Market-oriented or Government-dominated U.S. Healthcare Reform?

Bush Sets Focus For 2006 Healthcare Agenda By JOHN D. MCKINNON and SARAH LUECK Staff Reporters of THE WALL STREET JOURNAL January 12, 2006; Page A3 WASHINGTON -- President Bush, searching for a way to ease Americans' anxiety about the economy and to respond to business and consumer alarm over health costs, is gearing up to focus on health care as a centerpiece of his 2006 domestic agenda. The White House is unlikely to propose major new federal spending. Instead, it is considering expansions of several earlier proposals aimed at using market forces to improve the quality and restrain the rapidly rising cost of health care. The White House has been frustrated that the president isn't getting more credit for an economy marked by steady growth, low inflation and falling unemployment. Talking more about health care is part of its response. "Health care is obviously a big challenge, and ... creates angst on the part of the American people," Mr. Bush's economic adviser, Allan Hubbard, said in an interview this week. "Employers are spending more money on health care, and that's robbing people of wage increases," he said. The president is likely to sound similar themes in the State of the Union address later this month. In Louisville, Ky., yesterday, Mr. Bush called health care "an unmanageable cost" for businesses. Rejecting government-directed care as a solution, he said the ideal health system "is one in which there is a direct connect between provider and customer, [and] where there's transparency in the pricing system." In a likely signal of what is to come, the president urged Congress to expand health savings accounts, or HSAs. Created in 2003, HSAs allow Americans to set aside money tax-free to pay health costs if they choose high-deductible health insurance. Among the proposals Mr. Bush is considering are: Providing bigger tax breaks for Americans who buy their own health insurance to balance tax breaks available to workers who get health insurance through employers. Encouraging broader use of HSAs in the hope that giving consumers more control over their health-care spending will make them more cost-conscious. Helping consumers get more information about health-care providers' prices and performance to make them better shoppers. Building on past Bush proposals, the new White House focus on health -- beyond the government's Medicare program -- is intended to give Republicans an election-year answer to many of the worries that voters have about the fast-changing economy. In many voters' minds, those worries appear to be overshadowing the good economic news about the pace of growth and falling unemployment. Opinion polls show health care near the top of Americans' concerns. Last month's Wall Street Journal/NBC News survey, for example, showed health care ranking behind only the war in Iraq on the list of issues the public wants the federal government to address. While 41% identified the war as a top priority for Washington, 33% identified health care, exceeding the 28% who pointed to job creation and economic growth. While many experts and a growing number of business executives see reason to restructure the health-care system, politicians have shied away from wholesale changes since the failure of the Clintons' initiative in the 1990s. The Bush White House is unlikely to repeat what is widely seen as the Clintons' overreaching, but the outlines of the health-care system it envisions are becoming clear. It would rely less on generous insurance provided by employers that insulate individuals from the cost of their choices. Instead, it would rely much more on; (1) market forces, (2) provider competition, (3) using the Internet to provide consumers with more, better data about the care quality and prices charged by doctors and hospitals, and (4) individual (as opposed to employer-provided) insurance, (5) tax credits to help the uninsured. Improved information about the quality of doctors and hospitals would be valuable to people with HSAs, who according to some surveys, "don't feel like they've got enough useful information to make the best decisions about their care," said Mark McClellan, a former White House adviser who now oversees Medicare. He has been pushing the giant program for the aged and disabled to link government payments to the quality of care, instead of the volume of care. Medicare, for instance, is experimenting with paying hospitals a bonus if they perform well on preset quality standards. A slim new book, "Healthy, Wealthy & Wise," by former Bush advisers R. Glenn Hubbard and John F. Cogan, along with Daniel Kessler of the Hoover Institution, outlines the case for moving in the direction that the Bush administration is heading. It argues that "the unintended consequences of a handful of public policies" -- including tax and health-insurance rules -- "are in large part responsible for the problems of the health-care system" because they hinder "the proper functioning of markets." (See excerpts and more information1.) Mr. Bush's proposals are likely to draw fire from conservatives for not going far enough. And they will draw fire from Democrats and unions, who fear the administration would undermine the employer-based system and, by making individuals pay for more of their own health, discourage people from getting preventive health care. "I think this is a classic risk shift onto individuals that is both unpalatable to people and bad policy," said Jared Bernstein of the Economic Policy Institute, a liberal Washington think tank. Analysts on both sides express skepticism that Mr. Bush, unable to persuade Congress to embrace his Social Security proposals, can make much headway this year. Write to John D. McKinnon at john.mckinnon@wsj.com4 and Sarah Lueck at sarah.lueck@wsj.com5