Offering people money instead of social programs and market regulations can help lawmakers get health care budgets under control without a huge political fight, said panelists during a public forum on February 12.
“Who is the best judge of value? People,” said David Hyman, M.D., J.D., a Cato scholar and law professor at Georgetown University Law Center, at a Cato Institute forum titled “Health Reforms That Meet the Need.” (See related articles, pages 1,5.)
“If you want to disrupt the status quo, you need to figure out a way to enlist patients on your side for whatever reform it is you’re proposing and the best way to do that is to give them money directly rather than funnel it through other people,” said Hyman
With Congress under heavy pressure to rein in the $1.7 trillion federal deficit, the House Energy and Commerce Committee is looking at ways to reduce $900 billion of that spending over each of the next ten years. Opponents of budget cuts claim Medicaid and Medicare will be under the knife.
Health care spending is growing faster than the overall economy, but cutting public benefits is always politically harmful, the panelists noted.
Money Talks
Opinion polls show Social Security has wider public support than Medicare, probably because it provides people with a check in hand instead of telling them what to buy, Hyman told the gathering. Medicare and Medicaid are payers and are more popular among doctors and hospitals, who are paid by the programs, than among patients, said Hyman.
The median spending on a Medicare enrollee is $15,727 a year.
Medicare is an open-ended “defined benefit plan” rather than a “defined contribution plan,” which is not how most pension plans are run now, said Hyman.
“That doesn’t work out so well, from a budgetary perspective and a quality-of-care perspective,” said Hyman.
Funneling health care spending through a government budget makes little sense, said Hyman.
“If you look at how people make their spending decisions, they value health care, but they value all sorts of things, but we subsidize health care to a degree that we don’t in other areas of the economy,” said Hyman.
Employer Advantage
Another area where Congress can act if it wants to slow down increases in health care spending and put more money into people’s pockets is to eliminate the employer tax exclusion, said the panel.
“It is the functional equivalent of a mandate to purchase health insurance, which by the way is lousy health insurance,” said Michael Cannon, director of health policy studies at Cato.
The tax exclusion allows employers an exemption from payroll taxes on a portion of employee compensation that is spent on health insurance. Cannon said this robs workers of control over their earnings and drives up health care costs because there is no incentive to shop out the best prices.
In addition, Cannon said, the employer plans are not portable, so employees lose their insurance when they leave their jobs.
Cannon says Congress should reconsider the one trillion dollars a year it uses to subsidize employer plans and direct that money into tax-advantaged universal health accounts, about $9,000 a year for individuals and $18,000 for families.
“This is the best politically feasible option Congress has before us,” said Cannon. “It can be bipartisan, efficient, and equitable,” and can “provide a large, immediate benefit.”
Political Risk
Legislators should bear in mind what happened when Congress passed the Medicare Catastrophic Coverage Act of 1988 and then had to repeal it shortly afterward due to public backlash. House Ways and Means Chairman Dan Rostenkowski was chased down the street by angry senior citizens.
The plan improved Medicare, especially for those with severe disabilities or acute illnesses, and was an ideal way to design an insurance product, but lawmakers made the political mistake of frontloading “the spinach while backloading the dessert by forcing the beneficiaries to pay for the benefits they were going to receive” later, said Hyman.
“Health care is intensely personal, and if you want to make big changes, you better be prepared for the pushback,” said Hyman.
AnneMarie Schieber ([email protected]) is the managing editor of Health Care News.
