Health Care with an Ira Plan

By Talent, Jim | St Louis Post-Dispatch (MO), November 14, 1993 | Go to article overview
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Health Care with an Ira Plan


Talent, Jim, St Louis Post-Dispatch (MO)


A great deal is at stake in the current health-care debate. America has the best quality health-care system in the world. We must be careful to preserve that quality, while cutting spending and reaching out to Americans who have no secure, regular access to health care.

President Bill Clinton's proposal is government-run health care. That idea has produced poorer quality and rationing of care wherever it has been tried. Fortunately, there is an alternative now under discussion in Congress that shows real promise to reduce spending and protect the quality of our care. This solution, known as "Health Care IRAs," addresses the true cause of rising health-care spending - that there are few incentives for people to control their spending on health care.

Today, health care is almost always paid for by a third party, usually by group health insurance. Accordingly, the average person has no direct financial responsibility for the health care he or she is consuming and little incentive to control either the amount or cost of that health care.

This causes health-care spending to increase far more than it should. To understand why, suppose we had a system where most people bought food like they now buy health care - through employer-provided insurance. Under such a system, once a family had paid a deduction of a few hundred dollars, their "grocery insurance" would pay for their food purchases the rest of the year. Imagine what would happen to spending on food in America. How many people would buy less expensive cuts of beef, clip coupons or comparison-shop once they no longer pocketed the savings?

The Health Care IRA plan would reform this system by placing people in charge of their own health-care spending decisions. Here is how it would operate for the average employer spending $5,000 a year for an employee's family health care. Congress would allow employers to pay this $5,000 directly to the employee, provided that the employee put the money into a tax-deductible Health Care IRA. The employee would be required to buy at least catastrophic health insurance, but otherwise would be free to buy whatever benefits he or she chose. Most people would buy high deductible policies, say a $3,000 deductible, which would cost approximately $1,500 to $2,000, and would then use what was left in the Health Care IRA to pay the deductible.

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