BILL BRADLEY'S PROPOSAL for replacing Medicaid with tax credits for the private purchase of health insurance drew a furious attack from A1 Gore, but it deserves a closer look. Tax credits have two substantial advantages as an approach to health coverage: They break the arbitrary link between employment and health insurance, and they free the individual to shop for an affordable health plan tailored to his needs. Republicans, and voters generally, should pay attention: Bradley's plan is in step with what more and more people and businesses are coming to see as the best response to their complaints about health insurance.

What ails the American health care system, at bottom, is third-party control. Even in an age when 43 percent of Americans own stock and most manage their own financial affairs, few Americans buy their own health insurance. The government (if they are poor or old) or their employer does this for them, and it does so with less cost-consciousness and less attention to their individual needs than they would exercise if they were shopping for themselves and paying with their own money. As for the problem of the uninsured, it is not a matter of poverty. Most people without health insurance are employed -- as consultants, entrepreneurs, employees of small businesses, and low-wage workers. Most are in good health and use little health care. When they decide to forgo expensive insurance, they take a calculated risk.

Bill Bradley's proposal does not tackle third-party control head-on. He has not vowed to reform the employer-based system, which created the present mess. Neither he nor Gore has seized on the growing trend among businesses to give workers cash and let them buy their own health care. Xerox, for example, is moving as fast as it can toward a "defined dollar contribution" for health insurance. Patricia Nazemetz, vice president for human resources, explains that Xerox wants "to convert benefit dollars back to pay . . . so people can choose . . . and tailor their choices to their needs."

Still, Bradley's plan would move our health care system in the right direction. Tax credits belong to individuals regardless of their employment status. And, by promoting choice, tax credits would create competition likely to force down the cost of insurance and so entice some of the uninsured into the marketplace. By contrast, Gore's proposal to expand a government program called Kidcare as a catchall for the uninsured has none of these virtues. What's more, all but three states have opted to operate Kidcare as part of Medicaid, so the Gore plan amounts to shoving all the uninsured into Medicaid.

Second, while Bradley's plan is expensive -- it would give a $ 5,000 tax credit to every adult with an income up to 200 percent of the poverty level and every child up to 300 percent of poverty -- it would encourage cost-containment, since people who are paying for health insurance with a fixed amount of money are less likely to overconsume.

Finally, there are the matters of convenience and quality. Both Medicaid and Kidcare have failed miserably to attract millions of children who are eligible for benefits, despite aggressive enrollment efforts in the past three years. It is puzzling that Gore would use a program with such a record as the basis for universal coverage. Bradley takes as his model the Federal Employee Health Benefits Program, a popular and well-run program that offers 9 million federal workers dozens of health plans to choose from.

The failure of Kidcare to attract subscribers is related to the quality of the product offered. The traditional Medicaid program, which Gore so devoutly defends, treats its "customers" with contempt. Studies show children in Medicaid are less likely to have a regular doctor, and more likely to visit an emergency room and have unmet medical needs, than children with private insurance. Asthmatic children on Medicaid, in particular, are less likely to receive care from a specialist. Bradley offers Americans an escape from Medicaid, while Gore would lead families on a forced march into the program.

Bradley is on the right track, and so are those Republicans who are pushing incentives for the private purchase of individual insurance. According to a report released by the consulting and accounting firm KPMG, most employees and nearly half of employers would favor a health insurance system in which workers received a fixed amount of money to spend on health care. The tax credit idea has bipartisan support -- including, word has it, the tacit approval of George W. Bush.

The next step is to articulate policies that encourage businesses to give the employee a defined sum ear-marked for health insurance and allow him to buy his own coverage. Reforms should facilitate flexible-spending-account rollovers and, as John McCain and Steve Forbes have urged, should strip away the excessive regulation that has discouraged the creation of medical savings accounts (regulations that cap the total number of accounts that can be created, for example, and stipulate the size of companies that may offer such plans).

Finally, Republican candidates should promote "health marts" -- private, community-based versions of the Federal Employee Health Benefits Program, or, as some describe them, medical mutual funds, helping individuals select from among many plans tailored to different needs in a network of insurers and providers. Great ideas all.

The first step toward such broad-based reform is a Bradley-style tax credit or voucher that moves people away from employer-based insurance and out of government programs like Medicaid. Republicans should give Bill Bradley's plan the hearing it deserves.

Robert M. Goldberg is a senior research fellow at the Ethics and Public Policy Center.

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