Yesterday the nation’s largest health insurance trade group, the America’s Health Insurance Plans (AHIP), unveiled its proposal for major reform of the U.S. health care sector. AHIP President Karen Ignagni told the Los Angeles Times, “The nation is on the eve of a national discussion about healthcare. This comes around once every generation.”

Indeed, health care reform was a major theme in President-elect Barack Obama’s campaign. During the campaign, Obama pledged to build a health care system in which Americans can be assured of access to affordable health insurance; to use the health system that members of Congress have as a model for expanding coverage; and that Americans who already have insurance would be able to keep it and at a lower cost. These laudable themes struck a chord with Americans.

Achieving these goals at the same time will be difficult, and some truly bad public policy ideas will have to be opposed. For example, the AHIP plan insists on a mandate forcing all Americans to buy health insurance. During the campaign, Obama wisely fought against this proposal. Heritage’s new memo to Obama, “Ensuring Access to Affordable Health Insurance,” identifies that issue, and other important elements, as part of successful health care reform:

  • Use the consumer-choice system available to members of Congress as a true model. The system Obama and other federal employees have enjoyed, the Federal Employees Health Benefits Program (FEHBP), is not like Medicare or Medicaid. It is an employment-based system with important characteristics. Its “health insurance exchange” functions like a shopping mall for plans, making it easy for families to shop each year for plans and to have portable coverage.
  • Create a level playing field of competing private plans and real choice, and do not allow a “public plan” to undermine other commitments to Americans. Obama has spoken of including a government-sponsored “public plan” as one of the competing plans in his proposed health exchange, but there is no public plan in the FEHBP — and for good reason. There can be little doubt that if the government sets the rules for competition in an exchange and also runs one of the plans, the rules will be rigged to favor the public plan. Moreover, employers who currently offer coverage could switch their workers to this plan, and millions of Americans would discover that their employers had ended their existing private coverage. That would be an unacceptable violation of Obama’s “no change” commitment. Recent estimates from the Lewin Group, a leading health econometrics firm, suggest that more than 22 million Americans would experience an unexpected change in coverage with a public plan in place.
  • Reform the tax treatment of health insurance to make it more equitable and efficient for taxpaying families. Today’s unlimited tax relief for employer-organized health insurance gives large breaks to executives and other highly paid employees but little or no relief for families without employment-based insurance or with only limited coverage at the place of work. The value of this “tax exclusion” is over $200 billion, or about 10% of all the nation’s spending on health care. The tax exclusion should be limited and the revenue used to provide tax relief for those without tax help to make coverage more affordable.
  • Use incentives, not government mandates, to foster wider coverage. In his primary fight with Hillary Clinton, Obama laid out a strong case against government mandates. He showed that mandate advocates could not identify which powers they would use to enforce a mandate and he spoke eloquently of the unfairness of forcing families to purchase coverage they couldn’t afford. Any health care reform should explore the effectiveness of a combination of automatic enrollment and financial incentives to widen private coverage, and not draw up plans for more mandates or expansions of Medicaid or other public programs.
  • Promote family control and choice through refocused employment-based coverage rather than mandating employers to offer government-defined coverage. There are large gaps in the system of employer-sponsored coverage. Many smaller firms do not offer coverage at all, and others offer coverage that many of their workers don’t want or can’t afford. The solution is not to mandate that firms offer an expensive, comprehensive plan determined by Congress or else pay a tax. That would mean one-size-fits-all coverage, while changing coverage that many workers are happy with — which Obama pledged not to do. Instead, families should be able to choose and retain their health coverage from job to job. This can be accomplished through such things as arranging payroll deductions, much like their role in arranging 401(k) retirement plans.
  • Say “no” to the Daschle Federal Health Board. Even worse than congressionally mandated benefits would be mandatory coverage designed by a powerful Federal Health Board proposed by likely Health and Human Services nominee Tom Daschle. His Federal Health Board would have enormous power over medical decisions affecting every American. This is unacceptable, and would break Obama’s pledge to give Americans choice.

While Americans express frustration with our current health system and want action to make coverage more dependable and affordable, they also want the nation’s health system to retain important principles and features. Americans demand choice, for instance, and if they are content with the coverage they have, they do not want it disrupted. Millions of Americans voted for Obama because they believed his words meant he shared these principles. Let’s hope he keeps his pledge.

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