Patients’ Choice Act Moves Debate in a Market-Friendly Direction

Published August 1, 2009

A group of four Republicans has submitted a legislative alternative to the Democratic Party’s government-centric health care reform proposals.

Sens. Tom Coburn, M.D. (R-OK) and Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA), introduced their Patients’ Choice Act of 2009 in their respective bodies of Congress in June.

According to a statement released by its sponsors, the measures attempts to “achieve universal access to quality, affordable health care without bankrupting our children with trillions more in debt or imposing draconian tax hikes on all Americans.”

Coburn, Ryan, and their colleagues are pursuing the same goals Democrats, including Sen. Max Baucus (D-MT) and President Barack Obama, claim to want: lower health care costs, greater access for patients, and “universal” health coverage. The Republicans’ alternative takes a more market-friendly approach to those goals.

Reforming Tax Treatment

A key feature of the Patients’ Choice Act is a $5,700 annual tax credit for families ($2,300 for individuals) designed to cover employees’ out-of-pocket share of employer-sponsored health plans—an average annual cost of $4,200 per family.

The provision is similar to Sen. John McCain’s (R-AZ) campaign proposal to reform the tax treatment of health insurance by offering tax credits to help workers afford their choice of health coverage. But the Patients’ Choice Act doesn’t alter the tax code for employers, meaning businesses won’t see their tax burdens spike as a result of their employees’ newfound freedom to choose their own health care plans.

Peter Orszag, director of the Office of Management and Budget, explained the benefit to be gained from revising the federal government’s tax treatment of employer health plans in testimony before the Senate Finance Committee in June 2008.

“Imagine what the world would be like if workers [understood] that today it was costing them $10,000 a year in take-home pay for their employer-sponsored insurance, and that could be $7,000 and they could have $3,000 more in their pockets today if we could relieve these inefficiencies out of the health system,” Orszag said.

The Republicans’ plan would increase workers’ take-home pay and decrease their tax burdens, allowing them to better afford the health insurance policy and benefits of their choice.

Better Care for the Poor

Another provision of the Patients’ Choice Act is aimed specifically at lower-income Americans who are currently relegated to bureaucrat-run programs such as Medicaid and the State Children’s Health Insurance Program.

Recognizing those government-administered programs are so inefficient and undesirable that nearly half of prior-enrolled individuals and families decline to sign up for more than one year of nearly free benefits, the act’s sponsors included a provision establishing a path to private coverage and efficient medical care for those poorest Americans.

The act would provide low-income Americans with $5,000 debit cards for purchasing private insurance or paying for health care out of pocket, thereby giving them the resources to acquire effective health care.

Up to 25 percent of any unspent dollars on the debit card would roll over and be added to the next year’s balance, creating an incentive for recipients to exercise wisdom and restraint in using their health care money.

State-Based Exchanges

The Patients’ Choice Act provides for state insurance exchanges, allowing states to set up localized exchanges for their residents. By pushing for more state control over health care, the bill offers an alternative to more federal-centric proposals that would extend the inefficiencies of current government programs.

The states, not Washington, are where health care policy should be made, and the Patients’ Choice Act provides incentives for legislatures to creatively address such problems as cost-increasing health insurance mandates and Medicaid programs that are multibillion-dollar millstones around the necks of state governments.

No Massachusetts Miracle

It is troubling that the authors of the Patients’ Choice Act chose, in their discussion of state-level health care reform successes, to include Massachusetts’s attempt at universal coverage via mandate, which has turned out to be an utter disaster for the Bay State.

Far from fulfilling the intent of its creator, then-Gov. Mitt Romney (R), of insuring every citizen of the Bay State while lowering health care costs and improving access to quality care, Massachusetts’s program has expanded state bureaucracy and government control over the health care market and provider-patient dealings while simultaneously increasing health care costs and creating a chronic shortage of providers—all at an annual price tag more than twice the originally estimated $600 million.

The Bay State’s failure notwithstanding, states do need to be allowed the opportunity to sink or swim without having to answer to an overly expansive federal government for every health care policy decision.

Effective Alternative

The Patients’ Choice Act is light-years ahead of the government-run alternatives being championed by Obama and the Senate Democrats.

The willingness to attack the currently problematic tax treatment of health care and help poor Americans divorce their medical fates from the whims of government bureaucrats is a giant leap in the right direction.

Jeff Emanuel ([email protected]) is a research fellow of The Heartland Institute and managing editor of Health Care News.

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Patients’ Choice Act of 2009: