Opinion Editorial | |
| Thursday, May 28, 1998 | |
The Health Care Road Less TraveledPete du PontFormer Governor of Delaware, is Policy Chairman of the National Center for Policy Analysis |
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
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