The Public Policy

Healthy Medical Reforms

Some hopeful developments in market-driven health care.

By and 9.11.07

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Although there are plenty of negative aspects of our health care system to report on and analyze, it is important to every so often emphasize the positive. As of late, there are some very hopeful developments, ones that move our health care system away from one that is mismanaged by the government and toward one that is more market driven. Here are a few of them:

Doctor Coburn: Senator Tom Coburn (R-OK), has put forward the most market-oriented reform of health care yet. Under the "Universal Health Care Choice and Access Act," all Americans would be eligible for a $2,000 tax rebate, $5,000 for families. This money would be paid directly to the patient's health insurance. This would allow patients to make their own medical decisions. If the patient uses a cheaper health insurance company, the excess money will be deposited in a Health Savings Account (HSA). The HSA is a personal, tax-free savings account that can be used to help pay future medical bills. The account would be completely controlled by the individual. Furthermore, under Coburn's bill federal laws will be changed to deregulate insurance companies and allow portable insurance to be offered by employers. Insurance policies will be compatible nationwide and increased transparency in the health care system will be required.

The Show-Me State: When it comes to health care reform in the states, almost all of the attention has been focused on states that have expanded government or are poised to do so, such as Massachusetts and California. That's unfortunate because Missouri has passed a reform that expands free markets by changing the tax treatment of health insurance for those who purchase an individual policy. Called the "Missouri Health Insurance Portability and Accountability Act," it moves the insurance system in Missouri from one that is employer-based to one based more on the individual. First, under the new law employees working in small businesses can purchase their own individual policies and can pay for the premiums pre-tax by funneling them through a federal regulation known as "Cafeteria 125." It also permits small businesses to make pre-tax contributions to the individual insurance plans purchased by their employees. This increases health insurance portability -- employees can take their insurance policies with them from job to job knowing that their premiums will be pre-tax and that their employers can contribute to them. This is the type of reform that other states should be considering.

HSAs and Emergency Rooms: On of the big promises of HSAs is that they would cut down on unnecessary care. An article from the Journal of the American Medical Association from March of this year suggests that they are doing just that. The authors examined emergency room use (the most expensive type of care) among those with high-deductible policies and those in a traditional HMO. The results were that repeat visits to the emergency room dropped significantly among those with high-deductible plans. There was also a small drop among referrals from the emergency room to hospitalization. The article wasn't fully able to explore how the difference affected health outcomes. However, the drop in repeat visits occurred heavily among the "low-severity" group. This suggests that people cut back on emergency room visits when emergency room visits are least necessary. Gee, it seems that individuals are pretty good judges of their own health needs. Who knew?

The Health Care Freedom Coalition: Although it received little media attention, back in July a group of conservative, free-market organizations formed the Health Care Freedom Coalition. It includes Consumers for Health Care Choices, the Council for Affordable Health Insurance, Americans for Tax Reform, 60 Plus, FreedomWorks, and the National Taxpayers Unions. (Many state-level groups have since joined.) Its agenda can be seen here (PDF), and includes tax fairness and simplification for health insurance, permitting people to purchase health insurance across state lines, and opposition to individual mandates and government price controls. It's good to see that those on the right are gearing up for the fight well in advance this time. (To join the Coalition, contact that Brian McManus at brianfmcmanus@yahoo.com.)

While there are still many big obstacles to establishing a free market in the American health care system, it's important to not get discouraged. There are some positive developments that conservatives and libertarians can build upon in health-care battles to come.

David Hogberg is a Washington writer and host of the website Health Hog. Jeremy Taglieri is a student at Union College and a former intern for the National Center for Public Policy Research.

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David Hogberg is a senior fellow at the National Center for Public Policy Research.  Follow David Hogberg on Twitter.