How Not to Negotiate

by Michael F. Cannon

To put it mildly, the current Medicare debate is not the conservative movement's finest hour. Not only are a Republican president and Congress doing everything they can to create an explosive new entitlement, but key conservative groups are attacking one of few genuine free-market reforms before the House-Senate conference committee. These conservatives have managed a trifecta: a policy, tactical, and political blunder - all before the relevant negotiations have begun.

A Policy Blunder. The great object of health-care reform is to reduce government influence over consumers' choices. In private health-insurance markets, this means evening out the tax treatment of untaxed employer-provided health benefits and other types of health-care financing.

Until this year, the most conservatives had argued for was to enhance and expand eligibility for Archer Medical Savings Accounts (MSAs), which extend tax-preferred status to savings accounts dedicated for medical expenses (self-insurance) so long as they are coupled with high-deductible third-party insurance. While expanded MSAs would improve upon current law, the government still would play a paternalistic role, dictating that consumers must purchase a particular type of insurance in order to receive equitable tax treatment for self-insurance.

In June, House Ways & Means Committee Chairman Bill Thomas (R., Calif.) moved the ball forward. To attract conservative votes for an unsavory Medicare bill, he attached to it a measure that would expand MSAs but also would create a new type of tax-preferred health account. Health Savings Security Accounts (HSSAs) would further reduce government paternalism, notably by allowing more health-insurance choices. Even those who do not want or cannot find health insurance would qualify. (Eligibility would be restricted by income, a provision that should be removed.)

A number of MSA supporters have attacked HSSAs. As it happens, some of them represent companies that sell the insurance HSSA holders would not have to buy. Though their attacks are as easily answered as the Left's well-worn criticisms of MSAs, they are crippling future efforts to reduce government paternalism beyond what the pending MSA expansion would achieve.

A Tactical Blunder. That is, if we can achieve an MSA expansion. The merits of HSSAs aside, attacking them now makes an MSA expansion less likely.

Were conservatives united behind the Thomas bill, House Republicans would enter the negotiations with more political capital. Yet conservative attacks on HSSAs diminish HSSAs' value as a bargaining chip and increase the likelihood that the MSA expansion itself will be traded away.

"Don't negotiate with yourself." "Ask for a whole loaf, get half a loaf." Whatever your preferred adage, the upshot is the more these groups attack HSSAs, the more likely we all are to walk away from the Medicare negotiations without an MSA expansion.

A Political Blunder. And it could come back to haunt them. Picking the pocket of a Ways & Means Committee chairman during a high-stakes negotiation is not the height of political savvy. Particularly when he is trying to help you. To be fair, some MSA supporters are still smarting from the Thomas bill's haphazard evolution. To be blunt, they should get over it. Rep. Thomas more than made up for any mistakes by advancing a health care bill better than anyone expected.

MSA supporters are on the vanguard of health-care reform. Unfortunately, some of them are endangering their signature issue and crippling the next step in health-care reform by attacking a good idea that happens not to be their own.

- Michael F. Cannon is a senior fellow at the National Center for Policy Analysis .