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by Victor R. Fuchs and EzekieI J. EmanueI
The nation is debating how to fix Social Security when the real impending crisis is in health care. All agree that the Social Security trust fund is solvent at least until 2042 if not beyond, while the Medicare trust fund runs out in 2019, if not sooner.
Indeed, next year more than 1 out of every 25 dollars in the entire economy will be devoted to health care for just the 36 million Americans over 65 years of age.
The prospects for Medicare are so dire that by 2042 it will consume nearly all of the federal budget. And remedying Medicare requires drastic action—either doubling its taxes or cutting benefits in half. Simultaneously, because of the rise in premiums, employers are cutting back on health coverage; from 2001 to 2004, some 5 million fewer jobs provided health insurance. The consequence is inexorable rises in Medicaid, which is forcing states to cut benefits as well as funding for other programs, especially education.
System is broken
The current health care system is deeply and irreparably broken. Incremental reforms that build on this system, such as increasing the income eligibility for Medicaid or decreasing the age eligibility for Medicare, are doomed to failure, merely postponing the inevitable.
Indeed, the leading Republicans on health care, Bill Frist, Senate majority leader, and Bill Thomas, chair of the House Ways and Means Committee, have acknowledged that "the crisis we face [in health care] cannot be resolved by our present strategies or with patchwork efforts of the past. Neither can it be resolved by dealing with only one or several of the problems we face. Resolution will require comprehensive health system reform."
We propose such a comprehensive reform: universal health care vouchers—a 10-point proposal that is congruent with basic American values and should secure broad, bipartisan support.
* All Americans under 65 will receive a voucher that guarantees them basic health care services such as doctor visits, hospitalization, pharmacy benefits, some mental and dental health services and catastrophic coverage, from a qualified health plan or health insurance company.
* Individuals and families have free choice about which plan they enroll in.
* People who want additional services, such as a wider choice of specialists or more mental health benefits, are free to purchase them with their own money.
* An earmarked value-added tax would fund the vouchers.
* The private system of health plans, hospitals, physicians and pharmacies is retained to deliver care.
* The tax exemption for employer-based insurance will end, most likely ending employer-based insurance, since all Americans are covered under the voucher system. Medicaid and other state programs (except for long-term care) are also ended, with recipients merged into the mainstream health care system.
* Current Medicare beneficiaries are protected in their benefits. However, as Americans turn 65 they continue in the voucher program. In this way, Medicare is slowly phased out.
* The voucher system is administered by a Federal Health Board with regional boards modeled on the Federal Reserve system.
* An independent Institute for Technology
and Outcomes Assessment is established to evaluate the effectiveness and
value of new tests and treatments. It is funded by a dedicated one cent
of every two dollars of the earmarked tax.
Universal health care vouchers are simple and efficient, solving many of the current system's fundamental flaws.
First, equity is ensured because every American is guaranteed basic coverage without pre-existing exclusions or means testing.
Second, there are no free riders. Everyone
pays the value-added tax, and everyone is enrolled.
Same health plan
Third, continuity of coverage is enhanced because people can stay in the same health plan regardless of changes in their employment or marital status, health or other circumstances.
Fourth, employment decisions will be freed from considerations of whether a job has health coverage and the cost of health insurance.
The biggest worry about any comprehensive health care form proposal is cost. Currently, the United States spends about $800 billion on employer-based health coverage and the non-nursing-home part of Medicaid and other means-tested programs for the health insurance of the 250 million Americans under 65. These costs have been increasing 8 to 10 percent per year. We estimate that health care vouchers for Americans under 65 purchased from current health plans at current prices will cost about the same amount.
How can the voucher system deliver universal coverage without increasing costs? The current system is an administrative nightmare. For instance, the cost of screening a person for Medicaid—primarily, determining income eligibility—is about two months of benefits. At least $120 billion is spent on administering employer-based health coverage —much of it on sales, advertising, billing and the like that can be substantially reduced by the voucher system.
Most important, over time increases in expenditures should be constrained. By linking the earmarked VAT with basic benefits, expansion of coverage is linked to the public's willingness to tax itself. Further, the Institute of Technology and Outcomes Assessment will induce more rational use of medical interventions, limiting the use of services that have high costs relative to their benefits, such as new drugs for colon cancer that cost $60,000 per patient for just seven weeks in added survival.
Universal health care vouchers should have broad appeal. Conservatives will endorse the freedom inherent in vouchers, reliance on a market-driven delivery system, and the phase out of open-ended Medicare and Medicaid entitlements. Liberals will like its universality without means testing. State governments will be thrilled to be free from the Medicaid shackle, while businesses will be happy to escape their involvement in employee coverage.
All Americans will enjoy guaranteed lifetime coverage and the freedom to choose their own plan. Doctors and hospitals will prefer the lower administrative burden and freedom to care for Americans regardless of income.
The main opposition would come from small, niche health insurance companies, and benefits consultants who will view vouchers as a threat.
Today, universal health care vouchers may seem unrealistic. But as each part of the health care system deteriorates, support for major reform will grow, and the equity and efficiency of the voucher proposal will garner wide support.
VICTOR R. FUCHS, Henry J. Kaiser Jr. professor emeritus at Stanford University, is author of "Who Shall Live? Health, Economics, and Social Choice."
EZEKIEL EMANUEL, an oncologist and bioethicist,
is author of "No Margin, No Mission." They wrote this article for the San
Jose Mercury News.