Interesting, allternative idea for health care reform

[shira]

I read this in today's Washington Post and thought, "Wow!" No obvious issues with this approach spring to mind that would make it unacceptable to either the right or the left. Well, maybe the credit-card aspect needs to be analyzed a little more.

The basic idea:

a) End government tax subsidies of employer-paid plans.

b) Use the tax savings to provide families with (on average) a $3500 voucher for their health insurance. The size of the vouchers would be higher for poorer families.

c) Change health insurance plans from their current $200 or $500 (or whatever) deductible to a deductible that equals 15% of the AGI of the family. With deductibles this high, the premiums for the plans would be drastically reduced (and thus fully or mostly covered by the vouchers). Note: Families could choose to pay higher premiums for lower-deductible plans.

d) In order to assure that providers would accept all patients (even those the providers might fear would be unable to pay the deductible), the government would issue a government-backed heathlcare credit card to all families with a credit limit of 15% of the family's AGI. Families could choose to use the card to cover contingency situations where they couldn't afford a large medical expense.

This structure would cover everyone through private insurance, reduce health-related bankruptcies, and (because health-care consumers would "pay first"), would reduce the demand for health-care services) and thus lower costs.

And note: No effect on Medicare or Medicaid. And no net cost increase to the government (well, there ARE those credit cards, and there would be defaults, so an analysis is needed).

Text

A Better Way to Health Reform

By Martin Feldstein
Thursday, October 8, 2009

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.

There's got to be a better way. And it should not involve the higher government spending and increased regulation that characterize the proposals being discussed in Congress.

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. It is also the primary cause of the rapid rise of health-care costs. Because employer payments for health insurance are tax-deductible for employers but not taxed to the employee, current tax rules encourage most employees to want their compensation to include the very comprehensive "first dollar" insurance that pushes up health-care spending.

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, which is often used to buy the wrong kind of 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, including the provider of the individual's current employer-based insurance plan. Some families would choose the simple option of paying out of pocket for the care up to that 15 percent threshold. Others would want to reduce the maximum potential out-of-pocket cost to less than 15 percent of income and would pay a premium to the insurance company to expand their coverage. Some families might want to use the voucher to pay for membership in a health maintenance organization. Each option would provide a discipline on demand that would help to limit the rise in health-care costs.

My calculations, based on the government's Medical Expenditure Panel Survey, indicate that the 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. The net budget savings could be used to subsidize critical types of preventive care. And unlike the proposals before Congress, this approach could leave Medicare and Medicaid as they are today.

Lower-income families would receive the most valuable vouchers because a higher fraction of their health spending would be above 15 percent of their income. The substitution of the voucher for employer-paid insurance would be reflected in higher wages for all.

Two related problems remain. First, how would families find the cash to pay for large medical and hospital bills that fall under the 15 percent limit? While it would be reasonable for a family that earns $50,000 a year to save to be prepared to pay a health bill of, say, $5,000, what if a family without savings is suddenly hit with such a large hospital bill? Second, how would doctors and hospitals be confident that patients with the new high deductibles will pay their bills?

The simplest solution would be for the government to issue a health-care credit card to every family along with the insurance voucher. The credit card would allow the family to charge any medical expenses below the deductible limit, or 15 percent of adjusted gross income. (With its information on card holders, the government is in a good position to be repaid or garnish wages if necessary.) No one would be required to use such a credit card. Individuals could pay cash at the time of care, could use a personal credit card or could arrange credit directly from the provider. But the government-issued credit card would be a back-up to reassure patients and providers that they would always be able to pay.

The combination of the 15 percent of income cap on out-of-pocket health spending and the credit card would solve the three basic problems of America's health-care system. Today's 45 million uninsured would all have coverage. The risk of bankruptcy triggered by large medical bills would be eliminated. And the structure of insurance would no longer be the source of rising health-care costs. All of this would happen without involving the government in the delivery or rationing of health care. It would not increase the national debt or require a rise in tax rates. Now isn't that a better way?

 

[PJABBER]

Interesting proposal and a lot more practical than the House and Senate monstrosities currently under consideration.

 

[CPA]

b) is what kills it for me.

 

[Genx87]

Nice find. This helps address one of my key points in health care reform.

The disconnect between consumer and the costs of the system. High deductible plans introduce some level of demand constraint as people are forced to pay for routine procedures and visits out of pocket.

There will always be a need for catastrophic insurance. But that is truely insurance. Not some private run entitlement program that skims off the top we often have now.

 

[BoberFett]

Originally posted by: CPA
b) is what kills it for me.

I'm not entirely sold on the vouchers idea, but it has merit. It's a way of forcing everyone into the system without dictating how they use that system. It may be one of the better ways of balancing government and the free market. You can spend it at any service provider you choose. It can be supplemented with additional money if you want. You then don't have people abusing the system we have now, such as using the emergency room as their primary physician and foisting their costs onto the rest of us.

 

[shira]

Originally posted by: BoberFett

Originally posted by: CPA
b) is what kills it for me.

