Now lets take a look at the rising cost of health care. Could it be because the Government controls 45% of it now?
Gov Program Covering Cost Per Capita Private Plan
Medicaid 46.0 million $295 billion $6413.05 $1416
Indian Health 1.8 million $3.8 billion $2111.11 $1416
Medicare 43 million $295 billion $6860.47 $4368
Military Health 9.5 million $42 billion $4421.06 $1416
SCHIP 7.6 million $8.4billion $526.31 $996
See how much debt these programs have made
Federal Employees Health Benefits Program. Private plans because public options are not goodenough.
It covers everyone. It cuts costs. It can get through Congress. Why Universal Health Care
Vouchers is the next big idea.
Ten Principles of Universal Healthcare Vouchers:
1. Universality: Every American under 65 years of age would receive a voucher that would
guarantee and pay for basic health services from a qualified insurance company or health
2. Free Choice of Health Plan: Individuals and families would choose which basic insurance
program or health plan they wanted among several alternatives.
3. Freedom to Purchase Additional Services: Americans who wanted to purchase additional
services or amenities, such as wider choices of hospitals and specialists, or more
comprehensive mental health or dental services, could do so with their own money.
4. Funding by an Ear-Marked Value-Added Tax: Earmarking creates a direct connection between
benefit levels and the tax level, serving as a political restraint on health care inflation.
If the public wants more services to be covered in the basic plan, they must be willing to
support a tax increase.
5. Reliance on Private Delivery System: This proposal does not call for government health
care and would not legislate changes to the current private delivery system. 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.
6. Ending Employment-based Insurance: Experience demonstrates that health insurance provided
by employers lowers wages, raises prices or reduces employment. The end of employment-based
health insurance would translate into higher wages, lower prices, and the recapture of lost
7. Eliminating Medicaid and Other Means Tested Programs: Since every individual and family
would receive a voucher, there would be no need for Medicaid, the state Children’s Health
Insurance Program (S-CHIPs), or other means tested programs. Those covered by such programs
would be incorporated into the mainstream health care system without means testing.
8. Replacing Medicare over time: While no existing beneficiary would be forced to change to
the voucher system, Medicare would be phased out over time. Individuals turning 65 would
continue to be enrolled in UHV; there would be no new enrollees in Medicare.
9. Administration: Modeled on the Federal Reserve Board, management and oversight would be
the responsibility of a Federal Health Board with multiple regional boards to facilitate
implementation of programs in different geographic regions. The board would be active
contractor with health plans, defining and periodically modifying the basic benefits package,
informing Americans about their health care options, reimbursing health plans, and
undertaking data collection and research related to patient satisfaction, quality of care,
and risk and geographic adjustments for payments. The board would regularly report to
Congress on the health care system.
10. Technology and Outcomes Assessment: An independent Institute for Technology and Outcomes
Assessment would be established. Its research and database would focus on assessing the
effectiveness and value of different interventions and treatment strategies and disseminate
information concerning outcomes of treatments delivered in regular practice.
Here’s how it works.
Every household in America will receive a voucher entitling its members to enroll in a
private health plan of their choice. All plans will be required by law to guarantee the basic
features of what most Americans now receive from their insurers: doctors’ visits,
hospitalization, pharmaceuticals, and catastrophic coverage. These insurance policies will
not cover everything. Viagra and cosmetic surgery will not be included, but Americans will
still be able to purchase them and any other service or care with their own money.
Those with preexisting conditions or high medical costs will be protected because they will
have guaranteed coverage with any plan they choose. UHVs solve the problem of adverse
selection by adjusting the reimbursement value of the voucher to the differing risk levels an
insurance company absorbs by taking on different patients. So, the payment to insurers for
covering older, sicker patients will be higher than for younger, healthier Americans,
eliminating the incentive to exclude high-risk patients. Moreover, while individuals can
change health plans if they are dissatisfied, a plan will not be allowed to drop an
individual for any reason.
