Friday, December 21, 2007

Health Care

One of the main reasons the American health care system is messed up is the link between employer and health care. For most Americans, health care is subsidized by their employer, and as a result most people don't understand how much their care really costs. This leads to frivolous health care expenditures and a lack of responsibility among consumers...they're not paying [entirely] for it, so why should they worry about the cost? The link between ones employer and health care is basically the unintended consequence of government-imposed wage controls during the 1940s/1950s. Companies couldn't raise wages, so they began offering health care as an incentive to employees, essentially paying their employees with a currency of health care. Also, while individuals have to pay taxes on income used to purchase health care, companies don't. This ends up being a corporate tax loophole that companies can bury otherwise taxable income with.

Another problem with the current system is that certain health care expenditures shouldn't be considered "insurance." We don't have grocery insurance, because we know we need groceries. Likewise, we know we're going to need a certain amount of basic health care--there's no getting around it. Administering such basic health care through an insurance company or through the government is just unnecessary bureaucracy; it won't magically make the health care any cheaper, but it will add layers of administrative cost.

So if I were put in charge of solving health care, here's what I'd do:
  1. Break the link between a person's employer and their health care, which could be done in part by making all health care expenditures by individuals tax-deductible. This would take away the tax incentive that companies have to pay their employees with health care.
  2. I might consider making each individual purchase health care on the open market, just like how car insurance is mandated today. By making people think about how much health care really costs, they might think twice about getting the all-inclusive deluxe plan where all doctor visits and prescription visits are free (well, free at the point of purchase but paid for by high premiums). Additionally, people would be less likely to use insurance for routine doctor visits, which would likely lower administrative costs.
  3. I think these reforms would help a lot, but it wouldn't result in a utopia where everyone gets all the health care they possible need for the lowest cost possible. For example, people whose income is such that they already pay little or no federal income tax won't be affected by changing the tax code to allow health care expenditures to be tax-deductible. For these people, I would support a government-funded voucher program where each qualified person gets, say, a $2,000 per year voucher with which to purchase both health insurance and other health care services not covered by insurance (such as routine doctor visits). If they don't use all the money, at the end of the year the leftover amount gets rolled over year after year in an account they own. This would put the participants in such a program in charge of their health care decisions and provide them an incentive to make wise choices.

And after all that, for the people still left out (for whatever reason), I would support keeping Medicaid, although I'm sure it could use some reforms and hopefully would be used by far fewer people.

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