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No Comments [ Add Comment ]A new health insurance proposal that deserves serious consideration
By Vijay K. MathurThere is
a great deal of discussion on the health insurance crisis in this country since the release of the movie "Sicko." But most discussion in the media and among politicians lacks substance. If nothing else, "Sicko" has at least raised the conscience of Americans about the health care crisis.
The usual criticism against universal care and a single-payer system is that it is socialistic and inefficient, as opposed to a market-based system. It is contended that such a system would lead to long waiting lines for care and government bureaucracy, inherently inefficient compared to the market-based system. These arguments on socialization, efficiency and long waiting lines may have some merit, but those who advance them do not realize that we already have some socialized medicine in this country.
In 2004, the most recent data year, federal, state and local governments spent 45 percent of the total health care dollars. Between 2000 and 2004, public expenditure grew 40 percent and private expenditure by 36 percent. In addition, as far as market efficiency is concerned, government programs like Medicare, Medicaid and SCHIP procure medical services in the marketplace. The single-payer system allocates health care services by imposing a price in terms of waiting lines, and the market system allocates care by charging a market price. Yes, perhaps people do have a longer wait for an MRI under the single-payer system, but under the market system people may not get any MRI if they cannot pay the market price.
My purpose here is not to advocate a single-payer system, but to point out the faulty logic of many critics. Here I would like to talk about a proposal which needs close attention and consideration by all the policymakers, as it is a very thoughtful proposal incorporating some good features of both systems. The proposal is advanced by Ezekiel Emanuel of National Institutes of Health and Victor Fuchs of Stanford University. It is contained in a discussion paper, a part of a series of papers on health care at the Hamilton Project of The Brookings Institution (see details at www.brook.edu).
The following are the main features of the proposal:
* All U.S. residents would receive an insurance (not cash) voucher for health coverage through qualified health plans or insurance companies.
* Vouchers would be free and would provide benefits equivalent to the benefits under the Federal Employees Health Benefits (FEHB) program.
* Vouchers would be financed by a dedicated value added tax (VAT).
* Qualified private health plans and insurance companies would agree to provide FHEB standard coverage to all who choose them and would not be allowed to "cherry pick," and those who fail to enroll would be assigned a plan or an insurance company.
* The program would be administered by a National Health Board and 12 regional health boards patterned after the Federal Reserve System.
* The current tax benefit for employer-based health insurance would be terminated.
* Currently enrolled individuals in Medicare, Medicaid, SCHIP and other government health insurance programs would have the choice to continue or enroll in the voucher program, but the government programs would not accept new enrollees.
According to the authors, this universal voucher program would save money as compared to the current employer-based system, which includes Medicaid and private health insurance. It would reduce taxes now imposed to fund various health insurance programs, would be universal and would avoid duplication because it would replace our "checkerboard system." Furthermore, it would incorporate market discipline to improve efficiency and would simplify administration. It would assure quality care because regional boards would continuously monitor the system for quality and cost. It would provide choice of health plans and insurance companies. The plan would reduce incentives for malpractice suits due to the provisions for dispute resolution.
The program would also reduce risk to health plans and insurance companies. Risk is the most significant cause of rising insurance premiums. According to Henry Aaron, senior fellow at the Brookings Institution, the current health insurance market is a disaster as it "does not adequately pool risk."
I might add one additional feature to the voucher program. Low income people should be allowed a portion of VAT as income tax credit. This would reduce the regressivity of the VAT. I would also eliminate any interstate barrier to entry in the health insurance market and allow imports of drugs from Canada and Western European countries.
A national standardized system of licensing medical personnel should also be considered. A universal system would improve job mobility and wages while at the same time it would reduce cost to the employers, making our exports more competitive. Other proposals such as expansion of the current Medicare program and SCHIP, President Bush's proposal of a $15,000 standard tax deduction for a family and $7,500 for individuals for health insurance cost are not universal in nature. Also they do not address issues such as quality of care, access to choice of plans, administrative simplicity, market efficiency, minimizing risk, cost control, labor market efficiency and malpractice lawsuits.
Efforts by states to design their own health care programs on top of current federal programs and regulations would not promote efficiency in the health care system. These state programs also hinder job mobility across state lines.
The universal voucher proposal should be given serious attention by our policymakers and politicians to fix our health care system. The health of a country depends upon the health of its people.
Mathur is former chairman of the economics department and professor emeritus of economics at Cleveland State University in Cleveland, Ohio. At present he resides in Ogden.
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