Wednesday, January 19, 2011

A New Way Forward on Healthcare

Republicans will try to repeal healthcare this year although they will not succeed with President Obama still in the White House. But perhaps some beneficial changes will be considered to the original healthcare plan.

What I would suggest is allowing people to take catastrophic plans, something I proposed on this blog in 2009 during the height of the healthcare debate. Catastrophic plans typically pay for big medical expenses such as open heart surgery while leaving patients to pay for routine care such as check-ups and medication out of pocket. As one might expect, such plans are much cheaper than comprehensive plans. In 2009, the average single person could expect to pay $4,824 for a year’s worth of insurance. By contrast, a 33 year old in good health could get a decent catastrophic plan for just $1560 with a deductible of only $1000.

To be sure, there are some who cannot afford routine medical care. To help them, government could give everyone a health savings account and contribute say $1,000 to it every year.

This amount of money would allow patients to get check-ups, tooth cleanings, basic screenings etc. Patients would be allowed to keep any unused money in their accounts and use it for future medical care. This would be particularly beneficial for young people, who usually only require check-ups and medication for the occasional cold or flu. By the time they are older and need to pay for more expensive screenings, or basic surgeries they would have a decent amount of money saved up.

Of course, this leaves problems of its own. Most young people would likely choose the catastrophic plan leaving traditional insurance companies or government with high risk, elderly patients. But since government would save so much money on the young and middle aged, it could easily accommodate the elderly and sickly in a program like Medicare. In 2005, Medicaid spent about $5671 per recipient. The cost has surely risen a bit with inflation. Imagine government saving over $3,000 per patient. Surely, extending catastrophic plans and health savings accounts to the uninsured would be much cheaper than the current plan to expand Medicaid. It is easy to imagine using some of the money to give the elderly extra to help afford higher premiums.

Moreover, this proposal could end up generating substantial economic growth as companies employing a lot of young or middle aged people (most companies) had much lower healthcare costs and more money they could use to hire workers or research new products. This in turn would leave more people with the means to afford their own care and generate more tax revenue to help cover healthcare costs for government.

No healthcare proposal is perfect. But this would be something everyone should be able to support. Democrats who want everyone to have access to healthcare could do it. Republicans who want to rein in the costs would be able to do that. Both sides could take credit for a pro-business initiative that helps create jobs. Let’s hope lawmakers consider this change to Obamacare instead of engaging in a long, divisive battle over repeal.

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