The Medisave Route to Health Reform

Reforming the tax code would also end a bias against low-income and unemployed workers. The present system most benefits those with high incomes. These wealthier employees have the best health care plans, so they receive the largest tax breaks.

On the other hand, those who are not as well off--the unemployed, self-employed, part-timers and workers who do not receive insurance from their employers--do not benefit at all. The tax break actually hurts them because it drives up costs and prevents many from obtaining coverage of their own.

Those who could not afford health care own their own would not be neglected under the Medisave plan. Medicaid currently covers these people, but it too is a system involving third-party payment and bad incentives.

A better way of ensuring the availability of health care would be to provide them with vouchers which could be deposited into their tax-free Medisave accounts. Recipients could then draw on these funds to purchase insurance and medical services.

Because Medisave accounts would be owned and controlled by individuals--and money not spent would be theirs to keep--voucher recipients would have reason to conserve their medical expenditures.


Many believe that the free market is dysfunctional in the field of health care and that Medisave accounts will never work. They say that although the market may operate well for other goods and services, it cannot work in health care, especially in the case of medical emergencies.

For example, critics argue that most Americans do not understand all the complexities of the health care system. They will not spend the money in their accounts wisely, the argument proceeds, so they need the government's assistance to make medical decisions.

But bureaucrats sitting behind desks are not very likely to successfully choose health care for all. Although very few Americans know how to repair cars or fix leaking roofs, they are still able to obtain these services by turning to skilled workers. The same could happen in a market for health care.

The free market could also be applied to emergency health care. Although people would not be able to compare hospitals and doctors in medical emergencies, they would be able to shop around for insurance, which would cover such emergencies.

Detractors of the market system claim that health care is a vital good, a basic necessity that should be guaranteed to all. But the same is true for food. Without food each individual would die--yet the government does not control the distribution or production of food.

Despite what some think, and despite the political rhetoric, we do not have a market system in health care today. Government regulations, tax code biases and other interferences with the marketplace have produced the wrong incentives and resulted in spiraling health care expenditures. Removing government interferences would enable the market to operate effectively, resulting in the best care for the most people at the lowest cost.

In deciding how to fix our health care problems, we should keep in mind a vital lesson that experience has proven time and time again: free markets work; bureaucracies and price controls do not.

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