Seniors currently enrolled in Medicare will see no change. All of that program’s current
obligations will be fulfilled. But there will be no new enrollees into Medicare. Americans
who have yet to turn 65 will simply continue with their voucher-paid coverage, keeping the
same choice of plans that they enjoyed throughout their lives. Medicare, with the regressive
payroll tax that financed it, and its calamitous fiscal future, will over time be completely
replaced by the voucher system. Americans will no longer have to wait for retirement before
they are guaranteed reliable health insurance. And because every American will be covered
regardless of their income, Medicaid will also be eliminated.
When it comes time to go to the doctor, Americans will see little difference. Just as today,
different doctors may choose to accept or not accept different insurance plans. But unlike
today, when most employees have no choice of insurance company, people will have greater
freedom to choose a plan that suits them best. For their part, doctors will see little change
in how they care for their patients. But rather than spending time and energy fighting with
insurance company bureaucracies, doctors will have the information, infrastructure, and
incentives to deliver the best proven cares to their patients, and know they will be
reimbursed. Moreover, because everyone will be covered, doctors and hospitals will no longer
have to absorb the cost of “charity care” for uninsured patients who lack the means to pay.
The greatest change will be found not in the doctor’s office, but in the workplace.
Employer-based insurance, with all its inefficiencies and inequities will disappear. Workers
will have the freedom to switch jobs, try self-employment, or drop down to part-time work
without losing health coverage. Not only will “job lock” disappear, but so will “wedlock”
when men and women stay in marriages they would rather be out of because of health-insurance
needs. Employers will also be free to hire workers without considering how much they may add
to the health-insurance bill.
Small businesses and their employees would gain especially from UHVs. Small firms are often
stuck with premiums that run 20 percent higher per employee than large businesses. With UHVs,
all employees will be covered and all employers will be on equal footing.
The role of health insurers will be significantly changed by UHV. What too many patients find
these days is large insurance companies eager to offset risk and cost by refusing to insure
patients with pre-existing conditions or other serious needs. These at-risk patients can
still find coverage, but often only through boutique insurance companies that fill tiny
niches and require sky-high copays for the sickest of consumers. The new system changes all
of this in two important ways. First, because all Americans will be guaranteed coverage in
the plan of their choice, the hundreds of smaller insurers will probably fade away. The
result will be a significantly consolidated, streamlined, and more efficient industry;
economies of scale will lower administrative costs.
The system will be administered by a new board modeled after the Federal Reserve Board. The
Federal Health Board (FHB) will have regional boards to facilitate implementation of programs
in different areas. It will contract with health plans, define and periodically update the
basic required benefits package, inform Americans about their health-care options, reimburse
health plans, and collect data and research related to patient satisfaction, quality of care,
and risk and geographic adjustments for payments. Since many of these activities are
currently done by state health agencies and insurance companies, creating the FHB will still
mean a reduction in government bureaucracy.
The FHB will regularly report to Congress on the health-care system to ensure that the
program is politically accountable. However, like the Federal Reserve, its board will have
long-term appointments so that it is insulated from politics. The Federal Reserve Board has
proven itself remarkably adept at resisting political pressures; that same insulation will be
essential for the FHB so that it can issue decisions on what new drugs or treatments to
require insurers to cover without being influenced by congressmen who may receive campaign
contributions from health-care companies.
Shop and pay
While UHV will be more efficient than today’s health-care system, it will not be free. Unlike
past health-reform proposals, which have added the cost of a new health-care system to the
total federal budget and proposed financing it through income and corporate taxes, we propose
that UHV be financed by a dedicated Value Added Tax (VAT). Because consumers ultimately pay a
slightly higher price for the taxed good, a VAT is essentially a hidden tax. Some of the tax
might be absorbed by producers, but in the end, we can expect goods and services to be 8 to
10 percent higher than they are now.
The VAT is efficient, easy to administer, spreads the tax burden broadly, and encourages
savings. Still, financing health care with a VAT poses political vulnerability for the UHV
plan. Conservatives may argue that the VAT is a “money machine” that raises money too easily
because the tax is hidden. But there are reasons to think that this argument won’t be
definitive. Polls show that many Americans are willing to accept higher taxes in exchange for
guaranteed health care. Moreover, conservatives themselves, hoping to install a VAT in place
of the income tax have promoted its virtues.
