The Promise and Peril of Ownership Society Health Care Policy

Abstract:     
There has been a fundamental shift in tax policy over the past many years away from paternalistic social policies to the embrace of personal responsibility and ownership. The shift in retirement savings tax policy has received the most attention, but the shift which is taking place in health care tax policy is just as profound. Ownership society proponents believe that introducing market incentives into the demand-side of health care financing will help to control increasing costs, while having the additional benefit of allowing tax-favored individual ownership of health care savings. In 2003, the tax code was amended to grant tax benefits to the ownership society version of health care - a tax-favored health savings account coupled with high deductible health insurance coverage. This tax policy shift is consistent with the broader fundamental shift in social tax policy that has taken place over the past several years.

This article considers both the promise of this fundamental shift in health care policy, as well as the potential perils. There is much that is appealing about ownership society health care policy. It empowers individuals to make their own medical spending decisions, rather than putting such power in the hands of physician gatekeepers or health insurance administrators. It also promises to lower costs, by creating for the first time incentives for Americans to be cost-conscious in their medical spending decisions. Unfortunately, as the article concludes, there are many perils that must be adequately addressed and dealt with if ownership society health care is to truly effect health care reform.

Number of Pages in PDF File: 66

Keywords: Health savings accounts, tax policy, health care policy, ownership society

Accepted Paper Series