Recent Republican health care proposals to expand medical savings accounts to every American and grant immediate, full tax deductibility of health insurance premiums to individuals are a step in the right direction.
They imply, properly, that the solution to the HMO backlash lies in patient power. The true horror of HMOs lies in their origins. HMOs were designed by Democrats and Republicans to eliminate individual health insurance.
The proliferation of HMOs has practically eliminated individual health care. The individual was first discouraged from buying insurance in 1942 when employee health premiums were made tax-deductible to employers. Congress created Medicare in 1965, pushing seniors into health care through government and making individual insurance for those over 65 obsolete. Subsidized, unrestricted health care for seniors led to an unprecedented frenzy of spending by patients and doctors.
Costs went up, introducing an economic obstacle to individual health insurance. As costs rose, those on the New Left, including then-freshman Sen. Ted Kennedy, argued that government ought to pay for everyone's health care and promoted the idea of a health maintenance organization, a term coined by a left-wing college professor. President Nixon, who had already embraced wage and price controls, was eager to appease the left and proposed the HMO Act, which Congress passed in 1973.
The law created new, supposedly cheaper health coverage with millions of dollars in grants and subsidies to HMOs, which until then constituted a small portion of the market. Kaiser Permanente was the only major HMO in the country by 1969 and most of its members were compelled to join through unions. Combined with Medicare, the HMO Act eventually eliminated the market for affordable individual health insurance.
The new government-created managed care plans mushroomed with the federal subsidies. Employers perceived managed care as less expensive than individual insurance policies and stopped offering a choice of plans, making insurance even more expensive for the individual. HMOs' domination of the health care industry had effectively been subsidized into existence.
Nixon's HMO Act was passed 25 years ago. Since then, the individual has become a prisoner of the tax code. Covered by an employer and herded into an annual process called "open enrollment" in which the employee has no choice among health plans, the individual patient is lost in today's health care economy.
Under managed care, if the patient gets sick, he or she may wander the maze of managed bureaucracy, be treated, or languish in pain awaiting treatment. The patient may also be refused treatment and die.
Managed care premiums do not pay for an insured contract for medical care decided between the patient and the physician. Premiums pay for the management of care (i.e., health maintenance) by a third party.
Unrestricted free choice in medicine health insurance chosen, provided and paid for by the individual has practically vanished. But GOP proposals may help restore the free market to medicine.
Republicans propose to offer every patient a choice to purchase health insurance as an individual neither through an employer nor through government by legalizing Medical Savings Accounts for all Americans. (MSAs are currently restricted to a small group of self-employed, uninsured, small-business people and 390,000 Medicare recipients.) The GOP proposes to make every patient eligible for MSAs, lift MSA caps and restrictions, and grant immediate, full tax deductibility to the individual for health insurance premiums.
MSA opponents, including Kennedy, claim MSAs will attract young, healthy patients, and therefore raise premiums for the remaining population. According to the Treasury Department and private health plans, the opposite is true: One-third of thousands of MSA enrollees were previously lacking any health insurance and the median age for an MSA policyholder is over 40.
The lack of a free market for individual health care coverage, not lack of regulation, led to the domination of managed care. Congress should grant immediate full individual tax deductibility and expand MSAs. Such free-market reform offers an alternative to managed care. Patient power offers what America's free-market health care system needs most health insurance which preserves the right to choose, and pay for, one's own health care.
Scott Holleran is a freelance writer and editorial director of Americans for Free Choice in Medicine, an educational association. His e-mail address is email@example.com.
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