My Best Idea
Actually, it’s a Goodman/Musgrave idea that first appeared in Patient Power (1992) and later in “Applying the ‘Do Not Harm’ Principle to Health Policy” (2007). To my knowledge, no politician, no other think tank, no other health policy wonk has yet endorsed it – but, hey, this is a sleepy field.
First things first. There are five mega-changes that motivate the solution. The first two you already are familiar with. The next three you may not have thought about.
Trend No. 1: As health care costs continue to grow faster than income, being uninsured or being on Medicaid will look increasingly attractive to lower-income families. A new Commonwealth study by Glied and Mahato finds that the percentage of low-wage workers who are Uninsured/Medicaid grew from 1/4 to more than 1/3 in eight years.
[Note: I am going to treat “Uninsured” and “Medicaid” as interchangeable, since they both create the same social (economic) problem.]
Trend No. 2: Our commitment to free care will reinforce the incentives created by Trend No. 1. In a separate Commonwealth study, Glied and Mahato found that for each person in the Uninsured/Medicaid population we are spending about $1,500 per year through direct subsidies and cost shifting. Thus the health care system offers a family of four with few assets and low income “public insurance” worth about $6,000 a year. That compares to premiums of $5,799 for insurance purchased directly.
[Note to Self: Send kudos to Karen Davis. If good studies are praised, who knows? They might produce another one.]
Trend No. 3: Trends No. 1 and No. 2 threaten a system-wide death spiral. As people who have the least to gain from private insurance leave the system, average costs will rise for those who remain, including increasing cost shifting from Medicaid and the Uninsured to everyone else.
Trend No. 4: Public policies designed to create an increasingly competitive hospital marketplace will make it increasingly difficult to shift costs from one group of patients to another. In a perfectly competitive market, there is no such thing as cost shifting.
Trend No. 5: Under the pressures described by the first four trends, the safety net as we know it will eventually collapse. Those institutions that survive will deliver a different kind of care than what is received by private paying patients. Care will be delivered under a public/private version of localized global budgets.
Reform Idea: So what can be done? To ameliorate all five trends and neutralize perverse incentives there should be a government commitment of $X (in this case $1,500) to every individual. Those who choose private insurance would receive a refundable tax credit to offset premium costs. For those who do not insure, $X would be sent to local safety nets in the communities where they live – to be spent on Medicaid-type programs or on free care services.
This plan (1) makes private insurance just as attractive as public insurance as far as subsidies are concerned, (2) makes a fixed financial commitment to every individual, (3) lets money follow people as they move from insured to uninsured status and vice versa, and (4) guarantees a minimum per capita funding for the safety net.
This is similar to the idea that I described at the tale-end of “Expanding Access to Health Care — A Free Market Perspective,” a survey of the free market critique and recommendations on the Mackinac Center web site. “My” version is actually the health care plank in Charles Murray’s 2006 book, “In Our Hands: A Plan to Replace the Welfare State” (AEI Press). I get “expelled” every time I bring it up in free market/libertarian circles, so it’s nice to see I have company. A May 21 op-ed by Rep. Paul Ryan offered another version, and even Cato’s Arnold Kling had nice things to say about it.
Just read your email.
Here's an interesting piece.
Let Wal-Mart fix US health care
As always, brilliant in its simplicity and comprehensiveness.
I certainly agree with your five mega-changes, especially # 3; it seems to many people that this is what we are experiencing now. I also like your solution, but it’s not “free” (which seems to top too many peoples’ wish lists). How about paying for the whole system with productivity and responsible behavior; it’s the ultimate cost cutting solution AND the most efficient way to literally produce sufficient “health capital” to sustain the system (as best I can tell) indefinitely. It’s outside “the box,” but circumstances (see # 3) are pulling us out of that anyway…
I don’t see how this “guarantees a minimum per capita funding for the safety net.”
Is this payment the only gov’t subsidy for the safety net? Or is the payment on top of other gov’t funding, in which case it will just displace the other funding?
If I’m lower income, what is my incentive to pay premiums, other than the $1500 discount?
If you don’t insure, $1500 will be sent to the local safety net in the area where you live. This does not guarantee that you will get any particular care. And if you do get care, you may be asked to pay for it. This procedure puts a floor on the amount that safety net agencies have to spend per uninsured person in their area.
And yes, it does replace the average amount of past uncompensated care. But, that aid is imperfectly and inefficiently meted out and the cost shifting part of it is going to disappear as the market becomes more competitive.
So the current system is not viable.
DITTO comments from Mr. McHugh,Mr.Burgess and George.
You are a great mind; please continuing sharing your economically sound ideas and solutions! Without citizens as you who put the good of America ahead of personal agendas, we would be doomed!
“People for a New Society” might turn out to end up being “People for a Bankrupt Society with Mediocre Healthcare”. Many of the Universal and Single Payer ideas are stunningly similar to socialistic ideas that have been proven wrong and ineffective (at a high cost in terms of lives and uncountable pain) decades ago. Yet, these ideas sound seducative to those who forget history, as seductive as they sounded 100 years ago. Does every generatin have to learn again that “to everybody what they need and from everybody what they can” is a recipe for disaster. Why is the economy of the US so successful? Because of a strong link between giving and receiving, between contribution and reward, between sowing and reaping. Once you eliminate this link, you are doomed, be the society new or old.
A great balance between the basic principle of responsibility and compassion are the HSAs.
Sounds like a reasonable approach.
I would also add in some sort of tax deduction for premiums over the 1500 credit.
Perhaps the most detrimental action to affordable and fair helth care was to take away virtually all tax incentives for individuals.
Company run ‘one size fits’ is totally uncompetitive and unresponsive to local individual needs. Just putting the decision back in the individuals hands would be a huge step in lower cost and more efficient plans.
Deductibility could be prorated on premium size and on income, to allow those Tax the Rich at any opportunity congressional types a chance to get in their whacks.