by Rod D. Martin
April 4, 2006
President Bush was addressing health care again Tuesday morning. But the President many conservatives assail for his gargantuan prescription drug benefit wasn’t talking about socialism.
In fact, he was promoting its exact opposite. And it may well be the cure for virtually all of America’s health care disease.
The problem is not resources. America is the richest country in human history, with the best-trained doctors and nurses, the highest quality medical schools, and technology that is nothing short of miraculous.
The problem is also not the free market, as socialized medicine proponents always claim. The proof is as close as your television or Victoria’s Secret catalog. High quality plastic surgery is a booming business in America, and is largely uncovered by insurance or Medicare. As a result, it faces none of the government price-fixing applied to most basic health care, and guess what? Prices drop each year, while plastic surgeons make more and more money.
No, the problem is distribution; or more precisely, the left’s failed “solution” to that problem.
Born in an era of wage-and-price controls, our system was designed to allow employers — but not employees (i.e., patients) — to purchase completely tax-free health care. This benefited the unions who voted for Democrats and the fat-cat businessmen who contributed to their campaigns.
But it also largely destroyed the market in medicine: tiny groups of people in a handful of businesses and government agencies make the health care choices — and fix the prices — for everyone else.
The result is greater and greater centralization. Millions of consumers are forced into HMOs — or government programs, or overtaxed emergency rooms — to get the care they need, reducing choice and increasing bureaucrats’ power. And given her way, presumptive Democrat Presidential nominee Hillary Clinton would put us all in what amounts to a radical expansion of the VA system.
There’s just one problem: none of this works. It’s like a crack-user increasing his dose to cure his addiction. Costs keep spiraling — as government’s “fixed” prices always do — while consumers have no means to comparison-shop, and no way to even take their insurance with them from job to job.
President Bush has a solution, one I’ve strongly advocated for many years. That solution is a Health Savings Account — much like your IRA or 401(k) — and its enactment (in limited form) in 2003 is just the beginning of what could become a health care revolution.
An HSA makes whatever you save or spend on health care tax-free (a benefit FDR gave to big corporations decades ago). It also allows every American to easily own his own fully-portable insurance: changing jobs is no longer a problem. And it encourages vastly more employers to give better health benefits (or even just give benefits at all), by reducing the cost and increasing the flexibility in providing employees a health plan.
And it gets even better. HSAs are a tremendous savings vehicle. Right now, if you have medical insurance, you or your employers likely pay several hundred dollars each month to an insurance company. But when it’s gone, it’s gone. If you don’t get sick and “use” that money, you’ll never see it again. And if you fail to pay next month, you’re cancelled. Adios.
Not so with an HSA. With an HSA, you — or your employer — contribute monthly to a tax-free savings account. If you don’t use the money, it’s still there. In fact, it’s growing, either through compound interest or capital gains or both. If you get sick, you use some of your money to pay the doctor of your choice: no one can turn you away because they don’t take “your brand of insurance” when your insurance is cash. And if you get really really sick, your HSA has a catastrophic insurance policy on top of it to cover costs you can’t afford.
It won’t happen overnight, but HSAs will change everything if we let them. Young people — who rarely get sick — will amass enormous sums of tax-exempt money in their HSAs: by the time they’re old, they’ll effectively be self-insured; if they stay healthy into old age, they’ll pass that money — potentially hundreds of thousands of dollars — to their children.
HSAs can solve America’s health care crisis. Over the next generation, they can also largely eliminate poverty in America. And they can create a free market in most health services that sends costs spiraling downward instead of forever up.
President Bush wants to expand his HSA law, which just since 2003 has dramatically expanded coverage of the previously uninsured among the poor and employees of small businesses. We won’t fix health care overnight. But we need to start right away.