“The American health-care system suffers from three serious problems: Health-care costs are rising much faster than our incomes. More than 15 percent of the population has neither private nor public insurance. And the high cost of health care can lead to personal bankruptcy, even for families that do have health insurance.
These faults persist despite annual federal government spending of more than $700 billion for Medicare and Medicaid as well as a federal tax subsidy of more than $220 billion for the purchase of employer-provided private health insurance.
…
A good health insurance system should 1) guarantee that everyone can obtain appropriate care even when the price of that care is very high and 2) prevent the financial hardship or personal bankruptcy that can now result from large medical bills.
Private health insurance today fails to achieve these goals. ....
A good system should not try to pay all health-care bills. That would lead to excessive demand, wasteful use of expensive technology and, inevitably, rationing in which health-care decisions are taken away from patients and their physicians. Countries that provide health care to all are forced to deny some treatments and diagnostic tests that most Americans have come to expect.
Here's a better alternative. Let's scrap the $220 billion annual health insurance tax subsidy [for purchase of employer-provided health insurance] ..., and use those budget dollars to provide insurance that protects American families from health costs that exceed 15 percent of their income.
Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family's income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family's health bills in excess of $7,500 a year.
The family could give this $3,500 voucher to any insurance company or health maintenance organization, ... [and, if desired] pay a premium to the insurance company to expand their coverage [and reduce their deductible to a lower amount].
... [T]he budget cost of providing these insurance vouchers could be more than fully financed by ending the exclusion of employer health insurance payments from income and payroll taxes.”
Martin Feldstein, "A Better Way to Health Reform", Washington Post (8 October 2009).
www.washingtonpost.com/wp-dyn/content/article/2009/10/07/AR2009100703048_pf.html
Martin Feldstein is Professor of Economics at Harvard University and president emeritus of the National Bureau of Economic Research. He was chairman of the Council of Economic Advisers and chief economic advisor to President Ronald Reagan from 1982 to 1984.
In this article, Professor Feldstein puts forward a plan to extend health coverage to the 45 million in the U.S. who are uninsured. He claims this can be done without increasing government involvement in the delivery of health care, without increasing the public debt, and without increasing taxes. Moreover, there would be no need to touch Medicare (for the disabled and elderly) or Medicaid (for families in poverty).
According to Feldstein, only two related problems remain. First, how can we expect every family to have sufficient savings to pay for a sudden health bill equal to 15% of their annual income? Second, how can health care providers be confident that patients will be willing and able to pay the deductible amount?
The solution, according to Professor Feldstein: A government-issued health-care credit card that any family can use to charge medical bills up to the deductible amount. Its use would not be required, but it would exist as a backup to assure providers of ability to pay. Government, of course, is in a good position to obtain repayment from cardholder who choose to use it.
Feldstein’s proposal is more or less consistent with ideas suggested by other conservatives for universal catastrophic medical insurance supplemented by sliding means-tested medical care vouchers for the poor.
In this alternative, the argument for universal catastrophic medical insurance centers on countering the extraordinary cost of major medical disasters that can destroy families. Here it is assumed the much lower costs of trips to the doctor about a headache or the flu can be financed by most families. Catastrophic care insurance would be much cheaper than that for comprehensive care. It would also sharply reduce administrative costs and make the demand for basic medical care sensitive to the question of cost as they would be paid directly by households.
Means-tested medical care vouchers for low-income families could provide for direct payments to medical service providers instead of the vouchers to private insurance companies, such as Professor Feldstein suggests.
There are many alternative proposals to the plans now being formulated in the Congress. Professor Feldstein’s is certainly worthy of consideration as much cheaper and more comprehensive than those now under discussion in the Congress. Similarly, the alternative suggestion of universal catastrophic insurance with means-tested vouchers should also be explored before any extensive restructuring of one-sixth of the U.S. economy is undertaken.
Thanks to Larry Willmore for help with this Tdj.
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