News: CJ Exclusives

Report: Reform Individuals, Not State

Letting people get more involved in managing own health care will save

An expansion of the state-federal Medicaid program is a prescription for more health care problems, a new John Locke Foundation Spotlight report argues. Instead, consumers should manage their own health care.

Health insurance is a growing concern in North Carolina. The North Carolina Institute of Medicine (NCIOM) would address it by having state government and employers share the burden of expanding Medicaid. But according to JLF fiscal policy analyst Joseph Coletti’s diagnosis, the source of the problem is too much government intervention already.

“Government control over heath care and health insurance markets is creating waste and poor quality of care,” Coletti said. “Federal stats show that individuals pay less than 14 percent of their own health care costs. Even Canadians with universal health care coverage pay more of their own health bills than that.”

Coletti points to health savings accounts (HSAs) as a way to get consumers more involved in managing their health care. Under HSAs, individuals purchase and own their own health insurance plans. They offer high deductibles but relatively low premiums, he said. They also offer tax-free plans to consumers. Consumers can invest the money they save on premiums — savings that can help in case of a large health care expense in the future. Employers could also help to pay the premiums or contribute to employees’ HSAs.

“Studies show that, when the government is involved in making health care decisions, the wasteful spending runs from 20 to 40 percent of overall spending,” Coletti said. “But health isn’t improved through excessive coverage and overuse. A RAND study found that when individuals are responsible for making health-care spending decisions, the overall use declined with little measurable impact on overall health.”

HSAs limit the overall growth of health-care spending by making consumers more aware of what they are spending, Coletti said. They also tend to hold down increases in premiums. Already more than 3 million Americans use HSAs, even though the plans are only two years old, Coletti said. Thirty-one percent of subscribers were previously uninsured.

Instead of NCIOM’s idea of offering tax credits to companies that offer employees health insurance, Coletti said, the General Assembly should offer tax credits to individuals who purchase health insurance. Consumers buying their own insurance have to use after-tax dollars, he said.

Coletti would expand NCIOM’s idea of eliminating coverage mandates beyond Medicaid to cover private insurance, too. He also calls for opening the insurance market in North Carolina to insurance providers from out of state.

“The General Assembly should also study what they’re doing in Florida, South Carolina, and West Virginia,” Coletti said. “Those states are introducing consumer-directed health care like HSAs to their Medicaid programs.”

Policymakers should set their sights on making the individual insurance market work, Coletti said. “Expanding government health programs has done little for the uninsured, but has led to fewer people being covered by their employers,” he said. “It’s like the old practice of using leeches — each new application leads to another and makes the original problem worse.”