"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"
Simply put:
1. It would be a universal coverage plan. It deals with the opt out issues of many and it provides some semblance of cost recovery.
2. It would cover catastrophic illness. Namely it focuses on the real problem areas.
3. It would require payment under the 15% limit on an out of pocket basis. It places a burden on the payer to understand what the costs are and thus makes an economic stabilization on excess spending.
He then continues to say how he would cover the out of pocket:
The issue here is that the Government would become the lender if you will to the individual.
This is a simple plan. Yet it has several elements which the plan ignores:
1. The issue of demand reduction, again the growth of life style illness such as Diabetes, due to self imposed obesity, is still and issue as is the illness from smoking and sexually transmitted diseases. Any plan, or derivative thereof, must address these issues otherwise the cost will continue to spiral out of control.
2. There is the issue of prevention and early remediation. This plan is handled solely as a plan for catastrophic illness will not address the early detection and prevention. The annual visits and other preventative measures will be costs which a patient could and should participate in. For example, colonoscopies and mammograms are important but would be out of pocket. Yet there would be no reason a person could not have some cost sharing in these as well.
3. The chronically ill, such as those with Type 1 Diabetes, genetic diseases, and the like will have continuing lifetime costs and any insurance to cover families should have no pre-existing condition clauses and should then be poolable.
4. His proposal seems to be one of providing insurance to the person and not to the employer. This should be carried to its fruition, namely all insurance should be personal.
I cannot find his costs, but if you use data on current costs, you find that the under 65 group currently spend $5,000 per year per person on health care. Thus for a family of 4 that would be $20,000. It may be less due to children. Yet we are dealing with averages. Thus if such a family had an income of $60,000 they wold have to cover $9,000 and the catastrophic coverage would be for $11,000. That would be $2250 per person per year for catastrophic costs covered by this Government insurance, and that would be for the 240 million people $534 billion. This does not include the $425 B for Medicare the $200B for Medicaid. The total would be $1159 B and that would leave $900B payable by individuals or insurance companies. (See my White Paper which provides the financial and demographic details).
As a back of the envelope calculation this seems to be a really good idea! However Feldstein et al must remember that Medicare beneficiaries have already paid more than they will get and that the excess has already been absconded by Congress and it is on the debt books of the Government as $5T in intra-governmental debt! Notwithstanding, this is a very interesting idea,
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