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Ten Steps for a Market-Oriented Health Care System

 

 

IPI

The country needs a health care reform plan that would replace Obamacare, while increasing access, lowering costs and improving the quality of care—all the things Obamacare was supposed to do but doesn’t. The principles for creating a consumer driven, market-oriented health care plan that would achieve those goals have been around for years, and a number of Republicans have included them in their various reform proposals. Below we highlight 10 steps that would establish a market-oriented health care system.

1. Establish Tax Fairness

About 156 million Americans get their health insurance through an employer.1 The tax system is the primary reason that the employer-based system survives, when almost all other types of insurance are bought and paid for by individuals. Employer money spent on health insurance is excluded from employees’ income. The Office of Management and Budget estimates the tax exclusion costs the federal government about $170 billion in 2012 in lost income tax revenue and another $130 billion in lost payroll tax revenue.2 Redirecting that tax break directly to the individual, rather than having it flow through the employer, could be both budget neutral and would create a level tax playing field.

President George W. Bush proposed ending the tax exclusion and giving everyone a standard deduction: $7,500 for an individual, $15,000 for a family. As a presidential candidate, Senator John McCain proposed giving workers a refundable tax credit: $2,500 for an individual or $5,000 for a family. Either approach would have gone a long way toward implementing tax fairness because everyone, including the self-employed and employees without employer-provided coverage, would get the same break.

2. Expand Consumer Driven Options Like HSAs

The primary reason Americans spend so much on health care is that comprehensive health insurance insulates them from the cost of care. Health Savings Accounts (HSAs), in combination with a high-deductible health insurance policy to cover major accidents or illnesses, allow workers and their employers to deposit money in a tax-free account owned and controlled by the individual. Patients use their HSA money to pay for allowable small and routine medical care and medications, but they keep it if they don’t use it, giving them a reason to be value-conscious shoppers in the health care marketplace.

Several studies have demonstrated that HSAs lower health care spending without any negative impact on patients’ health.3 Obamacare reduced the number of allowable HSA expenditures; those restrictions should be reversed to allow the widest possible use of HSAs.

Employers Offering Health Accounts

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