For their part, some liberals will argue that the VAT is regressive. But there is a reason
why European voters have consistently signalled their approval of VATs. When applied to
social services, VATs are decidedly progressive. Not only will it be used to fund health care
for everyone, including low-income Americans who currently have none, but the VAT is also
much more difficult for the affluent to evade than income taxes. Furthermore, the VAT can be
made even more progressive by adjusting what is taxed–necessity items such as food and
utilities that cost the poor disproportionately can be excluded from the base. Perhaps most
importantly for the long-term viability of the program, the fact that lower-income Americans
will be paying into the system will mean that it will be more difficult for conservatives to
cast the program as “welfare.”
While this is a new tax, most Americans will end up paying the same for their health care as
they do today. Some upper-middle class and upper-income Americans will pay a little more in
order to achieve the gold-plated coverage that they enjoy as subsidized coverage through
their employers, but they will gain, as all Americans will, from the security of knowing that
their insurance is guaranteed for life. This is no small benefit, and one most Americans
appear willing to pay for. According to the Kaiser Family Foundation, the fear of losing
health insurance is more prevalent than the fear of losing a job, of losing one’s life
savings in the stock market, or of being the victim of a terrorist attack or violent crime.
What will the overall cost of this program be? The easiest way to estimate that is to
multiply the cost of the typical employer-provided insurance plan by the number of Americans
who would be covered. The cost of extending the same coverage to all 250 million Americans
under 65 is $713 billion. (Since Medicare will be untouched at first, we leave it out of our
calculations.) Adjusting this figure upward 7 percent to account for the fact that the
insured and Medicaid recipients tend to be sicker than the average worker and have higher
medical expenses brings it to $763 billion.
That’s a pretty big number. But it’s no more than the $800 billion employers and the
government spend today on a health-insurance system that leaves 45 million people without any
coverage. UHV offers everyone good insurance for about the same as the current system.
How is this possible? UHVs will dramatically reduce inefficiencies in both government and
insurance bureaucracies immediately. It could save tens of billions of dollars by eliminating
for insurance companies the cost of negotiating and contracting with employers every year and
by shrinking the number of overall insurance companies and their associated administrative
costs. Meanwhile, UHVs will do away with some of the absurd inefficiencies of government
health care, one of which is Medicaid, which–with 50 separate state bureaucracies required to
operate it–currently spends tens of billions each year just to determine who is eligible for
the program. That cost disappears under the UHV plan.
In addition to the immediate savings, UHVs would help rein in future health-care costs that
threaten our economy and our government finances. Health-care inflation is driven by four
1) the economy’s underlying inflation rate
2) the aging of the population
3) increased demand for expensive treatments or tests, such as MRIs
4) new technology. The first two, which account for 40 percent of health-care inflation,
cannot be changed (unless you’re God or Alan Greenspan). Still, they alone are not powerful
enough to make health-care costs rise faster than GDP. The threat to the economy comes from
the costs associated with new technology and demand for existing technology, which account
for the remaining 60 percent of health-care inflation. UHV holds these costs down
First, because the sole source of income for the UHV system is the VAT, increasing the amount
we spend on health care will require federal action to increase the tax. If the public wants
coverage of more services they can exert pressure on Congress to do just that. But higher
taxes are a tough sell, and it would likely take significant improvement in medical care for
Congress to agree to raise the UHV budget. And if the public values these improvements, the
budget should be raised.
In addition, the FHB will moderate increases in cost due to new technologies–the most
significant driver of health-care inflation. New technologies sometimes reduce the cost of
care, such as when pharmaceuticals obviate the need for expensive surgery. More often,
however, new medicines or equipment with small or negligible benefits add wildly inflated
costs to health plans. Vioxx, Celebrex, and similar medicines are not any more effective for
younger patients than is ibuprofen, which costs a penny per pill. But the sizzle of new drugs
leads thousands to request and be prescribed them at a cost of billions of dollars.
There is nothing wrong if individuals want to spend money on marginal medicine, but weighed
against, say, universal prenatal care, the benefits simply do not justify the costs. A
nonpolitical board that could objectively assess these data will reduce the use of marginal
medicine, causing a ripple effect that sends a message to pharmaceutical, biotechnology, and
device companies: Marginal improvements that a company develops are unlikely to be covered by
the voucher program. So, why not stop developing an unending chain of Viagra rip-offs and
redirect research toward drugs that offer clear benefits to the public health?
