New Thinking For Health ReformCommentary by Pete du Pont
November 27, 2001
Before September 11, Congress was embroiled in a partisan fight over the Patients' Bill of Rights. This was just the latest in a seesaw process where Congress first fights over how to lower health care costs and decrease the number of uninsured, and then fights over how to ensure better coverage for those who have it, only to find themselves squabbling over the uninsured again.
A change of thinking is needed so that both goals - universal access to affordable health insurance and a high level of patient satisfaction - can be achieved simultaneously.
Early in its first term, the Clinton Administration promoted managed care as the solution to high health care costs. In a plan designed by Hillary Clinton, the government would fund a nationalized system of managed care, with competition between HMOs helping to hold down costs. The argument for HMOs was based on the thought that health costs were high, because doctors were paid per service delivered. HMOs would make physician compensation independent of the amount of service delivered, either by putting doctors on salary, or through a strict per patient payment.
While Clinton's plan was rejected, the goals were largely achieved anyway. Today, over 80 percent of employees who get health insurance from an employer are enrolled in some form of managed care.
Yet traditional fee-for-service insurance wasn't the problem. Fee-for-service is only inflationary when a third-party is paying the bill. This is true regardless of the kind of third-party payer involved - employer, insurer, or government. They will all find a way to limit their costs by restricting the supply of services available to the patient.
As managed care became increasingly unpopular, those who had previously championed its promises began to condemn its abuses. There was one consistency however: The belief that the federal government should actively solve our health care problems.
Is there a better way? Yes, but it will take a new approach - one that empowers patients and limits the government and employers to a purely financial role. This means creating a refundable tax credit for the purchase of health insurance, and shifting to more consumer-directed health insurance models.
Today's system is centered around employer-based coverage, which is free from all taxes. Yet most people who must buy their own coverage get no tax break at all. A refundable tax credit can "level the playing field" and encourage the uninsured to purchase coverage without creating new big government programs.
By making this credit universal, the government would treat everyone the same, rather than subsidizing lavish coverage for the wealthiest, while providing no subsidy for many low to middle income workers.
On a level playing field, the role of the employer would be determined in the marketplace - not by tax law. Under this system, employers would have at least three options: They could offer no health benefit; they could offer a defined contribution to the health insurance of their employee's choosing; or they could negotiate with an insurance company to offer employees the option of joining a reduced-cost group plan. Either way, the choice is the employees, not the employers or the governments. And in most cases, the employee can stay with the same policy regardless of employment status. No more constantly having to adjust to new policies. No more having to find a new doctor.
As for patient protection, nothing protects patients more than the ability to manage some or all of their own health care dollars. When patients control their money, say through a personally owned Medical Savings Account (MSA), they have the power to act in their own interest. Unfortunately, tax-free MSAs are currently available only to the self-employed and businesses with 50 or fewer employees. Moreover, for those who are eligible the law is highly restrictive. A family, for example, must have a $3,000 deductible, regardless of how much money is in the family's MSA. These restrictions and others have needlessly reduced the availability and attractiveness of MSAs.
The government should allow every American to establish an MSA - irrespective of any deductible or any other feature of the individual's insurance plan. If they could, MSAs would wrap around any health plan - paying for any services not paid by the plan itself.
If we are ever going to get off the health reform seesaw, we are going to have to think differently. It's time for the federal government to stop micromanaging, and instead empower patients and allow the marketplace to design innovative solutions based on consumer demand.