The Wall Street Journal-20080129-The GOP-s Prescription for Health Care

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The GOP's Prescription for Health Care

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Health care has been a sleeper issue in the Republican presidential primaries. But as we heard in President Bush's State of the Union address last night, the GOP does have ideas -- big and transformative ideas designed to energize the free market to target many of the problems that plague our health sector.

The leading Republican candidates all have announced plans that would give more power and control to individuals over their health care and health insurance, breaking the employment-based coverage lock. That's a far cry from the proposals of the Democratic presidential candidates. While they talk about patient choice and private insurance options, their remedies rely on a much bigger dose of government.

The GOP candidates want to boost options for individually-owned health insurance, and they would change federal tax policy to create new deductions and/or tax credits for health insurance. Lower income people, especially the uninsured, would get new subsidies to purchase private insurance.

The candidates would allow people to purchase health insurance across state lines, and they would give states new incentives to fix problems, especially regulations and mandates, that have helped make health insurance so expensive in the first place. They believe that bringing millions of new buyers into the health care marketplace will expand competition and force insurers and providers to offer more affordable options.

The similarity among Republican candidates' health-care principles is such that they often sound like they have the same speechwriter:

-- Rudy Giuliani: "I believe we can reduce costs, expand access to, and improve the quality of health care by increasing competition. We can do it by increasing health-care choices and affordability, and by empowering patients and their doctors, not government bureaucrats."

-- Mike Huckabee: "I advocate policies that will encourage the private sector to seek innovative ways to bring down costs and improve the free market for health-care services. We can make health care more affordable by making health insurance more portable from one job to another, and making health insurance tax deductible for individuals and families as it now is for businesses."

-- John McCain: "It is good tax policy to take away the bias toward giving workers benefits instead of wages. It is good health policy to reward having insurance no matter where your policy comes from. To use their money effectively, Americans need more choices."

-- Even Mitt Romney, who led the enactment of a universal health plan for Massachusetts that expanded the role of government in the health sector, now says: "The federal government needs to loosen regulations on the nation's health-insurance providers, increasing competition and thereby lowering patient costs. The right answer is less government, less regulation, more individual responsibility, and more of the market dynamics that propel the rest of our economy."

While there are differences in implementation, Messrs. Giuliani, Huckabee, McCain and Romney all start with proposals to reform the generous but invisible tax provision that ties health insurance to the workplace. The U.S. offers a generous tax break worth more than $200 billion a year to those who get health insurance through the workplace. Any amount of income that workers receive in the form of health insurance is excluded from federal and state income and payroll taxes.

This provision, which dates back to World War II, has cascaded through the economy for 65 years to create a system in which more than 160 million people get health insurance through the workplace.

But today, when four in 10 workers change jobs every year, tying health insurance to the workplace isn't working for tens of millions of Americans. Further, because the full cost of job-based health insurance is invisible to most workers, they have incentives to over- consume health services and to demand more expensive health insurance, driving up costs for those trying to buy coverage on their own.

While the Republican presidential candidates don't want to blow up the employment-based system, they all want to give people the same tax benefit when they purchase a policy on their own as when they get it at work. This was also central to the health-reform proposals President Bush outlined last night.

The Democratic candidates would lock in the employment-based system with requirements for most employers to pay for coverage. In addition, Hillary Clinton and John Edwards would impose an "individual mandate" in which the federal government would require everyone to have health insurance.

None of the Republican candidates supports an individual mandate. Barack Obama is the outlier among the Democrats -- a major point of contention among them -- because he supports a mandate for children to get health insurance but not everyone. "The reason Americans don't have health insurance isn't because they don't want it, it's because they can't afford it," Sen. Obama says.

Sen. Clinton says that the key vision of the Democrats is to achieve universal health coverage. But that takes her down a rocky road of mandates on individuals, employers and insurers that squeeze genuine competition out of the health sector.

Is there any agreement about the future direction of health reform? Yes. Major candidates on both sides of the aisle support greater efforts toward prevention, use of electronic health records, more information for consumers on choices and prices, better chronic-care management, and most even call for medical malpractice reform.

There also is general agreement that people need more options to purchase health insurance through groups outside the workplace, that tax credits can help lower income people buy coverage, and that people should have more choice and control over their health insurance.

But beyond that, the contrast between the Republican and Democratic candidates is stark. Ultimately they break down over whether individuals or government will be in control of health care in the future. The choice this election year is real.

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Ms. Turner is president of the Galen Institute and editor of "Empowering Health Care Consumers through Tax Reform" (University of Michigan Press, 1999). She has advised the Giuliani, McCain and Thompson campaigns on health care.