded patient choice by reforming the Medical Savings Account legislation. Although more than 100,000 MSAs -- qualified tax-free personal savings accounts that must be combined with high-deductible health insurance -- have been sold since Congress created a demonstration project in 1996, restrictions on MSAs imposed by Congress have hampered their popularity and discouraged sales.

For example, the current pilot program permits up to 750,000 families over a four-year period to have an MSA, but they are currently available only to the self-employed and to small businesses with 50 or fewer employees. Major insurers are reluctant to enter so small a market since its size does not warrant the marketing of a new product. To remedy this problem, Republicans have proposed lifting the 750,000 cap and the company-size limitations to allow anyone to have an MSA.

Another restriction is that MSA plan deductibles cannot be lower than $1,500 for individual policies and $3,000 for families. While these deductibles are not unusual among standard high-deductible plans, they are intimidating to many middle-income Americans, especially those used to low deductibles. In addition, the deductible makes it difficult for insurers to create a plan that meets consumer needs. To remedy these problems Congress should lower the minimum deductibles at least to $1,000 and $2,000, respectively.

And then there is the problem of out-of-pocket expenses. Tax-free MSA deposits are limited to 65 percent of the individual deductible and 75 percent of the family deductible. The remaining gap could leave individuals and families exposed to significant out-of-pocket expenditures. A better approach is to allow people to deposit the entire amount of deductible in their MSA accounts.

While the MSA demonstration project was a step in the right direction, it needs some adjustments. Lifting the restrictions on MSAs would encourage the health insurance industry to promote the concept more aggressively. Since MSAs encourage people to become more prudent shoppers of health care, increasing the potential market for MSAs would help slow the growth in health care costs. In addition, experience in the demonstration project shows that many of those who purchase MSA plans are people who otherwise would elect to remain uninsured.

Unfortunately, most Democrats opposed the creation of tax-free Medical Savings Accounts in 1996 and they oppose their reform today. The administration has stated that including MSA reform in the health care bill would be a "poison pill."

But if the Democrats are railing against the insurers and managed care companies for not providing the proper care, why wouldn't they support MSA? They say they don't want an insurer standing between a doctor and his or her patient. But if that's the goal, then the solution is to give patients more control over their money so that they, in consultation with their physicians, can make decisions for themselves.

And that's what Medical Savings Accounts are intended to do: return money to the patient and let the patient decide. But then, we wouldn't need a politician or a trial lawyer involved in our health care decisions. Maybe that's why Democrats oppose MSAs.