I'm not entirely sold on the vouchers idea, but it has merit. It's a way of forcing everyone into the system without dictating how they use that system. It may be one of the better ways of balancing government and the free market. You can spend it at any service provider you choose. It can be supplemented with additional money if you want. You then don't have people abusing the system we have now, such as using the emergency room as their primary physician and foisting their costs onto the rest of us.

The money from (b) is to pay premiums for insurance, not to pay for medical services. That guarantees that everyone is covered. And since it's revenue-positive (the amount of tax losses the government avoids is greater than the cost of the vouchers), the government SAVES money.

Note that this isn't a tax increase: Employers would no longer be responsible for health insurance, so they'd SAVE money (which, of they choose, could be passed on the employees in the form of higher wages).

Edit: Let me put this another way: Right now, the government is PAYING companies to help them provide insurance coverage for their employees. Under this new idea, companies wouldn't pay anything at all for health coverage, and government would instead PAY individuals to help them pay for insurance coverage. Why is this a problem?

 

[PJABBER]

The consumer has private sector choice in this proposal so right away you are beating the pending legislation over the head with a very big stick. You are retaining the competitiveness of the private sector, which will lead to innovations, guaranteed. The "credit" card is better off being an interest bearing debit card with a credit advance function where contributions are made monthly until a set amount is achieved and the government subsidy/insurance balance declines over time. Contributions can be required no matter if the income is from employment or social welfare. Once the limit is achieved then the excess income can be thrown off to the card bearer, or you can have premiums deducted automatically from the account and then it is a self-replenishing payment means.

 

[soccerballtux]

How about get rid of all non-catastrophic coverage? As we've seen in Britain, if it's free people will use it every single time they have the sniffles.
And then we have a shortage of resources (Doctors/labor) and the people that really need the help don't get in.

 

[shira]

Originally posted by: soccerballtux
How about get rid of all non-catastrophic coverage? As we've seen in Britain, if it's free people will use it every single time they have the sniffles.
And then we have a shortage of resources (Doctors/labor) and the people that really need the help don't get in.

Well, this plan effectively does just that: With (say) a $7500 deductible for a family with an AGI of $50,000, sounds like that family is going to be paying for ALL of their own health care costs most years.

 

[TruePaige]

Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

 

[JS80]

No good, more people on the system without addressing supply problem = failboat.

 

[miketheidiot]

Originally posted by: BoberFett

Originally posted by: CPA
b) is what kills it for me.

I'm not entirely sold on the vouchers idea, but it has merit. It's a way of forcing everyone into the system without dictating how they use that system. It may be one of the better ways of balancing government and the free market. You can spend it at any service provider you choose. It can be supplemented with additional money if you want. You then don't have people abusing the system we have now, such as using the emergency room as their primary physician and foisting their costs onto the rest of us.

i would like this plan, if private personal plans worked well. Without some sort of reform to the way companies deal with their customers, i don't think individuals have the market power to get a very good deal, in addition to the higher administrative costs that tend to coincide with individual plans.

Personally i could settle for private insurance in a non-profit situation, or a for-profit system to go along with a single payer base.

 

[miketheidiot]

Originally posted by: soccerballtux
How about get rid of all non-catastrophic coverage? As we've seen in Britain, if it's free people will use it every single time they have the sniffles.
And then we have a shortage of resources (Doctors/labor) and the people that really need the help don't get in.

and yet britons still spend a third as much as us and live longer despite roughly identical lifestyles.


and incase ou hadn't noticed lots of americans already go in every time they have the sniffles.

 

[StageLeft]

Originally posted by: CPA
b) is what kills it for me.

All it would do is raise prices across the board as the limited supply:demand balance is kept, similar to how university tuitions have gone up along the lines with easier access to student loans.

Call me Castro but the more I am actually reading about health care in the US the more I feel like distancing myself from my earlier steadfast support of how it is. The FUD being spread by insurance companies and their lackeys (politicians wined and dined by their lobbyists) prevented me from seeing clearly before.

 

[Patranus]

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Again, why should society be forced to pay for your pre existing condition or chronic care?
What a free loading piece of shit.

 

[StageLeft]

Originally posted by: Patranus

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Again, why should society be forced to pay for your pre existing condition or chronic care?
What a free loading piece of shit.

Why should society be forced to pay for your police protection? Get a bullet proof vest and pistol and learn to take care of yourself!

 

[miketheidiot]

Originally posted by: Skoorb

Originally posted by: CPA
b) is what kills it for me.

All it would do is raise prices across the board as the limited supply:demand balance is kept, similar to how university tuitions have gone up along the lines with easier access to student loans.

Call me Castro but the more I am actually reading about health care in the US the more I feel like distancing myself from my earlier steadfast support of how it is. The FUD being spread by insurance companies and their lackeys (politicians wined and dined by their lobbyists) prevented me from seeing clearly before.

university tuition have gone up because schools are getting less money from their states, i posted an editorial about UC berkley the other day about it. Basically people of a certain ideology think that these institutions should be for profit inspite of the tremendous benefits that come to the local and national economies from these institutions.

