It's hard to believe that you could make America's health care financing system any worse than it already is. But President Bush's proposals would simultaneously:

(1) worsen access to care for people who are already covered;

(2) offer billions for new tax subsidies that will not expand coverage;

(3) drive up bureaucratic costs (already over $400 billion per year) and do nothing to control overall health spending; and

(4) offer tax breaks targeted to the wealthiest Americans.

In contrast, a single-payer national health insurance program could slash bureaucracy and use the savings to provide affordable, comprehensive coverage with no waits for care to every American. Polls show that the majority of Americans, and their physicians, support national health insurance.

Analysis

1) "Consumer Directed Health Care" (CDHC) is a polite term for lousy coverage. These plans shift costs from employers to workers by forcing them to pay huge deductibles - from $2000 to $20,000 - before insurance kicks in. Moreover, many plans exclude important services (e.g. maternity care) altogether, so spending for these doesn't even count towards the deductible.

A great deal of research has proven that high deductibles discourage needed as well as unneeded care, and particularly discourage preventive care. For instance, diabetic patients forego routine eye and foot care, and end up with amputations and blindness. Similarly, patients with high blood pressure skimp on treatment and end up with strokes and heart attacks.

These plans effectively penalize the sick for being sick, and will drive an increasing number of middle class families into bankruptcy. While healthy people may pay a little less, the sick will pay far more. Of course, virtually everyone gets sick and has high health costs at some point in their life - costs that will drain whatever money middle class people will be able to put into an HSA.

2) The President proposes tax credits to help the uninsured buy coverage. But the tax credits he would offer are so meager that they would not even cover the skimpiest of plans that are actually available. The average cost of family coverage is now about $10,000, while the President suggests offering the poor only a $3000 tax subsidy. Past experience with a similar subsidy program (under The Trade Adjustment Assistance Act) showed that only a tiny fraction of low income families were able to get coverage, even with a substantially more generous subsidy than Bush now proposes.

3) HSAs and high deductible plans save nothing on existing insurance bureaucracy (31% of total health spending) because patients and insurers must still keep track of each health expenditure to know when the deductible is reached. Moreover, they add a new layer of bureaucratic costs to the system. A consultant has estimated that additional account management fees, transaction fees etc. required because of HSAs will cost $1 billion annually by 2011 (Modern Healthcare January 16, 2006:16). Moreover, doctors and hospitals will have to spend even more than at present on their billing, since collecting cash from individual patients (many of whom will not be able to pay) is costlier than computerized billing of insurance plans. One consultant has estimates these increased collection costs at 0.5% of total practice revenues, which would amount to billions of dollars annually.

Already, insurance firms are chartering their own banks and investment firms are gearing up to manage HSA assets - for a fee. Moreover, insurers are planning to issue HSA debit and credit cards (with high interest rates), getting them into the ugly business of predatory lending to sick families.

Nor will the incentives in CDHC contain overall health spending. First, about 70% of health costs are incurred by a relatively few very sick people who will quickly exceed their deductible limits and have no incentives to "comparison shop" or otherwise save on care. Second, by discouraging routine preventive care in the short term CDHC threatens to actually increase costs in the long run. Finally, research in other nations demonstrates that an increase in deductibles does not decrease system-wide costs. Doctors generally tell their sick patients how soon they need to return for a visit, how frequently lab tests should be monitored etc. In Saskatchewan, Quebec and Switzerland, co-payments merely shifted care from the poor toward the wealthy as doctors apparently kept themselves fully booked, and yielded no overall savings.

4) The tax advantages of HSAs are far more valuable to people in high tax brackets than to the poor or middle class. As a result, the vast majority of tax breaks are sure to accrue to those who need them the least. In fact, early data shows that only one half of people choosing HSA plans have deposited any money in the account - presumably because they couldn't afford to. Rich people choose these plans because they offer a big tax break, and poor people choose them because the premiums are lower - they look like a good deal until you get sick.

In sum, President Bush manages a rare daily double with his plan: reduce coverage to the sick and the middle class while simultaneously handing huge tax breaks to the affluent. After the Medicare Part D debacle, you'd think he'd learn that sending sick people out to comparison shop in the extraordinarily complex medical marketplace is a recipe for disaster.

Fortunately, there is real remedy to the health care crisis that is much simpler, less-costly, and will provide true coverage (and financial security during illness) to all Americans: national health insurance. A majority of the public and physicians already support it. All that is required is political will.

Dr. David Himmelstein and Dr. Steffie Woolhandler are part of Physicians For A National Health Program.

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