ASK BROOKE G. ABOUT her job, and she enthuses about her salary, health benefits, and her office with a view. There's only one catch: She hates the work. She'd like to quit, but she worries about getting health insurance. "It's very expensive in New York," she explains. Brooke, a self-described liberal Democrat, voted for Kerry in 2004. Ironically enough, she could benefit greatly from President Bush's health care proposals. If the White House gets its way, people like Brooke will have more insurance options at lower premiums and better health information.
Health care will be the centerpiece of the White House's domestic agenda for 2006. In Tuesday's State of the Union, the president will focus on rising health costs, with more detailed policy announcements to follow in the weeks ahead. This much is already clear: The president will strongly promote consumer-driven health care with a series of tax initiatives--relatively modest and, compared with ClintonCare, easy on the wallet--that represent an important shift in the health care paradigm of the last three decades: toward choice and competition, away from big government efforts.
Since 2000, health insurance premiums are up 73 percent. Speaking recently in Kentucky, President Bush observed that health care is increasingly "an unmanageable cost" for business. He stated that, in an ideal health system, "there is a direct connect between provider and customer, [and] there is transparency in the pricing system." His proposals will push in that direction.
The goal is clear. Patients ought to behave more like consumers--asking hard questions of providers, researching their options, and shopping around for the best value. Just as consumer empowerment has transformed banking and telecommunications, health care would be reshaped by such innovation and competition.
But compared with the president's ideal system, today's reality is vastly different. Transparency in pricing is a case in point. Hospitals have price lists, but they often mean little. I should know. Some years ago, my wife injured her back. Uninsured and needing surgery, she admitted herself to a reputable hospital. Six weeks later, we received an inscrutable bill for an extraordinary sum of money. When we called, the hospital administrator explained the bill was "negotiable."
The problem is the lack of financial accountability between those who provide health care and those who receive it. Rather than paying directly, most people get their health insurance from their employers. Someone else foots the bill. Consider that, as of 2003, three quarters of Americans covered by employer plans faced a co-pay of $15 or less to see a physician. The end result is that the market forces that have reshaped the rest of the economy are almost completely absent from health care. Patients have little incentive to look for a better deal. Whereas in a functioning market, information is readily available (think of shopping for a hotel room in New York City), the health care market remains a black box (now think about trying to find a hospital with the best outcomes for hip replacements).
How then to move in the right direction? Fortunately, Congress already has taken one important step. Because of the Medicare Modernization Act of 2003, Americans can now get health savings accounts. HSAs allow people to purchase relatively inexpensive, high-deductible insurance and deposit money into a tax-free account. Thus, they combine real insurance (i.e., coverage for high and unpredictable costs) with contributions to a savings account that can be used to pay for smaller health expenses and be rolled over from year to year. Unlike traditional insurance, HSAs empower their holders with health dollars, providing them an incentive to act more like consumers.
HSAs are quietly winning converts. Last March, America's Health Insurance Plans, an industry trade group, announced that more than three million Americans were enrolled in HSAs, a tripling of enrollment in just 10 months. Now large employers, like Wal-Mart, who tend to be cautious about change, are starting to offer the option.
President Bush hopes to push the idea further: allowing people to put more money into their health accounts; encouraging individuals not covered by company plans to opt for HSAs by making the premiums deductible; encouraging providers to make more cost-related health information available so patients can better choose among hospitals and physicians. Together, the above reforms could help popularize HSAs. Under President Bush's plan, Brooke, for example, would have the same ability as her employer to pay premiums in pre-tax dollars. Though that wouldn't completely address the tax inequity, it still means she'd save 30 percent.
But if the president is on the right path, he walks gingerly. In 2005, he stood before Congress and offered a sweeping plan for Social Security; this year, he offers some important tinkering--but tinkering, nonetheless. In part, the White House remembers too well last year's failure. But it's also true that Congress has done little with Bush's health reforms to date. Tax credits for the uninsured, association health plans, Medicaid block grants--in each case, White House enthusiasm has been met by congressional apathy.
President Bush now promotes small goals. But it may be in his interest to be bolder. This, after all, is an election year, and congressional Republicans can anticipate an attack on their health care flank. Why not push the HSA idea further? President Bush could outline a new vision for American health care--where people are able to get health insurance across state lines, thereby avoiding the hyper-regulation of certain states; where Medicaid recipients are given their own HSAs, empowering them with health dollars; where HSAs are flexible in structure, so that the chronically ill aren't stuck in the same model as their coworkers at the workplace.
Ultimately, American health care needs to devolve decision-making back to the individual. President Bush can help make that happen.
David Gratzer, a physician, is a senior fellow at the Manhattan Institute.