July 13, 2017

REFORM, NOT REPEAL:

WHAT A GOOD CONSERVATIVE HEALTH CARE PLAN WOULD LOOK LIKE (ED DOLAN , 7/12/17, Niskanen Center)

As the chart below shows, just 1 percent of the population accounts for 20 percent of all personal health care spending, and the top 5 percent of population for half of all spending. Many people in that range suffer from one or more chronic conditions like diabetes, kidney failure, or AIDS that require expensive treatment year after year. Their medical needs are literally uninsurable by traditional standards. They are not just at high risk of needing care; they are certain to need it. And even if an insurer could be persuaded to cover them, an actuarially fair premium would exceed the annual income of all but the very wealthiest among the chronically ill.

Preserving coverage for people with preexisting conditions is popular among both liberal and conservative voters. A recent poll from Politico showed that only 42 percent of Republicans favored allowing states to opt out of a requirement to cover people with such conditions.

Conservatives policy experts have made some very reasonable proposals for dealing with those at the top of the cost curve. One of the most attractive is universal catastrophic coverage, or UCC for short. UCC would cover the top-of-the-curve health care needs of all Americans, subject to a deductible that limited out-of-pocket expenses to a substantial, but not impossibly high, percentage of their income.

Universal catastrophic coverage has an impeccable conservative pedigree. It was proposed back in the 1970s by Martin Feldstein, who would go on to serve as Ronald Reagan's chief economic adviser. In 2004, Milton Friedman, then a fellow at the Hoover Institution, endorsed the concept. An up-to-date version, specifically designed to address the problems of the ACA, is outlined by Kip Hagopian and Dana Goldman in National Affairs.

The exact parameters of the program would be subject to negotiation, of course, but let's sketch some possibilities, for the sake of discussion. Suppose the deductible is set at 10 percent of the amount by which a household's income exceeds the Medicaid eligibility level, now about $40,000 for a family of four. Under that formula, a middle-class family earning $85,000 a year would face a deductible of $4,500 per family member, with a cap of twice that amount for households of more than two people. By the same formula, the deductible for a household with $1 million of income would be $96,000.

The high-deductible policy might be provided directly by the government, as an extension of Medicare. Alternatively, following the Swiss example, people could choose among private insurers offering policies meeting the program's standards. In that case, UCC would resemble an expanded version of Medicare Advantage -- originally a Republican idea but one that now enjoys bipartisan support. [...]

Fiscal conservatives might, quite properly, ask how UCC could be financed. A large chunk of it could be paid for with another proposal favored by many on the political right -- abolishing the tax deductibility of employer-sponsored insurance (ESI), which currently costs the federal budget an estimated $235 billion per year. That oddity of the US health care system is a holdover from World War II, when employers lavished in-kind benefits on scarce workers to evade wartime wage controls. Both its liberal and conservative critics say it is long overdue for repeal.

Posted by at July 13, 2017 9:21 AM

  

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