How about health care vouchers?

by on December 6, 2005 at 7:55 am in Medicine | Permalink

Many of you favor vouchers for primary education so why not for health care?  Ezekiel Emanuel and Victor Fuchs write:

We propose a system of universal health-care voucher that would provide every American under 65 a voucher for basic health services from a qualified insurance company or health plan. Participating health plans would have to guarantee enrollment and renewal for the risk-adjusted value of the voucher regardless of medical history. Those who enrolled would be free to choose among several basic insurance programs and health plans; those who failed to enroll would be assigned one.

People who wanted to purchase additional services or amenities, such as a wider choice of hospitals and specialists or more-comprehensive mental-health or dental services, could do so with their own after-tax dollars.

Where would the funding for the vouchers come from? From an earmarked VAT, or value-added tax. Earmarking creates a direct connection between benefit levels and the tax level: if the public wants more services to be covered, they must be willing to support a tax increase. A VAT is administratively efficient, cannot be easily evaded, and creates an approximate link between taxation and personal wealth.

Government itself would not administer medical services; the current private delivery system would be maintained. Health-insurance companies and health plans would continue to contract with physicians, hospitals, rehabilitation facilities, pharmacies, and other providers for services to the individuals who enroll in their plans.

With universal health-care vouchers, employment-based insurance would probably fade away, and with it the lower wages, higher prices, and reduced employment that it brings. Critics across the political spectrum have noted the many shortcomings of employment-based insurance; few would mourn its passing. Medicaid and other means-tested programs would also become virtually obsolete as those covered were integrated into the mainstream health-care system. (Funding for long-term care such as nursing care would need to be continued.) As for Medicare, it could be phased out over time without forcing any existing beneficiary to switch to the voucher system. Importantly, current Medicare benefits would be supplemented by a tiered pharmacy benefit modeled on the one provided as part of the voucher program’s basic benefits package.

Management and oversight of the voucher program would be the responsibility of a federal health board modeled after the Federal Reserve Board, with multiple regional boards to facilitate implementation. It would define and periodically modify the basic benefits package, inform Americans about their health-care options, reimburse health plans, and collect data on patient satisfaction, quality of care, risk, and geographic adjustments for payments. It would also regularly report to Congress on the health-care system. The success of the voucher program would also be assessed by an independent institute, funded by a dedicated portion of the VAT, that would research the effectiveness and value of different interventions and treatments.

Here is the full argument, and another explanation, try here too.  Here is the write-up for RandDaniel Akst has put forward related ideas in The New York Times.  Here is another version of the plan

What is the main problem with this idea?  Is it that insurance companies would have to be so stringently regulated (otherwise they cut benefits for high-risk buyers) that this amounts to single-payer insurance with the companies as an extra shell and thus an extra cost layer on top?

Comments are open.

1 Slocum December 6, 2005 at 8:13 am

“Is it that insurance companies would have to be so stringently regulated (otherwise they cut benefits for high-risk buyers) that this amounts to single-payer insurance with the companies as an extra shell and thus an extra cost layer on top?”

I’m not sure this would be a problem. In theory, it would be desirable to attract high-risk customers for the higher government payments and then skimp on services. BUT–an insurance plan that did that would tend to lose those high-risk customers to other plans with better reputations, so an insurance plan could go broke by being too stingy as well as too generous. For this dynamic to work there would have to be high levels of both competition and information. But I’m sure Consumer Reports and others would get into the business of collecting and publishing customer satisfaction ratings.

2 Chris Meisenzahl December 6, 2005 at 8:41 am

I’m very scared of this and all similar proposals, for reasons related to both economics and liberty.

But on a closely related note, what about veteran’s health benefits? It seems like a ton of money is spent on keeping local VA hospitals open. Rather than having separate duplicate facilities for veterans only, wouldn’t it make more sens to give them a card and let them use it to buy the best health0-care they can find in the private sector? Just a thought.

Chris
http://amateureconblog.blogspot.com/

3 Tim Worstall December 6, 2005 at 10:34 am

Hypothecation. I’m always against it. What is sensible or efficient to raise in taxing one specific activity has little or not connection with what it is efficient or necessary to spend on another. A VAT might be better or worse than income or capital or any other taxes might be worse, but there’s no connection between that and how much it would cost to run the health insurance.

