Acton Commentary

Health Care Reform: Government Subsidy or Restoring Subsidiarity?


Often absent from many of the policy debates in Washington is a reference to the first principles that animate, or should animate, the discussions surrounding important issues. No contemporary issue illustrates this more clearly than the looming debate over health care reform in the United States. While policy wonks debate the merits of various proposals making their way through Congress, a fundamental question looms: Will the attitude of government subsidy or the restoration of communal subsidiarity ultimately form the foundation of this debate?

Christian social teaching, as articulated in the Catholic theological tradition, holds that the principle of subsidiarity should be applied in evaluating proposals relevant to the common good of society. Within the Protestant theological tradition, there exists a similar principle, termed sphere sovereignty . These principles demand that decisions be made, if possible, at the level most competent to make them, i.e., at the level closest to those affected by the decision. Decision making authority should not be assumed by or relegated to higher levels of authority when lower levels are competent to decide. This principle embodies and recognizes a reverence for the institutions of civil society, the obligations of personal responsibility, and the demands of the common good. When this principle is correctly understood and appropriately applied to the evaluation of the vagaries of public policy, it should result in a healthy skepticism of big government programs administered by un-elected, unaccountable bureaucrats.

This is especially true as the nation moves to the very important debate of reforming our nation’s health care system. No one denies that our health care system is in crisis. Costs are rising at rates far outstripping consumer’s ability to meet their health care obligations. Even conservative estimates show that health care costs are rising by double-digit percentages (14% last year alone) with no relief in sight. The sad fact is that 42 million Americans are uninsured, with more sure to come as costs rise and economic growth remains timid. Disproportionately, single mothers and children bear the burden of the substandard health that results from inadequate or no health insurance coverage. It is important to note, however, that with costs rising, an increasing number of middle-class Americans find themselves without health insurance as small businesses find they cannot bear the costs of health benefits.

While there is no policy panacea for the health care woes of our current system, the time has come to reorient national health care policy. The current system is heavily regulated by state and federal regulatory mandates. This command and control approach, pitched in the past as a way to extend coverage to those unable to afford adequate health care, has had the effect of putting those with and without health care in rigid “boxes”, such as Medicare for the elderly, Medicaid for the poor or disabled, CHIP for children, Veteran’s Administration for veterans, or employer-sponsored insurance plans for most workers. These boxes are quickly getting too small.

In order to expand these boxes and to increase the number of those receiving adequate health coverage it will be important to return health care related decisions to the lowest level of capable of making them—consumers. In that regard, a few sensible and innovative changes in health policy could go along way in spurring reform in the financing of health care in the United States:

  • Extend the Health Reimbursement Arrangements already within the tax code. This provision allows employers to set up a medical savings account for their employees and still preserve the tax break given to businesses under the current system. This would allow businesses to purchase high-deductible policies and use premium savings for employee savings accounts. Employees would be able to use the accounts to cover out-of-pocket health expenses, allowing any remainder to be rolled over into the next year. The effect of this would be to match more closely health care costs with consumption, incentivizing accountability and choice.

  • For low-income workers, enacting a refundable, advanceable tax credit in order to put money directly in the hands of those in need of health care. This would allow consumers to purchase healthcare wherever they choose, giving many low-income workers the ability to opt-out of various state sponsored programs that fail to meet their needs. With a more realistic assessment of the actual costs of health care, this too would encourage choice and discourage frivolous consumption.

  • Enact a tax credit for those doctors, dentists, and other essential health care workers who set aside meaningful blocks of time for the pro-bono treatment of those without insurance, with a special emphasis on the treatment of children, the mentally ill, those suffering from addiction, and the homeless.

  • Remove the tort premium placed on those in the medical profession through meaningful tort reform. Enacting caps on non-economic damages, and eliminating highly subjective punitive and hedonic damages are reasonable steps in this regard.

For many years now, health care decisions have been moving farther and farther away from those who should be directly responsible for making them. Removing command and control regulations, restoring individual accountability for health care consumption, giving consumers more of their own money, and expanding choice are sound steps toward fixing the current health insurance crisis. Subsidiarity, not government subsidy, is where the future of sound health care policy lies.