Healthcare

Will Teddy Kennedy Write the Medicare Bill?

We are in the 11th hour of an epic debate that could shape the future of the health care industry. Within days, the House and Senate are expected to agree on a Medicare prescription drug bill that could authorize the largest expansion of the federal role in health care in decades. All that can save the bill from being a major setback for the conservative-free market movement is if it contains free-market reforms that move us toward a more rational, cost effective, and competitive health care system. A handful of House Republicans, led by Pat Toomey of Pennsylvania and Paul Ryan of Wisconsin, are fighting to that end. They are facing tough, but not impossible odds. The White House prefers a market-based system, but desperately wants a bill that the President can sign. Meanwhile, the Democrats led by Sen. Ted Kennedy of Massachusetts, have virtually pledged a blood oath to oppose any bill that even hints at free markets. They won’t allow any initiatives that collide with their grand vision of a socialized health care system. Expanding government’s role in health care, of course, will add to the dysfunction of an industry that is arguably already the most dysfunctional in America. Why? Because health care markets are not permitted to operate efficiently; in fact, they are hardly allowed to operate at all. Government’s dominating role in health care has caused hyperinflation. According to the Labor Department, employer-covered health costs rose by 14%, 12.5%, and 13.9% in the last three years. In just five years, health care costs have doubled. Today, the average annual cost for health insurance for a family of four is an astonishing $9,068. This is why the ranks of the uninsured are surging. Health care is simply not affordable for a growing number of families. Soaring health costs are also a major reason that so many states are broke today (Medicaid expenses) and that the federal government is running huge deficits (Medicare). Government-run Medicare and Medicaid operate on a monopoly basis with almost no competition to drive down costs. They exhibit all the efficiencies and consumer-driven innovations of the Postal Service. A move toward a free market health care system would do far more to reduce out-of-pocket costs for seniors than will a subsidized drug benefit. In fact, the extremely complex Medicare prescription drug bill may not be the political savior Republicans and the Bush White House seem to think it is. This is for two reasons: First, the benefit is not free. Seniors will have to pay as much as $6,000 a year for it. Second, as the Heritage Foundation reports, as many as half of all seniors with existing drug insurance may lose it and be forced into the government program. That means many seniors may end up with worse coverage than they already have—and that won’t make them happy campers. In fact, they may take their anger out on Republicans. Kennedy and Senate Minority Leader Tom Daschle (D.-S.D.) want a plan designed to fail and antagonize seniors—who will then vote Republicans out of office. This is where Ryan and Toomey come in. They are leading a few dozen conservatives in the House in an effort that could save the health care system and the Republican congressional majorities. They say they and their conservative allies won’t vote for a prescription drug bill that does not install free-market reforms in health care and Medicare programs. They insist any Medicare bill contain three provisions:

    1. A requirement that Medicare compete with private insurers after 2010 so taxpayer costs will be driven down through competition. 2. Universal health care savings accounts to give consumers more options in choosing plans and coverage that meet their individual needs and control costs. 3. A cost-control feature in the bill that guarantees that the price tag will not exceed $400 billion over 10 years.

The most vital of these requirements is mandating health care savings accounts (HSAs). HSAs are like tax free IRAs where money is stored in a personal account to pay for health expenses. If the family incurs a medical cost, it pays the bill out of the account. If the family does not incur expenses of $3,000 or more during the year, it gets to keep the money not spent and roll it into a regular IRA. HSAs would make private health coverage more affordable for families, while increasing consumer choice and competition. Thus it is an idea that gives Ted Kennedy heartburn. If Republicans enact a Medicare prescription drug bill, they should do so only with a reform package that gradually gets the government out of health care and restores market discipline to this industry. That begins with the universal HSA provision. If the President and Republican leaders ignore Toomey, Ryan and the free market coalition and pass a bill that makes nice with the Kennedy Democrats, not only will they further injure the health care system just to provide a drug benefit that many retirees don’t even want, they may also incite the wrath of seniors and taxpayers going into a critical election season.


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