While
the idealists among us still hope for a major overhaul
of our health care system, there are some minor
reforms lawmakers could enact that would pay big
dividends. Here are 10 suggestions along with
the Web addresses of NCPA publications that discuss
them in greater detail.
Reform
No. 1: Roth HSAs for Seniors
Currently,
the elderly pay half their health care costs out
of pocket. Even with the new Medicare prescription
drug benefit, health care costs will continue to
claim a significant chunk of their income.
Roth IRAs are an attractive way for seniors to build
up savings for medical contingencies. Since
deposits to these accounts are made with after-tax
funds, withdrawals are tax-free and penalty-free
(after age 59).
Roth
accounts offer better incentives than conventional
Health Savings Accounts (HSAs). A dollar withdrawn
from a Roth account to pay medical bills is a dollar
that could have been spent on other goods and services.
So, seniors won’t spend a dollar on medical
care unless it is worth a dollar to them.
With a conventional HSA, by contrast, taxes must
be paid on any dollar withdrawn for nonmedical purposes.
In this case, the choice between a dollar spent
on medical care and, say, 65 cents spent on something
else — encourages the choice of medical care,
even if it is worth only 67 cents to the buyer.
Roth
IRAs could be turned into Roth HSAs by (1) allowing
deposits even in the absence of wage income, (2)
lifting the five-year moratorium on withdrawals
for health needs, and (3) removing the income limits
on participation. (www.ncpa.org/ba/ba315/ba315.html)
Reform
No. 2: HSAs for Medicaid
Twenty-five
states have obtained federal waivers to allow disabled
patients to manage some of their own health care
dollars (a program sometimes referred to as Cash
and Counsel). These patients generally get
better care and (potentially) save taxpayers money.
Experiments like these should be expanded and encouraged
— beginning with those patients with chronic
conditions who consume most of state Medicaid budgets.
Parents of children with diabetes or asthma, for
example, can be trained to monitor their children’s
health and recognize when self-medication is a sensible
alternative to emergency room care. When people
can reap financial rewards for making wise health
decisions, they will better manage their health
care dollars.
HSAs
for Medicaid enrollees are, in many ways, even more
promising than conventional HSAs — now so popular
in the marketplace. The reason: there is no
need to worry about high deductibles and other restrictions
that burden people who want the tax advantages of
a conventional HSA. Since Medicaid recipients
usually don’t pay income taxes, we can ignore
these restrictions and design HSAs for Medicaid
in ways that create maximum advantages for patients
and taxpayers. (www.ncpa.org/pub/st/st257/)
Reform
No. 3: FSA Rollovers
Up
to 21 million Americans have access to Flexible
Spending Accounts (FSAs), allowing employees to
make before-tax deposits to an account used to pay
medical bills. These accounts have limited
value, however, because a use-it-or-lose-it rule
requires that the account be completely exhausted
by year’s end. Studies have shown that
FSA owners who don’t accurately predict their
health care needs tend to engage in last-minute
spending on items of marginal value. President
Bush has proposed allowing up to $500 in unused
FSA funds to roll over each year. Allowing
all unused funds to roll over would be even better.
It would eliminate year-end spending sprees, encourage
more employees to make annual contributions to their
accounts, and encourage employers to make matching
deposits as well. (www.ncpa.org/pub/ba/ba439/)
Reform
No. 4: Private Insurance Options for Medicaid
For
every one dollar increase in Medicaid spending,
spending on private insurance is reduced by 50 cents
to 75 cents, as taxpayer-funded insurance crowds
out private sector spending. We should reverse
that process. Medicaid enrollees should be
allowed to join private plans, including employer
plans and individually owned insurance, paid in
part with Medicaid funds. Although private
sector plans may appear less generous on paper than
the current Medicaid program, they usually allow
enrollees access to a greater range of providers
and facilities, and there is less rationing of care.
This proposal would save taxpayer dollars and allow
Medicaid enrollees to participate in the same kinds
of health plans as other citizens. (www.ncpa.org/pub/st/st257/st257e.html)
Reform
No. 5: Health Insurance and the Minimum Wage
Employer-provided
health insurance is a substitute for money wages.
One study concludes that in most cases the trade-off
is dollar for dollar. As a result, a higher
minimum wage encourages employers to drop health
coverage along with other fringe benefits.
To avoid this socially undesirable outcome, employers
should be able to count health insurance contributions
toward the minimum wage. (www.ncpa.org/ba/ba306/ba306.html)
Reform
No. 6: Employee Access to Portable Insurance
Under
the current system, employers cannot buy individually-owned
insurance for their employees. Specifically,
lawyers interpret the Health Insurance Portability
and Accountability Act of 1996 (HIPPA) to say that
if employers purchase employee health insurance
with untaxed dollars, the insurance must be group
insurance. This type of insurance eventually
ends when the employee changes jobs and in any event
tends to change every 12 months, even with the current
employer. Moreover, employees have no assurance
that their new insurance will have the same benefits
and include the same providers as their old insurance.
A better alternative would allow employers to purchase
individually-owned, personal and portable insurance
for their employees. Even though employers
would pay some or all of the premiums, employees
could take the insurance with them as they move
from job to job. A place to start with this
idea is to give individual states the option to
create this opportunity. (www.debate-central.org/topics/2002/pers_port.html)
Reform
No. 7: Insurance Options for Spouses and Dependents
Though
two-earner households are common these days, employee
benefits law operates on outmoded assumptions about
how families live. Employees who turn down
employer-provided health insurance (because, say,
they have coverage at a spouse’s place of work)
should be able to get higher wages instead.
Under current law, employers cannot give employees
that option without jeopardizing the tax-free status
of their entire health benefits program.
Reform
No. 8: Insurance Options for Part-time Employees
Part-time
work is common, especially for single mothers and
spouses in two-earner couples. While some
need health insurance, those who don’t should
be able to choose between health insurance and higher
wages. As in the previous example, employers
generally cannot give their employees such choices
under current law.
Reform
No. 9: Fair Prices for Emergency Room Care
Some
states bar hospitals from charging lower prices
to uninsured patients. This legislation prevents
normal market responses, where patients who need
elective surgery and pay out-of-pocket would ordinarily
be charged no more than the marginal cost of the
procedure. Clearly, such laws should be repealed.
Congress should consider a federal override.
Reform
No. 10: Flexibility for HSAs
HSAs
are giving millions of Americans the opportunity
to control some of their own health care dollars.
However, a simple reform could improve them substantially.
Rather than codify the health insurance design,
we should allow insurers and employers to innovate
and experiment to ascertain what works and what
doesn’t. Under current law, for example,
employers cannot establish low-deductibles for wellness
programs; they cannot create specially-designed
accounts for patients with chronic diseases (such
as diabetes and asthma); and in the future they
will not be allowed to waive deductibles (for example,
to encourage heart patients to take beta-blockers).
As
is currently the case in South Africa, American
insurers should be able to vary deductibles and
out-of-pocket limits depending on the health care
service provided. The market, not politicians,
should determine health insurance design.
(www.ncpa.org/pub/st/st254/)
Conclusion
Any
one of these 10 health reforms would expand consumer
choice and increase the efficiency of health care
markets. Implementation of all 10 would not
solve all our health care financing problems, but
it would be a good start.