Economic feasibility, of course, is not enough. If the history of health-care reform teaches
us anything, it is that its politics cannot be an afterthought. Looking at the hammerlock
which conservatives hold on the federal government and on the lobbyists of K Street, some
might say that the chances of a successful bipartisan overhaul of the health-care system are
next to nil. We disagree for two important reasons. First, what elevates UHVs above the ranks
of attractive yet doomed health-care reforms is the way that vouchers reshape the politics of
the issue, attracting some powerful interests that have traditionally opposed reform while
isolating and limiting the remaining opponents. To put it bluntly, it will be hard to oppose
this plan on grounds that aren’t strictly partisan. And the second reason cannot be repeated
too often: This is not 1994.
The turnaround of the attitude of business towards reform is one of the biggest changes from
1994 and the first health-care fight. Large businesses opposed Clintoncare on the theory that
managed care would keep their expenses in check. For the short term, it was a good bet.
Managed care did restrain health-care costs until 1999. Since 2000, health-care costs have
risen dramatically, breaking the backs of companies, and there are no more savings to wring
out of the current system. In 2003, business health-care spending rose 12 percent, the fifth
consecutive year of double digit rates of inflation. General Motors and Ford both had their
debt rating slashed to junk status this May in large part because of their pension and
health-care liabilities (Ford’s liability in 2004 reached $12.3 billion or 70 percent of its
market capitalization). Nearly half of 1,400 chief financial officers surveyed by Robert Half
Management Resources said they expected health care to account for the biggest increase in
their cost of doing business over the next year. Removing these costs from their balance
sheets and restoring a measure of predictability to wage and benefit costs would be
irresistible to businesses. While many CFOs might prefer to be relieved of the responsibility
for health care altogether without any tax at all, most recognize that such a retreat (to the
1920s) is unlikely to happen.
Large insurance companies–whose opposition presented a significant stumbling block to
Clintoncare–should support a UHV plan because it preserves the role of private insurers and
brings 45 million new paying customers into the industry. They should be joined on the side
of reform by doctors, who stand to benefit financially from reduced administrative costs
associated with consolidation of the industry and from the end of charity care for uninsured
patients, and who did, after all, enter their profession in order to care for the sick, not
just wealthy sick people. Governors and state legislators would put their muscle behind the
plan because it relieves them of the Medicaid costs. Even traditional liberal constituencies
that were lukewarm about Clintoncare can be expected to support this reform. The union
movement, for instance, has been forced to accept higher premiums and copays in negotiations;
if health benefits are no longer an issue, leaders will have more leeway to bargain for
higher wages and other benefits.
Certainly, the most significant opposition to UHV will come from smaller insurance companies,
whose steep profits come from insuring those Americans who are too risky for large insurers
to touch. With universal coverage, these boutique insurers will be rendered obsolete as their
customer gravitate toward the larger, most efficient firms which offer higher levels of care
for the same amount of money. While small insurers are well-funded, well-connected, and
well-organized, they will be on their own in this fight. Their old ally in the Clintoncare
fight–big business–has grown tired of paying high premiums and doesn’t see the existence of
small insurers as vital to its own survival.
When you add business, doctors, state officials, and large insurers to the column for reform,
the political scorecard looks a lot stronger than it did for Clintoncare. Even if small
insurers and no-tax conservatives put all their strength behind defeating UHVs, they would
still have to overcome a powerful coalition. The outcome certainly isn’t predetermined, but,
for the first time in a long while, the odds seem more favorable to reform.
And so does public sentiment. At its high point, the Clinton health-reform proposal garnered
the support of 56 percent of Americans–a not-insignificant number, but nothing like the
levels of support for universal health care today. In 2003, the Pew Research Center asked
Americans if they would support universal health care even if it meant rescinding tax cuts
passed since President Bush took office. A full 72 percent said yes, including a majority of
Republican respondents. Voters no longer view health care as a squishy liberal cause, but as
a moral and security issue. A recent Business Week cover story identified a block of voters
dubbed “Safety Netters”; Pew calls them “Pro-Government Conservatives.” Whatever the label,
the new political landscape now includes a significant segment of voters who are basically
conservative, but who believe in the benefits of a social safety net and who fear the
financial and health costs of losing access to care.
