The Health Care Road Less Traveled

Commentary by Pete du Pont

Two roads diverged in a health care woods,

And sorry they could not travel both,

Republicans chose the one less traveled by,

And that has made all the difference.

 

The Republicans are at a health care crossroads. Decisions made in the near future may determine the direction of health care reform - and the health care system - for years to come.

House Speaker Newt Gingrich recognizes the crossroads. Commenting on a recent meeting of the House GOP task force set up to consider health care reform proposals, Gingrich said: "They've made very important steps in the right direction. I just think we ought to be focusing on empowering citizens, not empowering the Washington bureaucracy," according to the Associated Press.

Considering the growing intrusion of government into every aspect of our lives, refusing to empower the Washington bureaucracy is clearly the road less traveled.

And Gingrich is absolutely right. The Republicans should be bolder in looking for ways to empower patients rather than bureaucracies, and there are at least three measures they could support that would implement that bolder, pro-patient vision.

First, give people who purchase their own health insurance a tax break comparable to the tax subsidy currently bestowed on employer-provided health insurance. Under current law, every dollar of health insurance premiums paid by an employer escapes the federal income tax, Social Security (FICA) payroll tax, and even state and local income taxes. As a result, the federal government is effectively subsidizing up to half of the cost of health insurance for many middle-income families. By contrast, the self-employed can deduct only 45 percent of the cost of their health insurance (increasing to 100 percent by 2007). The unemployed and people whose employers do not provide health insurance get virtually no tax break.

One solution to this inequity is to give people who purchase their own health insurance a tax credit. People could subtract the cost of health insurance directly from taxes owed up to, say, $2,000 for a family. Such a tax credit would cover the cost of core, catastrophic insurance, leaving people the option of paying for more extensive or elaborate coverage with their own money. The credit also could be made "refundable," so low-income families with little or no tax liability would also receive $2,000 for the purchase of insurance.

Second, health insurance should be made personal (belonging to the individual) and portable (traveling with them from job to job). Unlike auto or life insurance, people lose their health insurance when they change jobs. As an alternative to traditional group health insurance people should be able to purchase individual health insurance at group rates through their employer. Employers could still pay premiums just as they do now, but these payments would be included in the taxable income of the employees, who would receive the tax credit on their personal income tax returns discussed above. Because employees would own their policies, they would not lose coverage when changing jobs - though they or their next employer would have to take over the premium payments.

Finally, we need to give individuals control over more of their own health care dollars. Current tax law encourages employees and employers to turn all of the money over to a third party, which tries to control costs by imposing arbitrary restrictions on doctors and their patients. A better solution is to allow people to have a special type of medical savings account called a Patient Protection Account (PPA). This account would be structured like the new Roth IRA: deposits would be from after-tax income, but withdrawals for any purpose would be tax-free.

PPA funds could be used to pay for health care not covered by health plans, giving people more freedom of access and choice. This option would allow them to take advantage of the lower premiums offered by restrictive HMOs and put the savings in a PPA. Funds in the PPA could be used to pay for visits to out-of-network doctors, for drugs an HMO would not cover and for diagnostic tests the HMO would not provide - thus providing health care consumers more options in the health care marketplace.

House Speaker Gingrich is right. Republicans should be looking for bolder plans that empower patients rather than bureaucracies. So far both Republicans and Democrats have taken the health care road most traveled - and it has led them in the wrong direction. It's time to take the other fork in the road.