LUNCHABLES::

Free-Lunch Health Insurance: A simple idea for insuring some of the poor. (Daniel Gross, Jan. 6, 2005, Slate)

The tax break for employer-provided health insurance—worth about $140 billion per year—is larger than several welfare programs combined. But it doesn't work very well. Three years into an economic expansion, the number of uninsured is rising—at 45 million and counting. President Bush and Congress are pushing a host of new tax credits and tax-favored savings vehicles as a means of reducing the rolls of the uninsured.

The simplest solution—having the government expand coverage of the poor not covered by Medicaid, who make up the bulk of the uninsured—is generally ruled out for ideological and fiscal reasons. Such a free-lunch solution may actually be the most effective way to attack the health-insurance crisis. At least that's what Massachusetts Institute of Technology economist Jonathan Gruber concludes in a recent paper. Gruber is no Ira Magaziner. A former deputy assistant secretary at treasury in the Clinton administration, Gruber is not a proponent of universal coverage and believes that Medicaid is too generous. But he does believe we can do better.

Gruber set out to investigate the relative merits of different approaches to insuring more Americans. He aimed to add 3 million people to insurance rolls. The two main criteria he used were efficiency (getting dollar values of insurance for dollars spent) and targeting (the ability of an approach to rope in large numbers of previously uninsured people and only small numbers of previously insured people). Gruber constructed a model that estimates how individuals and companies would react to different tax-based incentives and then compared the results to the effectiveness of a more straightforward method.

If the government simply gave free public health insurance to everybody whose income places them at or below the poverty level, it could add the 3 million insured. Of those who could take advantage of such a program, Gruber concluded, 87 percent would have been formerly uninsured. Taxpayers would spend $1.17 for each dollar value of insurance gained. (The results are summarized in Table 5 of the paper.)

Next, Gruber examined a proposal similar to that contained in President Bush's 2004 budget, which would offer individuals tax credits (a maximum of $3,000 per family) to buy insurance.

Forget credits, just deposit money directly into HSA's for them.

Posted by Orrin Judd at February 3, 2005 6:00 AM