A healthy direction on health insurance

Well, at least the presidential campaign will offer something of a debate on the issue of health care. On the Democratic side, Hillary Clinton and Barack Obama disagree only over whether buying government-approved health insurance will be mandatory for all Americans (Hillary’s plan) or only for children (Obama’s approach). Both anticipate even more government involvement in health care, which accounts for about one-sixth of the national economy, than already exists.

While John McCain, the presumptive Republican nominee, is far from a consistent free-market advocate, his approach to health care, as outlined in a major speech Tuesday, takes some important steps in that direction. Whether he would actually be able to move policy in that direction should he be elected president, given solid Democratic majorities in both houses of Congress, is another question.

“The most important thing at this stage is direction,” Grace-Marie Turner told the Orange County Register, sister publication to this newspaper. She heads the Galen Institute, a free-market-oriented health policy think tank, and has done some advisory work for the McCain campaign. “Sen. McCain is interested in moving toward giving consumers more choices, encouraging innovation and making health care more individual patient-oriented,” she added.

Specifically, the McCain plan would offer a tax credit of $2,500 for individuals and $5,000 for families to individual consumers for buying health insurance rather than having a tax deduction for employers only. He would permit competition across state lines for health insurance companies, encouraging competition, innovation and serving a variety of needs.

His other major proposal is to work with state governors to set up “risk pools” for people who because of pre-existing conditions or other circumstances can find themselves denied insurance. As of now 33 states have such plans in effect; some of them work reasonably well, and some don’t. The McCain proposal is to work with states to devise a “best practices” model and offer federal taxpayer money – some $7 billion – to subsidize the programs.

Critics charge that tax credits for individuals would undermine the system of health insurance provided by employers. Perhaps that’s true, but some employers would still offer it to attract quality employees, and expanding competition in this way should put downward pressure on prices.

Whether McCain, who has been a fitful supporter of free markets, is sincere about this approach is a question worth considering. And whether he could get such reforms through a reluctant Congress or would be reduced to vetoing worse ideas is another.

But at least he’s talking about changing in the direction of more patient choice and patient control. So there will be two sides to the discussion in the general election campaign, and that’s a healthy development.