This week, Rep. Mark Green (R-TN) introduced a bill into Congress that would grant states more freedom in how they chose to spend their Medicaid dollars. The bill would allow states to allocate Medicaid dollars directly to patients and give them the power to chose how to spend those dollars. Here is how the plan would work:

As a Tennessee state senator, I introduced an idea for a program that allows Medicaid recipients a “swipe card” with dollars on it designated for medical purchases. Coupled with an insurance plan that covers catastrophic expenses, this ensures Medicaid recipients a safety net while at the same time encouraging them to find the best deals on their care — especially since they get to keep the money they don’t spend each year, in the form of an earned-income tax credit. Additionally, physicians are paid immediately, making the costly claims process unnecessary and encouraging medical providers to compete for these patients.

Unfortunately, this program, while it has been signed into law in Tennessee, has not received federal approval yet from the Centers for Medicare and Medicaid Services (CMS). Now that I’m a federal lawmaker, I will attempt to spur things along with the Medicaid Improvement and State Flexibility Act. This bill would direct CMS to allow all states to test this idea through a pilot program.

States can empower patients by giving them the money directly. By taking the middle man out of the equation, patients have more control over the healthcare they receive, and it will encourage more cost-effective spending. This also puts pressure on providers to offer the best possible price to patients as they are competing for dollars instead of just billing Medicaid for services provided. North Carolina could implement a pilot program if this bill were to pass to evaluate the costs and benefits of an account-based Medicaid arrangement.

In his op-ed, Rep. Green also draws a parallel with another account-based health care arrangement – health savings accounts (HSA):

There are other ways to introduce competition to American health care as well. For those Americans who do not need the assistance of Medicaid, Congress can pass the Health Savings Account (HSA) Expansion Act, which was introduced by my fellow Republican Mike Gallagher. The proposal would dramatically expand the scope of HSAs, which allow people to save money tax-free so they can help pay for some of their own medical costs. Patients with HSAs pay attention to prices; they want to most effectively stretch the resources in their accounts.

I have discussed this problem on the blog recently a few times (See here and here). Congress should make it as easy as possible for individuals to use their own dollars how they see fit to purchase medical services. HSAs pair well with healthcare models like direct primary care, giving patients more choice of providers and more personalized care. It increases consumer power by creating a market where providers are competing directly for the patients business, rather than insurance contracts.

Healthcare reform needs to focus on empowering patients and removing the barriers between and patient and providers. Rep. Green’s bill and Rep. Gallagher’s bill to increase the use of HSAs would do just that.