Plus of course, the tax would never remain dedicated to that. Look how the social security “surplus” is being over spent or how the money from the cigarette settlement is going.

4 Brian December 6, 2005 at 12:22 pm

I’ve often wondered what it would be like if we had some combination of the two big ideas from each side of the political spectrum. Might it make some degree of sense to allow consumers to use an HSA-like vehicle to spend money on services that don’t need to be immediate, like dental care, basic check-ups, and vision, and then have the government cover the most expensive care, like heart attack services? I guess this all depends on how much the basic services end up costing each type of health care plan.

5 Boonton December 6, 2005 at 2:16 pm

“Note, however, that you now have EVERYONE with insurance. Won’t this take us to the dreaded Canadian model (or close to it) where we now have to wait for medical services? I have never bought into this as a real problem except on an anecdotal basis. But, even so, alot of peple have been rather cold to the idea of universal health care.”

I’m not quite sure I see how the single-payer and ‘single-voucher’ model are the same. In the single payer model every doctor basically gets his paycheck from the gov’t & the gov’t negotiates with various medical associations to set prices. Under the single-voucher model each insurance company must negotiate with both patient and doctor. If they let the patient go hog wild and purchase any medical care they want at any price they will go bankrupt (or have to charge a patient a premium above the voucher). If they negotiate too hard with the doctor they will generate a mini-shortage…no doctors will accept that insurance leaving other insurance companies with an attractive way to win new customers.

I would suggest any critics of this type of plan analyze it using your standard textbook economics. Shortages happen when the price is below the intersection of the supply/demand curves. In Canada it is easy to see how this can happen when the gov’t is setting the price. In the single-voucher plan the price is set by the intersection of supply and demand (all the insurance companies plus those paying their own way). Since nothing in this plan would require insurance companies to either charge the same price to patients or pay the same prices to doctors why would it create a de facto ‘single-payer’ system?

“A VAT might be better or worse than income or capital or any other taxes might be worse, but there’s no connection between that and how much it would cost to run the health insurance.”

The nice thing about having a dedicated special type of tax to fund the vouchers is that it breaks the entitlement aspect of universal care. The voucher will simply be the revenue raised by the tax divided by the number of vouchers to be issued. If voters want larger vouchers they will have to vote to increase the tax. If they want lower taxes they will have to vote to cut the vouchers.

“Plus of course, the tax would never remain dedicated to that. Look how the social security “surplus” is being over spent or how the money from the cigarette settlement is going.”

Actually Social Security has a long record of being nearly neutral. In other words every dollar in went out only to benefits or administration. The surplus was the creation of our friend Alan Greenspan and the Republicans in the 80’s to build up funds in the system. If the voucher was simply set at the revenue raised divided by the # of vouchers to be issued you’d have little problem keeping the tax dedicated.

“So what really happens? The poor pay a disproportionate share of their income to support this program, while the wealthy pay essentially nothing. Sounds like a French solution to me: welfare for the wealthy! That’s the spirit!”

Errr well actually most of the money will be spent on the middle class and they will pay most of the tax. The fact is most consumption in the US comes from the middle class. Wendy’s sales are hundreds of times more than all the fancy ‘rich only’ restruants combined. The rich will pay a share proportionate to their consumption. Believe it or not there’s more than a few rich people who burn thru nearly all their income with gaudy consumption. If you’re of the school that says eventually all savings get consumed then ‘the rich’ will eventually be taxed on all their income under a VAT tax.

But if progressivity is a very important value to you why don’t you just include an expansion of the Earned Income Tax Credit or some version of Milton Freedman’s ‘negative income tax’ to restore balance?

6 Boonton December 6, 2005 at 4:55 pm

What a sales tax gains in visibility it looses in terms of complexity and difficulty of enforcement. The VAT tax is a bit easier because it works along each transation. Neither tax, though, really fits the promise of being simple and ‘paperless’…which you’ll hear from some that want to swap it with the income tax.

