Leading policy-makers and scholars explain how market forces, deregulation, and consumer choice can work to improve health care for all Americans.


The Health of a Nation
Alan Hubbard, The New York Times, 4-3-06

Hubbard, director of the National Economic Council and an economic policy advisor to President Bush, argues here that "to control health care costs, we must give consumers an incentive to spend money wisely."

Health care is expensive because the vast majority of Americans consume it as if it were free. Health insurance policies with low deductibles insulate people from the cost of the medical care they use—so much so that they often do not even ask for prices. And people don't recognize the high premium costs of this low-deductible insurance because premiums are paid by employers. Finally, the tax code subsidizes these expensive, employer-purchased insurance policies.

To control health care costs, we must give consumers an incentive to spend money wisely. We can do this by encouraging the purchase of high-deductible policies and providing the same tax benefits for out-of-pocket health spending that employer-provided insurance enjoys. The overall cost to the consumer will be no greater than it is now and, in most cases, significantly lower. And no consumer is better than the American consumer at driving prices down and quality up.

The president has proposed a package of reforms that will spur such changes by building on the success of consumer-directed Health Savings Accounts and the insurance policies that go with them.

The president's reforms would make these plans even more attractive by providing payroll tax relief to those who hold Health Savings Accounts (currently the accounts are only exempt from income taxes); giving employers more incentive to offer and contribute to the accounts; and making it easier for consumers to get the information they need to make good decisions about the health care they purchase.

Hubbard's points are certainly well taken. HSAs are a valuable tool for empowering consumers and will help lower costs and improve health care quality. But we shouldn't consider them the only tax-advantaged insurance option for consumers: patients with expensive chronic diseases like diabetes should be able to choose insurance policies where preventive care kicks in after a low-deductible, in return for higher-premiums.

Project FDA.
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