In the inevitable debate over health-care reform, there will likely be three basic choices.
First, the status quo, which promises ever-higher numbers of uninsured, endless cost
increases for business, and potential fiscal ruin for government. Next is the conservative
option, in which individuals are by and large on their own, swallowing a greater portion of
their health costs while unabated inflation makes the cost of a doctor’s visit more and more
prohibitive. But as the Social Security debate proves, any major legislation demands
bipartisan support. Conservative health-care reform has little if anything to offer
Democrats, even moderate ones. UHV, because it enhances consumer choice while offering clear
benefits to Republican constituencies such as large insurers and business, has a good chance
to draw enough Republican legislators to get over the top.
Precisely when Americans will once again look to Washington for solutions to the problem of
American health care is somewhat unclear. But what is certain is that the day will come, and
soon. Those who believe that health care is a right, not a privilege, should be prepared to
offer an answer with a chance of succeeding.
I feel this is the most appropriate health care system for the US given the system we have
This is what I would prefer the system to be.
The Singapore government spent only 1.3 percent of GDP on healthcare in 2002, whereas the
combined public and private expenditure on healthcare amounted to a low 4.3 percent of GDP.
By contrast, the United States spent 14.6 percent of its GDP on healthcare that year, up from
7 percent in 1970… Yet, indicators such as infant mortality rates or years of average healthy
life expectancy are slightly more favorable in Singapore than in the United States… It is
true that such indicators are also related to the overall living environment and not only to
healthcare spending. Nonetheless, international experts rank Singapore’s healthcare system
among the most successful in the world in terms of cost-effectiveness and community health
How does Singapore do it? Singapore is no libertarian health care paradise, but it does
self-consciously try to maintain good incentives by narrowly tailoring its departures from
The price mechanism and keen attention to incentives facing individuals are relied upon to
discourage excessive consumption and to keep waste and costs in check by requiring co-payment
The state recovers 20-100 percent of its public healthcare outlay through user fees. A
patient in a government hospital who chooses the open ward is subsidized by the government at
80 percent. Better-off patients choose more comfortable wards with lower or no government
subsidy, in a self-administered means test.
I’ve heard a lot of smart people warn that co-payments are penny-wise but pound-foolish,
because people cut back on high-benefit preventive care. Unless someone is willing to dispute
Singapore’s budgetary and health data, it looks like we’ve got strong counter-evidence to
this view: Either Singaporeans don’t skimp on preventive care when you raise the price, or
preventive care isn’t all it’s cracked up to be.More details on how Singapore’s system
works:* There are mandatory health savings accounts: “Individuals pre-save for medical
expenses through mandatory deductions from their paychecks and employer contributions… Only
approved categories of medical treatment can be paid for by deducting one’s Medisave account,
for oneself, grandparents, parents, spouse or children: consultations with private
practitioners for minor ailments must be paid from out-of-pocket cash…”
1.“The private healthcare system competes with the public healthcare, which helps contain
prices in both directions. Private medical insurance is also available.”
2.Private healthcare providers are required to publish price lists to encourage comparison
3.The government pays for “basic healthcare services… subject to tight expenditure control.”
Bottom line: The government pays 80% of “basic public healthcare services.”
4.Government plays a big role with contagious disease, and adds some paternalism on top:
“Preventing diseases such as HIV/AIDS, malaria, and tobacco-related illnesses by ensuring
good health conditions takes a high priority.”
5.The government provides optional low-cost catatrophic health insurance, plus a safety net
“subject to stringent means-testing.”
Singapore has achieved American health outcomes for about a quarter of the share of GDP the
U.S. spends. Furthermore, if Canada shows that socialized medicine can save a few percent of
GDP without hurting health, Singapore shows that the free lunch offered by greater government
control is meager compared to the free lunch offered by old-fashioned individual incentives.