7 Adam December 6, 2005 at 5:23 pm

If something like this is implemented, how about a five-year windfall profits tax for health care companies, or a special capital-gains tax for their stocks, effective as soon as the law is passed?

8 Tom Kelly December 6, 2005 at 7:23 pm

An excellent idea. A reasonable moral foundation for such a scheme is to look at the externalities.

The reason we should have health care vouchers and education vouchers is that those two services provide external benefits to our society that go beyond the benefit to each individual.

Healthier better educated people are more productive, and all of us share in the added productivity. We would also more equitably distribute health care costs among all instead of just those currently insured.

The reasons we should not have vouchers for most goods is there is little or no external benefit. There is no societal benefit to each of us having a nice car or a big house, indeed that consumption may have negative externalities in terms of environmental impact.

I’m not as enthusiastic about a new tax to fund it, it would be just as good to raise old taxes as needed. I’m not fond of government intervention, but an exception is in promoting behavior with large positive externalites- like having health insurance and getting educated.

9 Michael December 7, 2005 at 7:43 am

Sounds similar to the Swiss model, which seems to combine the private delivery of the American system along with the benefits of insurance that is more portable and consumer driven, as well as addressing the issue of universal coverage:
http://www.emaxhealth.com/72/2593.html

One question is why would the government have to regulate the minimum package of benefits offered by the insurance plans? If everyone received a voucher that would be sufficient to buy a median plan given their pre-existing conditions, wouldn’t they naturally buy the most comprehensive package available?

A government-mandated package would decrease flexibility in the provision of health care. For example, if someone wanted to opt for the HSA + catastrophic coverage option, they should be allowed to do so with their health care voucher. As long as each person is receiving enough money to buy their own health care, we should leave the responsibility on them to make sure that they are getting enough coverage.

Btw I think the reason for having vouchers for health care, unlike for food, etc., is a somewhat paternalistic one. People often don’t realize how important it is until they get horribly sick, at which point they expect society to somehow pay for all their costs.

I am still unclear how the problem of risk is dealt with in such a system. Does each person receive a voucher for a different amount, depending on their pre-existing condition? Or are insurance providers not allowed to discriminate against people with pre-existing conditions, with some sort of government re-insurance or regulating promoting risk-pooling to compensate?

If you started from scratch, you could make a system where each person is insured from birth. The law could forbid any insurance provider from droppping anybody. If a person wanted to switch insurance companies, and they had a pre-existing condition, their existing insurance company could pay the new company a sum of money for relieving them of the extra risk burden the client posed. It seems like this would only work from birth, however…

10 Trevor Bothwell December 7, 2005 at 2:25 pm

My support for school vouchers is driven by a desire to see this implemented as a means to effect outright privatization of schooling. Since health care is (largely, though not sufficiently) private already, there is no reason in a free country to shift toward a socialist model. Considering the monopoly and control the state and teachers’ unions currently have over public education, school vouchers are a pragmatic, if unideal, solution to freeing our children from the draconian fancies of government schools. We should not feel compelled to saddle ourselves in the health care industry with the same problems we’re trying to eliminate in our schools.

11 Steven Jens December 7, 2005 at 6:32 pm

Boonton, if it isn’t quite a literal monopoly, it’s certainly overwhelming market share (at least K-12) driven by a large subsidy. I’m not sure how you can dispute that, unless you’re just pointing out that private schools aren’t illegal.

12 Jason December 8, 2005 at 7:23 pm

This issue of personal responsibility vs. societal responsibility for health care is an interesting one.

The libertarian position is a nice idea (if you’re young, rich and healthy), and our current system is theoretically very libertarian. The problem is our society DOESN’T buy it–we have laws that require hospitals to treat anyone who walks into the ER with a serious condition. As long as that requirement exists, we do have universal health care (in a bizarre and inefficient form). So the issue is how to pay for it.
Basically, those of us who buy insurance (from GM and Microsoft to the guy who owns the local barbershop) are subsidizing those too rich for Medicaid and too poor to buy insurance.
We’re not getting very good value for our money–we’re paying for a highly inefficient system. Huge amounts get spent on administration. (My physical therapist said his office had 12 therapists and 3 billing specialists.) And cheap cost-effective treatments are not done because they are too expensive, while major preventable surgeries are paid for by the system.

