Bush's healthcare vision
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December 06, 2004 12:00 AM

Bush's healthcare vision

He seeks new models of financing and delivery in incremental steps

Robert Moffit
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    In federal healthcare policy, George W. Bush may emerge as the most consequential president since Lyndon B. Johnson. He has presided over the largest expansion of the Medicare program-the addition of the prescription drug benefit-since the Great Society. And he has helped create individual tax relief in the form of the recently enacted health savings accounts, which are both personal and portable. These accounts, coupled with Bush's innovative insurance market reforms and medical liability proposals, could end up transforming the nation's healthcare system.

    Bush's proposals would effect qualitative changes in the financing and delivery of care, resulting in greater personal ownership and control over health insurance policies.

    According to a survey commissioned by the Blue Cross and Blue Shield Association, healthcare ranked third as a voter concern that the president and Congress should address next year.

    Nevertheless, even major changes should be accomplished by incremental steps. While Americans often tell pollsters they want major changes in the healthcare system, they also say they're overwhelmingly satisfied with their health insurance, their physicians and the care they receive. Americans are living longer, and are generally healthier and wealthier than ever before. Over the past 20 years, there has been a 50% decline in mortality from heart disease, a 20% decline in disability among senior citizens, serious progress against cancer and dramatic advances in biomedical research.

    Americans are practical. They want to see Congress and the president fix what is broken, and not break what is already fixed.

    What's broken? Costs are too high, too many Americans lack coverage, and health insurance markets are increasingly less competitive. Americans also know that doctors are demoralized as their control over key decisions erodes. The trick is to address what's wrong with the healthcare system while retaining what's right.

    Progress is possible in three areas next year:

    * Expanding private-sector insurance coverage. Today, if you're an American citizen, you get tax relief for the purchase of health insurance only through your place of work. If you work for a big company, you get a chunk of tax-free income. If you work for a small company and your employer offers you nothing, you get nothing. The current tax treatment of health insurance undermines the portability of insurance, fuels higher costs and almost exclusively favors upper-income folks. It is not surprising that the bulk of the uninsured are low-income working people who are between jobs or are employed by small businesses that do not offer health insurance coverage.

    There is a consensus on the use of tax credits to expand coverage, reflected in the fact that both Bush and his defeated challenger, Sen. John Kerry, proposed them. An individual tax credit for the uninsured, targeted to those who work in small businesses, could achieve the best results. As Urban Institute analysts John Holahan and Jack Hadley estimate, the cur- rent expense of caring for the uninsured already costs Americans more than $40 billion annually, mostly in additional government expenditures. Tax credits for working families therefore should be generous and progressive, with more help going to low-income people or those with high healthcare costs.

    * Increasing options for employees in small businesses. Small group markets are plagued with high costs, particularly administrative costs, and small businesses are not the best vehicles for expanding coverage, even to their own workers. Small group markets are artificially small, increasingly dominated by state or geographically based oligopolies, and dysfunctional as the playing fields of real consumer choice and competition.

    The president wants to create association health plans, where individuals, families and small employers can band together in pools to secure more affordable healthcare options. These pools could be expanded beyond employment-based association plans to include new health plans sponsored by unions, trade associations, and fraternal, ethnic and even religious organizations.

    * Creating national and regional health insurance markets. As professors Regina Herzlinger and Michael Porter of Harvard University argue, we don't have the breadth of competition among plans or the intensity of competition among doctors and other medical professionals that would maximize the efficiency of America's healthcare system. We have expanding information technology and a potential treasure trove of information on the performance of health plans, providers and medical outcomes, but ordinary people still can't act directly on that information without running into outdated market restrictions, regulatory obstacles or tax penalties.

    One solution is to promote a robust interstate commerce in health insurance products, laying the groundwork for regional and national health insurance pools. So, instead of having small groups of 10 to 50 employees, the market could encompass plans with large groups of enrollees, able to purchase plans from Seattle to Orlando. These large pools, coupled with an infusion of younger, previously uninsured enrollees, could cut administrative costs, reduce average claim costs and expand consumer options. The trade-off would be federal rather than state regulation of these products.

    Americans can't get everything they want for free. But that doesn't mean Congress and the president can't take bold steps in 2005 to fix the urgent problems of our healthcare system.

    Robert Moffit is director of the Center for Health Policy Studies at the Heritage Foundation, Washington.

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