EDITOR’S NOTE: This piece appears in the February 27, 2006, issue of National Review.
In his State of the Union address, President Bush devoted only a few sentences to health policy. But, to coincide with the speech, the Bush administration released a five-page document proposing health-policy reforms so sweeping and bold as to merit comparison to the scope–though certainly not the content–of Hillary Clinton’s plan of a decade ago. If the White House is able to see its proposals through, it will leave a lasting and positive mark on American social policy.
One component of Bush’s reforms is Health Savings Accounts (HSAs). The idea behind HSAs is quite simple. Individuals should be allowed to manage some of their own health-care dollars through accounts they own and control. They should be able to use these funds to pay the costs of out-of-network doctors, diagnostic tests, and other procedures not covered by third-party, catastrophic insurance. The accounts should be tax-free, and should eventually be available for non-medical purposes, letting individuals profit from wise decisions that allow them to reduce their health-care costs.
The logic of such accounts is that they bring health incentives in line with market incentives. Right now, because consumers of health care don’t control the dollars with which that care is purchased, they have little incentive to keep expenses down. HSAs provide such an incentive. Some people will respond by seeking information about treatments and health-care providers over the Internet, choosing the options that are most cost-effective. Some may bypass primary-care physicians altogether and directly order their own diagnostic tests or seek online specialist consultations. Others may forgo name-brand drugs in favor of less expensive generic medications, therapeutic substitutes, and over-the-counter drugs. Studies show that, with a modest amount of training, diabetics, asthma patients, and others can manage their own health care and achieve results at least as good as, and at lower cost than, traditional care. The general principle is that people will not choose to spend a dollar on health care unless they get a dollar’s worth of benefit–and this will place downward pressure on both medical costs and insurance premiums…