Helping the Medically Needy, Part One

By Greg Scandlen

In an earlier posting I said that health reform needs to be broken out into several discrete topics, with each one debated on its own. I listed them as –

– Medicare payment reform
– Insurance regulation
– Assistance to the needy
– Management technology upgrades
– Workforce initiatives
– Quality improvement initiatives
– Professional liability reform

These are just top of the head. There are certainly other topics that need discussion. But these are a pretty good beginning. It was nonsensical for the Democrats in Congress to lump them all together in a single package, and think there could be any rational understanding or even discussion of the proposal. As I said, ObamaCare was simply too big to ever succeed.

Now that we’ve spent some time on the last item on the list, professional liability, let’s introduce a new topic – assistance to the needy.

In my opinion, by far the most elegant idea was developed by John Goodman and written about in many places but perhaps most comprehensively ten years ago in Characteristics Of An Ideal Health Care System.

I call it elegant because it is simple to understand, can be applied universally with a minimum of administration, and will actually get the job done.

The two basic ideas are these:

  1. People should be insured if at all possible, but they cannot really be required  (“mandated”) to do so. All that can be done is fine them if they fail to do it. Let’s assume the fine is $2,000 per person. Fining non-compliers $2,000 is precisely the same as rewarding compliers $2,000. So giving a voucher in the amount of $2,000 for every person who has health insurance is exactly the same as placing a $2,000 fine on those who fail to have it. In either case, non-compliers are $2,000 worse off than compliers.
  2. We already know how much our society values health coverage. We know that by how much our society spends to provide care to the uninsured. This isn’t part of John’s argument, but I would add we also know by how much we currently subsidize those with employer-based coverage. Curiously that number is about the same in both cases. In 2007, the Congress’s Joint Committee on Taxation reported that the value of the exclusion for employer-based coverage was $143.3 billion in foregone income taxes and $100.7 billion in foregone payroll taxes, or $244 billion in that year alone. Assuming 160 million people receiving employer-sponsored benefits, that is $1,525 per person in 2007. Goodman estimated that in Texas in 2001, each uninsured person received about $1,000 in free care. So, our ballpark estimate of $2,000 per person today is probably not far off the mark.

So, John’s proposal is to provide a voucher of $2,000 (or so) to every person who buys health insurance. Those who do not choose to buy it would have their voucher deposited in a safety net program. This would be financed by eliminating the employer exclusion, as well as other existing free-care programs for the uninsured.

Before we get into the politics (winners and losers) of this idea, let’s supplement it with some additional thoughts.

  1. It is clear (at least to me) that some not-small number of people cannot handle coping with any kind of insurance program. They may be mentally ill, drug addicted, illiterate, or in some other way dysfunctional. There are people with poor impulse control who are simply unable to plan ahead even for a few weeks. They don’t keep appointments, don’t fill prescriptions, don’t understand the difference between an optometrist and an ophthalmologist. It is simplistic to think that sticking an insurance card in their wallet will do anything positive for them. It will not. These folks need the direct provision of services, not insurance of any kind. The Goodman proposal is the only idea out there that accounts for their needs.
  2. Very low-income people’s needs could be supplemented with state funds, especially if this idea supplanted Medicaid – and it should. Medicaid is a very poor insurance program that looks great on paper but pays so poorly that many enrollees can’t find a doctor to see them. Hence, about one-third of the uninsured are already eligible but haven’t bothered to enroll. Rather than corralling people into a Medicaid ghetto, this proposal would enable them to have real insurance, just like their neighbors. It also accounts for frequent changes in eligibility, as people get and lose jobs.
  3. Similarly for SCHIP. It has never made sense to divorce children from their parents to obtain health insurance. One policy is hard enough to understand without having several different programs for different family members. It would also be more affordable for children to be covered as dependents on their parents policy than to farm them out to a state program. I mean, ObamaCare is allowing independent “children” to age 26 to stay on their parents’ policies. Why in the world should an 8-year old be treated differently?
  4. The current punitive approach in ObamaCare is so full of holes that it will never actually work. Most of the uninsured are too poor to pay taxes, so a tax penalty will have absolutely no effect on them. Goodman’s approach rewards everyone equally, regardless of their income level.

I’m going to leave it there for now, but there will be much more to say about all this in future postings.

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2 Responses

  1. Thanks, Greg. This is a good summary of a rational approach to government subsidies for health insurance. Let’s hope that the opponents of Obama Care will latch onto it a propose a positive alternative to the things they oppose.

  2. I need edit my website to compare John’s approach to mine; but there are a lot of points of similarity under a different surface appearance, I am pretty sure.

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