Bush’s Health Plan

On Tuesday night, President Bush devoted only a few sentences to health policy. At the same time, the administration released a five-page document describing the President's health policy proposals. The reforms described therein are so sweeping and so bold that I would compare them to Hillary Clinton's proposals of a decade ago.

I don't know if the White House will devote the energy and political capital necessary to see this through. But if they do, these reforms will leave a lasting mark on social policy in this country.

Here are the four ideas I find most remarkable.

HSA Expansion.

The President proposes to substantially expand HSAs by (1) allowing contributions to equal all out-of-pocket exposure, (2) by expanding their uses (early retirees could use them to pay insurance premiums), (3) making it easier for people to get one and (4) strongly encouraging everyone to have one (the tax relief, portability, and chronic care features described below apply only to HSA plans).

Tax Fairness.

For the first time in 60 years of post-World War II tax policy, individually-purchased insurance and employer-purchased insurance would be on a completely level playing field under the tax law. (Individuals would even get a credit against their payroll taxes.) There would literally be no reason for an employer to offer insurance (instead of wages) unless there were clear economies or other advantages from group purchase.

Portability.

Some have misinterpreted this idea to mean an extension of COBRA benefits. But as Roy Ramthun explained at an NCPA Capitol Hill briefing yesterday, the President has something far more radical in mind. Employers would be able to purchase individually-owned, personal and portable insurance for their employees – insurance that would travel with them from job to job.

Although few specifics are available, I believe the genesis of this idea is an NCPA – Blue Cross/Blue Shield proposal for the state of Texas. The Administration is proposing to take this idea nationwide – allowing federally regulated insurers to sell the insurance product.

Chronic Illness.

Equally radical, in my opinion, is the President's proposal to allow employers to make special deposits to the HSAs of the chronically ill. Until now, HSAs have not been designed with sick people in mind. But they could be. Just as employers currently make risk-rated premium payments on the behalf of employees, the President would allow them to make risk-rated deposits to HSAs.

Studies show that diabetics, asthma patients, etc., can, with a modest amount of training, manage their own health care – and achieve results at least as good and at lower cost than traditional care. If they could also manage the dollars involved, we could align financial incentives with health incentives. Pilot programs for the disabled are already showing very positive results (in Medicaid, of all places!).

Considering that chronic patients spend about 70 percent of all health care dollars, this is not a minor reform. It is a huge reform. A brief explanation of the potential is in my brief analysis, "Making HSAs Better."

The February issue of National Review has my analysis of the President's new health policy proposals.

In addition to a stronger-than-ever push for Health Savings Accounts, the President is calling for tax fairness (giving individually purchased insurance the same tax break as insurance obtained at work), portable health insurance, special HSAs for the chronically ill and allowing consumers to shop for insurance in a national marketplace.

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