NCPA - National Center for Policy Analysis

Bush's Patient Empowerment

February 19, 2002

In his speech before the Medical College of Wisconsin, President Bush left little doubt that his vision for health care reform departs from those who have gone before him.

The solution to the problems of managed care is to empower individuals rather than large, impersonal bureaucracies. Bush proposes to empower people by (1) creating health savings accounts, (2) encouraging individuals to purchase private insurance and (3) creating new options for enrollees in government health programs.

  • He would put more money in the hands of the patient by easing restrictions to make tax free medical savings accounts (MSAs) more broadly available. For example, he would lower the required family deductible (from $3,000 to $2,000) and allow all employers to offer MSAs rather than limiting them to firms with 50 or fewer employees.
  • The President has proposed turning Flexible Spending Accounts (FSAs) into a form of MSA by allowing up to $500 in these accounts to roll over to the next year.
  • The president proposes a refundable tax credit, under which all families up to a certain income level would receive the same tax break if they purchase health insurance.

Government tax subsidies for employer-provided insurance currently total $141 billion a year. Yet people who purchase their own insurance get virtually no tax relief [See Figure I]. Moreover, the subsidies for employer-provided insurance are extremely regressive: families in the top fifth of the income distribution get almost six times as much tax relief as families in the bottom fifth. [See Figure II].

Bush wants to encourage people to voluntarily obtain private insurance. But his proposals also open the door to something desperately needed: personal and portable insurance. Individually-owned health insurance is the only permanent solution to the portability problem inherent in an employer-based health care system.

Source: John C. Goodman (NCPA president), "Two Cheers for Bush Health Plan," Brief Analysis No. 389, February 19, 2001, National Center for Policy Analysis.

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