The Wall Street Journal, June 28, 2007; Page A12

This election cycle's health policy debate has proven depressing. Leading Republican and Democratic candidates and the thinkers behind them appear to be in agreement on two issues: American health care is in crisis and the way to fix it is with more taxes, more regulations and more government care.

The Democratic slate is in lockstep: increase taxes, regulate the market and hand out more government-sponsored insurance. The only disagreements are over how much to tax and from whom to collect the worker's revenue. Republicans are more circumspect. Yet two leading candidates have disturbing records. Sen. John McCain once teamed up with Democratic Sen. Edward Kennedy to further regulate the insurance industry under the auspices of the Patient's Bill of Rights. Mitt Romney, also in cahoots with Sen. Kennedy, kicked off the latest craze for individual mandates as governor of Massachusetts.

One candidate, however, appears poised to offer voters a real choice -- Rudy Giuliani. Rather than increase the power of bureaucrats and politicians, he wants to devolve power back to the people. "It's your health," Mr. Giuliani said in a June Republican debate. "You should own your insurance."

This is a strikingly different message than the standard political fare of telling people they have a right to health care and someone else has an obligation to pay for it. It will be politically effective, as it addresses the core anxiety most Americans experience with health care -- the insecurity of knowing that we could lose insurance if we changed jobs. Americans don't mind paying for health insurance. We already are. We just want security.

Mr. Giuliani refers to this as a paradigm shift, akin to the shift from traditional pensions, which appeared to be employer funded, to self- and employer-funded retirement plans such as 401(k)s. Actually, all employee benefits are employee-funded. There is no "government" money handed out, only taxpayers to redistribute money from. Benefits, whether from retirement plans or insurance, are simply a component of an employee's total compensation package. A dollar spent on health care is a dollar that cannot be spent on cash wages or retirement plans. And a dollar spent by an employer, be it for health care or a traditional pension, is a dollar that the employee doesn't control and can access on only limited terms.

A shift away from employer insurance, then, is not a shift to an increased financial burden, but rather an increase in freedom and choice for an employee: freedom to choose a health plan that fits an individual's needs and the freedom to keep it should he change jobs.

Mr. Giuliani is no radical, and unlike the plans of Democratic candidates that would affect nearly everyone with increased taxes, his paradigm shift would affect many fewer people and in far more positive ways. The key is to provide incentives to reinvigorate the individual health insurance market, putting it on a level playing field with group insurance and giving the industry the incentive and ability to innovate.

The first change would be to make dollars spent on health care tax deductible regardless of whether those dollars are spent by employers on group benefits or individuals on portable coverage. Putting individual insurance on a level playing field with group insurance will allow people to seriously compare the features and benefits of group versus individual insurance and make informed decisions.

To further provide a real choice in the health insurance market, Mr. Giuliani would adopt an idea that's been proposed in Congress for years: free up the market in private health insurance. Rather than force people to buy plans approved by their state, he'd allow people to shop anywhere. One reason why health insurance in some states is very expensive is because they can't do so now. If New Jersey imposes expensive mandates on what health insurance must cover, Garden State residents can't buy insurance that's available in, say, Delaware. Under Mr. Giuliani's plan, you could. That would allow more people to buy the health coverage that fits them best. Teetotalers will no longer need to subsidize substance-abuse treatments. People can buy insurance for the risks they face.

These two reforms -- tax parity and a national market for insurance -- would free up both consumers and the health insurance industry to design and acquire plans customized to individual and family needs. Some will elect Health Savings Account arrangements that allow them to accumulate money tax free for future use for heath expenses. Others will elect first dollar coverage of HMOs. Many will stay with what they know -- employer-provided plans.

The key is that many Americans, for the first time, will have meaningful choices when it comes to health care. And when people have choices, good things happen.