 

[miketheidiot]

Originally posted by: Skoorb

Originally posted by: Patranus

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Again, why should society be forced to pay for your pre existing condition or chronic care?
What a free loading piece of shit.

Why should society be forced to pay for your police protection? Get a bullet proof vest and pistol and learn to take care of yourself!

don't forget a tank and a firetruck incase his back yard gets invaded by the chinese or his house starts on fire.


I have no problem with people 'freeloading' off me, because i expect in time that i may have to 'freeload' as well.

 

[Patranus]

Originally posted by: Skoorb

Originally posted by: Patranus

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Again, why should society be forced to pay for your pre existing condition or chronic care?
What a free loading piece of shit.

Why should society be forced to pay for your police protection? Get a bullet proof vest and pistol and learn to take care of yourself!

I pay taxes, I get police protection. I also compliment my home security with a security company. I would carry a gun if California let me, but since they don't let me defend myself, the government has taken it upon themselves to mandate that they must protect me.

If you live in a high crime rate city, a larger percentage of your local taxes are going towards law enforcement.

If you have a pre-existing condition a larger percentage of your income is going towards paying for medical treatment.

I am not really getting your example.

 

[StageLeft]

Originally posted by: Patranus

Originally posted by: Skoorb

Originally posted by: Patranus

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Again, why should society be forced to pay for your pre existing condition or chronic care?
What a free loading piece of shit.

Why should society be forced to pay for your police protection? Get a bullet proof vest and pistol and learn to take care of yourself!

I pay taxes, I get police protection. I also compliment my home security with a security company. I would carry a gun if California let me, but since they don't let me defend myself, the government has taken it upon themselves to mandate that they must protect me.

If you live in a high crime rate city, a larger percentage of your local taxes are going towards law enforcement.

If you have a pre-existing condition a larger percentage of your income is going towards paying for medical treatment.

I am not really getting your example.

My example simply hints that this is all gray lines. I think if you have a pre-existing condition you ought to in general pay more than somebody who doesn't, depending on what it is. Like if your hobby is fire eating and you have chronic burn pain you should pay extra for your drugs, but if you have a genetic heart disorder and you don't make much money and you basically are getting no care at all, is it really part of a civil society to say too bad you don't get anything screw you?

university tuition have gone up because schools are getting less money from their states, i posted an editorial about UC berkley the other day about it. Basically people of a certain ideology think that these institutions should be for profit inspite of the tremendous benefits that come to the local and national economies from these institutions.

I didn't know that, I was parroting the typical argument about why costs are up

 

[shira]

Originally posted by: JS80
No good, more people on the system without addressing supply problem = failboat.

You seem to be unable to read an comprehend. The fact that everyone would pay ALL of their medical expenses out of pocket, up to 15% of their AGI, would drastically reduce demand. Supply problem solved.

 

[shira]

Originally posted by: Skoorb

Originally posted by: CPA
b) is what kills it for me.

All it would do is raise prices across the board as the limited supply:demand balance is kept, similar to how university tuitions have gone up along the lines with easier access to student loans.

Call me Castro but the more I am actually reading about health care in the US the more I feel like distancing myself from my earlier steadfast support of how it is. The FUD being spread by insurance companies and their lackeys (politicians wined and dined by their lobbyists) prevented me from seeing clearly before.

You're wrong. See my last post.

 

[shira]

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Private insurers are willing to overlook pre-existing conditions exclusions if EVERYONE has coverage, which is exactly what this plan would do. Problem solved.

As to chronic care, I'm not sure what you're referring to. Please be specific. And also please inform us what plan does a BETTER job on whatever you mean by "chronic care" than this one.

 

[JS80]

Originally posted by: shira

Originally posted by: JS80
No good, more people on the system without addressing supply problem = failboat.

You seem to be unable to read an comprehend. The fact that everyone would pay ALL of their medical expenses out of pocket, up to 15% of their AGI, would drastically reduce demand. Supply problem solved.

So there is no new demand from people who previously did not have health insurance now have $3500 to buy insurance with?

 

[TruePaige]

Originally posted by: shira

Originally posted by: TruePaige
Does absolutely nothing to address pre-existing conditions and cost of chronic care. What a piece of shit.

Private insurers are willing to overlook pre-existing conditions exclusions if EVERYONE has coverage, which is exactly what this plan would do. Problem solved.

As to chronic care, I'm not sure what you're referring to. Please be specific. And also please inform us what plan does a BETTER job on whatever you mean by "chronic care" than this one.

Really? They are? Didn't see that in the article. I mean why would I expect people who currently cut a large chunk of people out to not just continue to exclude them and rake in even more cash.

Chronic care, you know conditions that require frequent, expensive visits to specialists or emergency rooms. Conditions that require lots of medication which isn't covered by affordable insurance plans, etc..

A better plan? Universal Health Care. Cradle to the grave full coverage.