Vouchers seem to me like they might provide a reasonable solution. I’m not sure a VAT is the way to pay for it, as it’s regressive as another poster pointed out. But why not put a payroll tax like Social Security on businesses and individuals, which would replace the “voluntary tax” that employers now pay in the form of health insurance premiums. Many–especially small employers or those with aging employee bases–would get a much better deal for their money. It would level the playing field, and reduce the current incentives for age discrimination.
Now, as far as personal responsibility. There should be an incentive to take care of your physical and mental health. Why not make the participant portion of that payroll tax vary by a formula based on Body Mass Index and resting heart rate (which correlates with aerobic activity). In other words, stay slim and you pay lower taxes.

13 Chris December 9, 2005 at 12:41 am

For the free-marketers out there, are you opposed to the current tax exclusion of employer provided health insurance, especially given that there is no deduction for individually-purchased insurance (except if you run your own business)? Government is already subsidizing a portion of healthcare for middle class people — despite the inefficiencies you complain about. Whether government should be involved in helping people pay for health insurance is certainly a matter for honest debate, but let’s not pretend that it isn’t already. The reality for those with employer-provided insurance is that the government is paying up to 35% (increasing with your income — not your need) of your healthcare as it stands now.

14 Boonton December 11, 2005 at 5:29 pm

I think we agree the benefits of a BMI tax are there but the costs almost certainly are much greater. It also opens the door up to so many other gov’t intrusions into privacy. Why not, for example, a tax on the number of sexual partners a person has in a year considering how expensive STD’s can be?

Another point I’m finicky on is word usage. ‘Socialized’ does not mean gov’t involvement. Socialism is gov’t ownership of ‘the means of production’ (capital). The typical socialist idea would be something like:

Private hospitals make profit. If gov’t owned the hospital it could price services so low so there would be zero profit. Therefore everyone wins because health care is chaper and easier to access.

If you asked Karl Marx or Lenin what ‘socialism’ would look like in the healthcare industry this is probably what they would say. What they would certainly not say is that gov’t would give you money to buy healthcare from for profit providers (whether they be hospitals or doctors).

15 Boonton December 13, 2005 at 3:32 pm

Why mandate HSA’s? Why not allow people to buy whatever type of insurance they want with their vouchers/universal accounts including full service HMO’s if they wish? Shouldn’t the market decide in this case which is the most efficient form of healthcare; managed care or individually managed care with a catastrophic coverage?

16 æ°´æ— ç—• July 4, 2007 at 4:38 am
17 gill July 10, 2007 at 11:17 pm

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21 xdrs July 17, 2007 at 11:13 pm

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22 32rrfrtg July 20, 2007 at 1:54 am

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25 huojia August 7, 2007 at 3:21 am
26 货架 August 14, 2007 at 8:51 pm




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27 Missliang August 15, 2007 at 3:55 am

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电火花检测仪

google排名
门禁
门禁
门禁系统
门禁系统
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搬家公司
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光盘制作
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激光打标机
搬家公司
北京搬家公司
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hongkong hotel
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集团电话
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china tour
china tour
青春痘
青春痘

28 Missliang August 17, 2007 at 1:41 am

houyuping 07年8月17日

wow gold
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world of warcraft powerleveling
world of warcraft powerleveling
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world of warcraft power leveling
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翻译公司
翻译公司
上海翻译公司
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风机
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红外测温仪
红外测温仪
超声波测厚仪
超声波测厚仪
超声波探伤仪
超声波探伤仪
频闪仪
频闪仪
涂层测厚仪
涂层测厚仪
电火花检测仪
电火花检测仪

google排名
门禁
门禁
门禁系统
门禁系统
搬家
搬家公司
北京搬家公司
光盘制作
光盘印刷
光盘印刷
搬家公司
激光打标机
搬家公司
北京搬家公司
hongkong hotel
hongkong hotel
beijing tour
beijing tour
集团电话
集团电话
china tour
china tour
青春痘
青春痘

29 likaida March 18, 2009 at 5:42 am
30 likaida March 18, 2009 at 5:45 am
31 likaida March 18, 2009 at 5:47 am

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