Health care reform is on everyone’s minds – so what direction SHOULD health care reform take to get the system back on track?

Suggestion #2: Let individual citizens control their health care dollars.

Health insurance is a topic that few people understand. (According to Wikipedia, it’s “a form of collectivism by means of which people collectively pool their risk, in this case the risk of incurring medical expenses.” Huh?) And largely, it’s a topic that most people don’t really ever deal with directly, and thus have no need to learn how it works. A majority of Americans – 55.8 percent in 2009, per the U.S. Census – are covered by an insurance plan provided by their employer.

Given that the most interaction anyone has with insurance is “how much is my copay,” it’s little wonder that consumption of health care services – the cost of which continues to increase – has skyrocketed in recent years, a trend that is expected to continue. As the Congressional Budget Office wrote in the November 2007 study The Long-Term Outlook for Health Care Spending:

Most analysts agree that the most important factor contributing to the growth in health care spending in recent decades has been the emergence, adoption, and widespread diffusion of new medical technologies and services. Major advances in medical science allow providers to diagnose and treat illnesses in ways that were previously impossible. Many of those innovations rely on costly new drugs, equipment, and skills. Other innovations are relatively inexpensive but add up quickly as growing numbers of patients make use of them. Although technological innovation can sometimes reduce spending, in medicine such advances and the resulting changes in clinical practice have generally increased it. 

Other factors that have contributed to the growth of health care spending include increases in personal income and the growth of insurance coverage. Demand for medical care tends to rise as real family income increases. Moreover, the growth of insurance coverage in recent decades, as evidenced by the substantial reduction in the percentage of health care spending that is paid out of pocket, has also increased the demand for medical care, because coverage reduces consumers’ cost of care. However, according to the best available evidence, increasing income and insurance coverage cannot explain much of the growth in health care spending in recent decades.

Therefore, one way to address the nation’s growing appetite for “free” health care services would be to give individuals an incentive to learn more about how their health care dollars are spent, so that they make wiser choices. Health savings accounts (HSAs) allow people to accumulate funds tax-free that can be used for qualified health expenses. If the money is not used, it can be rolled over year-to-year; the money is yours to keep, and can be passed on to beneficiaries, providing ownership. Used in conjunction with high-deductible health care plans, HSAs empower individuals to control their own money – rather than the current process that keeps people in the dark.