Take Your Medicine!: If the GOP neglects health care, it is in deep trouble - period

National Review, June 30, 2003 by John Hood

Republican politicians and conservative activists seem positively giddy about the political prospects for 2004. With the president enjoying strong public support for his foreign policy and signing a third growth-oriented tax cut in as many years, optimists seem willing to look beyond the reelection of George W. Bush to other ground-shaking goals.

But it's too early for popping corks. Among other uncertainties is the lingering, indeed the festering, problem of health care -- on which the Right has yet to establish a coherent and credible message.

Think the Democratic presidential wannabes are foolish to be focusing so much -- and so soon -- on health care? Think again. Back in the cities and suburbs and small towns where everyday life doesn't revolve around Capitol Hill turf fights and judicial nominations, a lot of people are nervous about health care. Employers have seen double-digit annual percentage increases in premiums for their health plans; in some cases, premiums are up by 30 percent or more. In the early 1990s, a similarly dire outlook for health costs led to the ClintonCare debate. Many thought the managed-care revolution would wring this level of inflation out of the system, but it didn't.

The problem today isn't that conservatives lack sound proposals to address the public's concerns. Bush himself was an early convert to such ideas as tax fairness for individual health care and market-based solutions to the insolvency of Medicare. But these issues, understandably, haven't been on the front burner, and as a result, the public still isn't buying what Republicans are selling. On education, several factors have eroded the Democrats' traditional advantage, with a Fox News/Opinion Dynamics poll in May showing virtually no difference in confidence in the two parties on the issue. Yet on health care, Democrats still retain a sizable advantage -- 18 points, according to Fox News.

It's time to go on offense. Here are some strategies that will be key to any successful Republican approach:

No more "me-tooism." After a brief celebratory moment at the failure of ClintonCare in 1994, many conservative politicians lost their nerve and began to collaborate with Sen. Ted Kennedy and other liberals to implement a government takeover of health care on a piecemeal basis. The Kennedy-Kassebaum legislation of 1996 has created a certifiable mess. The subsequent passage of the State Children's Health Insurance Program (SCHIP), with the critical acquiescence of Sen. Orrin Hatch, has proved even worse, adding millions of non-poor children to the rolls of Medicaid or Medicaid-like government programs. There were a few rhetorical fig leaves about allowing for "state experimentation" and private-insurance options, but their practical effect on legislatures' implementation of SCHIP has been negligible.

President Bush's post-tax-cut return to the negotiating table for a Medicare prescription-drug benefit may appear to be another case of me- tooing a liberal fantasy to life. But it need not be. Adding a drug benefit to a Medicare system that is already unsustainable would be an act of fiscal recklessness. Nor would it advance the larger goal of offering Americans ways to make their own health-care arrangements outside of government control. So the administration has coupled a full drug benefit with a pared-down, private-sector plan. Good. Even better would be what the Cato Institute's Tom Miller has proposed: introducing some true market prices into Medicare itself through competitive bidding, and integrating the various parts of the program into a single, coherent whole.

Expand personal choice and control. The current private marketplace for savings-based and individually controlled health benefits is dynamic, promising, and frustratingly complex. For example, I just took my small group of 22 health-plan enrollees at the John Locke Foundation out of a traditional PPO plan into a combination of a high-deductible insurance package, flexible spending accounts (FSAs), and health-care reimbursement accounts (HRAs).

In their first, halting steps into savings accounts and individually controlled health care, policymakers have gotten the concept right but the details wrong. The original legislation in the late 1990s was -- again thanks to the canny Kennedy -- designed to fail. It was cumbersome to administer, scary to potential vendors, and off-limits to the large, multi-state employers that actually have the staff and expertise to manage major transitions in employee benefits.

I pulled the plug on my organization's first attempt to convert to medical savings accounts (MSAs) years ago because it didn't make financial sense. But this time around we were able to put together a package that dramatically sliced our scheduled premium hike and gives workers an attractive new array of choices and benefits.

There are already clear signs in the marketplace of strong consumer interest in savings vehicles, in converting from defined-benefit to defined-contribution plans, and in limiting employer control over health-care decision-making. Federal and state policymakers can help this process along. Allow FSAs to roll over (like MSAs) and allow employees greater control over HRAs, and there would quickly be a convergence of these into a single, easy-to-understand, highly flexible savings account for health care. The implications for health-care policy across the board would be subtle but revolutionary over time, as workers were exposed more directly to the actual cost of medical services and encouraged to think long-term about their needs.