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Tuesday, August 28, 2007

Laurence Kotlikoff: We Are All Uninsured Now

A plan to reform health care:

We are all uninsured now, by Laurence J. Kotlikoff, Commentary, Boston Globe: Big numbers, like 45 million uninsured Americans, are hard to grasp. But ... the rest of us with health coverage are also uninsured. We too face terrible, albeit more remote, healthcare risks -- the risk that our employer will drop our plan, that Medicare will go bust, that our plan won't cover our needs, that premiums will eat us alive, that our doctor will stop taking our insurance, that long-term care will wipe us out, and that our uninsured friends and family members will need major financial help.

These risks are entirely avoidable. We can have an efficient, transparent system that includes everyone; treats everyone fairly; covers all the basics, including prescription drugs, home healthcare, and nursing home care; and costs little more than what we now spend. But we can't get there via the piecemeal reforms that President Bush, most of his would-be successors, and our state governors are advocating.

Bush first pushed health savings accounts -- a knuckle-brained scheme to get the uninsured to save for all their healthcare costs short of catastrophic care. When that didn't stop 5 million more Americans from becoming uninsured, the president proposed letting the uninsured deduct the cost of their health plans if they buy private coverage ..., but it won't help much. Most of the uninsured are in too low a tax bracket or pay too little in taxes for it to make any difference. ...

Most of the Democratic and several of the Republican presidential candidates ... end game would be a balkanized healthcare system with the old in Medicare, the poor in Medicaid, most workers in employer plans, and the losers -- the otherwise uninsured -- in highly subsidized, limited-coverage plans. Loser plans.

This won't work. First, Medicare and Medicaid are already on a course to bankrupt the nation. Keeping these programs intact is fiscal suicide. Second, many employers are fed up with healthcare spending and are heading for the exit. ... And the more attractive loser insurance becomes, the quicker employers will drop their plans.

Third, loser insurance requires a major federal bureaucracy (think Hillarycare) and unaffordable subsidies. Fourth, this "solution" does nothing to reduce the administrative costs that consume a fifth of our healthcare dollars. Fifth and most damning, making loser policies available doesn't guarantee their purchase. Millions will remain uninsured.

My solution is called the Medical Security System. It would eliminate Medicare, Medicaid, and (by dropping the tax breaks) employer-based healthcare. The government would give everyone a voucher each year for a basic health plan. The size of the voucher would be based on one's health status. Those in worse health would get bigger vouchers, leaving insurers no incentive to cherry-pick. Furthermore, insurers would not be permitted to refuse a voucher or otherwise deny coverage.

The government would set the total voucher budget as a fixed share of gross domestic product and determine what a basic plan must cover. We would choose our own health plans. If we cost the insurer more than the voucher, he would lose money. If we cost him less, he would make money. Insurers would compete for our business and could tailor provisions, like co-pays and incentives to stop smoking, to limit excessive use of the healthcare system and encourage healthy behavior.

Nothing would be nationalized. Virtually all of the cost would be covered by redirecting existing government healthcare expenditures as well as tax breaks. Doctors, hospitals, and insurers would continue to market their services on a competitive basis.

This is not a French, British, or Canadian solution. It's an American, market-based solution that Republicans should love. It's also a progressive solution that Democrats should love. (Democratic presidential candidate Mike Gravel has endorsed it.) The poor, who are, on average, in worse health, will receive, on average, larger vouchers. The rich will lose their tax breaks.

Why can't a country as rich as ours come up with a system that works?...

Not the way I'd put the system together, but just wanted to point out that this says "[Mr. Kotlikoff] is serving as an economic adviser to Mike Gravel." It seems to me that should be made clear, especially given the implicit and explicit potshots taken at the "loser" plans of the other candidates.

    Posted by on Tuesday, August 28, 2007 at 12:24 AM in Economics, Health Care, Politics | Permalink  TrackBack (0)  Comments (28)


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