Health-care proposals seek to shift more of burden to consumers

Critics say the system would most benefit the young, healthy and affluent.
Los Angeles Times
WASHINGTON -- President Bush is preparing to unveil a series of proposals that are intended to make the U.S. health-care system more efficient but are also likely to revive a bitter debate -- begun last year over Social Security -- about how much of life's biggest risks Americans should bear on their own.
Although many of the proposals, such as limits on medical malpractice lawsuits, are ones the president has previously failed to get through Congress, he plans to unveil new initiatives as part of his vision for reshaping U.S. health-care policy, aides and advisers said.
Among the possible initiatives: offering additional tax breaks for the use of Health Savings Accounts, and making most out-of-pocket medical spending by individuals tax-deductible. Currently, individuals must spend 7.5 percent of their annual incomes on health care before they qualify for an income tax deduction.
Bush and his backers say that the changes would help tame rocketing medical costs by encouraging people to buy their own health-care insurance and become smarter shoppers, rather than relying on employers or government programs such as Medicare and Medicaid to cover their health costs.
Critics argue that Bush's expected proposals would undermine the employer-provided health insurance system that now covers most working Americans. And, they say, it would encourage them to switch to the Bush-authored Health Savings Accounts, established in 2003, under which they would bear more of the financial risks of illness and injury.
Battle expected
Just as with Bush's Social Security personal accounts proposal, the president would be seeking to persuade Americans to rely less on government-provided or employer-provided safety nets and more on themselves.
He would also exhibit the kind of combativeness that has become a trademark of his time in Washington. Despite the political drubbing that the administration sustained on Social Security and over the flawed rollout of its Medicare prescription drug benefit, Bush appears eager to return to the fray.
"We may be looking at the start of a fundamental shift in what we mean by health insurance, from a system where we share risks to one where it's up to individuals to make their own deals and bear their own risks," said Drew E. Altman, president of the nonpartisan California-based Kaiser Family Foundation.
"The danger," Altman said, "is that this new arrangement could work out very well for some people, especially the young, the healthy and the affluent, but be very bad for the health system as a whole."
Savings accounts
The Health Savings Accounts, known as HSAs, are designed to encourage people to cover a substantial portion of their own health-care costs by opening tax-advantaged accounts from which they can pay routine medical expenses. The account must be paired with a high-deductible insurance policy to cover catastrophic medical costs.
The theory behind the accounts is that people who pay more of their own costs become better consumers and less likely to demand unnecessary care. Proponents say the accounts would encourage people who have no insurance to buy at least some coverage. Detractors fear that the accounts will attract only the healthiest Americans, leaving traditional employer-provided plans to cope with people who have the highest health costs.
Bush signaled his readiness to act on health care in a campaign-style speech in Virginia last week, saying that government must ensure "health care is available and affordable."
Last year, Bush spent considerable effort trying to convince Americans that younger workers should be allowed to divert a portion of their Social Security taxes into stock and bond accounts that they would own and control. In return, their traditional Social Security benefit would be reduced. But the plan failed to gain popularity with the public or in Congress amid a debate over whether it would undermine the finances of the overall program and would leave workers too exposed to stock market risk.
Economist's influence
Much of the president's recent thinking about health care appears to be influenced by former Reagan administration economist John F. Cogan, now at Stanford University, and former Bush chief economic adviser R. Glenn Hubbard, now dean of Columbia University business school.
The pair, together with Stanford economist Daniel P. Kessler, have just unveiled a plan for overhauling the nation's health-care system. The proposals include new tax breaks for individual health spending, an expanded system of "report cards" on doctors and hospitals, stricter enforcement of anti-monopoly laws against health providers and insurers and a limit on malpractice suits.
Hubbard briefed congressional leaders on the proposals last week and, according to congressional staff members, has been asked by the White House to begin a nationwide speaking tour aimed at drumming up public support for the measures.
In recent interviews and in a newly released book, "Healthy, Wealthy and Wise," the economists portrayed their ideas as modest first steps that would not drastically alter the current employer-based health-care system in the next few years and would shave a comparatively small $60 billion from the nation's $1.9 trillion annual health-care tab.
But the three also say their proposals could eventually result in HSAs' replacing the entire current system, including Medicare and Medicaid. "There's no reason to have a separate Medicare and Medicaid arrangement if you had these souped-up HSAs," Hubbard said.
Debate
Many analysts believe that the two big government programs or something very much like them are needed because the elderly, poor and disabled who are covered by them have the most costly care -- and, especially in the case of Medicaid, are the least able to afford it. Hubbard said such problems can be handled by government subsidies.
The measures are attracting criticism from a variety of political quarters even in advance of Bush's formal embrace of them.
From the left, Sen. Edward M. Kennedy, D-Mass., blasted administration calls for more tax breaks and additional deregulation, saying the president "continues to do the wrong thing on health care." "On top of the Medicare mess, Bush's savings accounts are a tax giveaway to the wealthy and healthy that will drive costs up even further," Kennedy charged. From the moderate right, Douglas Holtz-Eakin, a former Bush economic adviser and Republican-appointed director of the Congressional Budget Office, described the idea of tax deductions for people's out-of-pocket medical expenditures as "really bad tax policy."