“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beachis one of the finest papers I have ever read. Over the next few days I will post portions of this paper, but I will start off with the section on Healthcare.
Health Savings Accounts. Health savings accounts are replaced by the
new Roth IRA savings system under the tax reform features of the Heritage plan.
Existing HSAs are grandfathered, meaning that current HSA balances are not taxed
when withdrawn, but account owners may make no further deposits in the
accounts.
However, under the Heritage tax reform, money saved for future health care
needs or for any other purpose is no longer double-taxed. In addition, any
health credit or health assistance amount not used for premiums and any unused
supplemental subsidies can be deposited into a Roth IRA–style savings account
and can be used for out-of-pocket health care expenses, including deductibles,
co-pays, and other medical expenses. Under the plan, withdrawals from these
accounts are not taxed. (See the tax reform proposal.)
New Medicaid Safety-Net Program. In the Heritage plan, low-income
nondisabled individuals and families currently on Medicaid, are covered through
the credit/assistance. Low-income disabled and elderly continue to receive care
and assistance through Medicaid.
For the Medicaid-eligible elderly and the disabled, federal Medicaid acute
and long-term care spending is converted into a capped federal allotment to the
state. Total federal Medicaid spending is set at its 2007 levels beginning in
2014, after the recovery is solid and unemployment at a normal level, and is
adjusted for medical inflation thereafter.
In exchange for the capped federal allotment, states are granted considerable
new flexibility to manage and administer the restructured Medicaid program to
meet its mutual federal and state objectives. This means that states are granted
broad discretion and authority to meet general objectives and outcome measures.
States that wish to try very different approaches to better serve and improve
health care quality for these key populations would have additional authority
beyond the normal waiver process.
While states receive an allotment from the federal government, they
still need to use their own funds to achieve agreed goals for providing care and
services for the elderly and disabled on Medicaid. However, if states use
innovative approaches that require less state spending than is now the case
under the current Medicaid formula that determines the state share (known as
FMAP), they can keep the savings and spend them on state priorities or provide
tax breaks to their citizens.
The Bottom Line
Health care is a major cost for several important federal spending programs
and for households and businesses. Thus, in addition to redesigning the
programs, health care reform is needed to slow down rising costs in the public
and private sectors. The Heritage approach to this challenge of rising health
care costs and uncertainty over coverage is to transform the current government
and employer-based models into a consumer-centered, market-based system in which
individuals own and control health care dollars and decisions and the health
industry competes for their business.
The Daily Hatch 