Thursday, January 31, 2008

Some in-depth thoughts on a voucher-based national healthcare plan

Vouchers, unlike a single-payer system, get past the three-legged stool of opposition to a single-payer plan

Earlier this week, riffing on President Bush’s State of the Union address, I called for Pell Grants for national healthcare. In that post, I laid out the bare bones of an argument that a voucher-based system is politically much more realizable than a single-payer system. Also, though not mentioned there, a voucher-based system is still paid for, on the part of giving individuals money to buy insurance, unlike the unfunded mandate Mitt Romney signed into law as Massachusetts governor, or the incremental changes to our current healthcare system Democratic presidential candidates are proposing.

Is there a better way, but one that offers consumer choice as individuals — and also requires consumer responsibility? Yes.

The Netherlands has a voucher-based system that requires individuals to buy insurance, as in Massachusetts and as a Gov. Schwarzenegger proposal would do in California. However, unlike Massachusetts, but like Ahhnold’s proposal, insurers cannot deny people coverage for pre-existing conditions. The government gives insurers the extra money needed to take care of the extra needs of these people, supplementing the insurance premium base cost. Private insurers do business as before, only now entirely with individuals; unlike in Massachusetts, companies in the Netherlands are not required to buy insurance, and many don’t. Individuals, then, don’t have to participate in a company-run, one-size-fits-all program. And, going a step beyond the government-filtered Medicaid program here, in Holland, poor people get direct government money to go buy their own insurance along with everybody else.

Aside from government taxes helping fund the vouchers (which would probably cost less than Medicaid), this actually has a free-market orientation. Individuals buy the insurance plan they want, from less comprehensive to more comprehensive.

As for paying for this, eliminating the corporate tax deduction for employer-provided insurance (which tends to favor bigger businesses that have more things to try to deduct, and more money to spend to find these deductions over smaller businesses) would free up money right there.

More below the fold, including my take on the political viability of this.

Germany has some features of a voucher system, albeit with more government regulation.
German bureaucracies implausibly combine efficiency with red tape. The healthcare system is no exception. It has been running smoothly since Bismarck's days. The national insurers issue to their members “Krankenscheine” — booklets with coupons or vouchers.

Insured patients are entitled to one free consultation every 3 months. The coupon used in lieu of payment is redeemed by the insurance company which pays the doctors. Recognizing the dangers of over-visitation and over-consumption of free services and drugs, in Germany patients partly pay for everything else — from medicines to corrective contact lenses.

Hospital admittance — to both private and public facilities —is conditioned upon referral by a doctor. This apparently onerous demand served to virtually eliminate waiting lists together with the hypochondriacs, factitious disorders, and impostors that infest hospitals elsewhere.

There’s a three-legged stool of opponents to a British-Canadian single-payer system here that shoot it down as a model for an American national healthcare system.

Those legs are Big Pharma, that is, the major pharmaceutical companies, the American Medical Association, and health insurance companies.

Tackling Big Pharma just isn’t doable. There’s less than a dozen major drug companies, with a strong, tightly focused group of lobbyists, first, as compared to the other two legs of the stool. Also, Big Pharma has ginormously Deep Pockets. Finally, not all Big Pharma companies are even headquartered in the U.S., so would be tough to ride herd on, anyway.

A voucher-based plan might be able to offer at least a quarter-loaf, if not a half-loaf, above current HMOs, to doctors, whether AMA members or not. And, this is something that’s needed anyway.

It’s called a federal office of insurance regulations. Such an agency would have the power not only to monitor fraud, or, under a voucher system, attempts to still not insure people with pre-existing conditions. It could also oversee both policyholder and doctor complaints about lack of timely payment, disputed charges, and so forth.

I don’t doubt that doctors would see that as a reasonable pot sweetener to agree to a national health care system of some sort.

That leaves insurers. Since a British-Canadian single-payer system would, except for people buying supplemental health insurance policies, pretty well eliminate the world of private health insurance, and since insurers know that the clamor for major healthcare reform is growing, they have an incentive to totally get on board with a voucher-based system.

Expressing somewhat similar ideas, more support for a voucher-based national healthcare plan can be found here.

In other words, a voucher-based system of nationally-funded, privately-purchased healthcare is very politically doable.

Of course, there’s more systemic factors involved with escalating U.S. healthcare costs.

They include what I call “MRI envy” among hospitals, overtreatment of patients out of lawsuit fears (and, no, Texas-style tort “reform” is not the answer from where I sit), and even the cost of medical school in the U.S. versus western European countries with similar standards of income. Besides addressing the paying for healthcare, we need to further look at its pricing.