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Healthcare crisis solved (with vouchers)

They helped end hunger in America. Applied to healthcare, they could cover the uninsured yet keep government from taking over.

By David C. Rose / August 10, 2009

St. Louis

Democratic proposals to reform the American healthcare industry require too much faith in government while Republican proposals don't solve the problem of the uninsured.

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The best known hybrid proposal, the Wyden-Bennett plan, overhauls the current insurance industry and solves the uninsured problem by mandating coverage. But as we have learned from Massachusetts' experience, enforcing mandated coverage is very difficult.

Americans deserve reform that deals with the three most important problems with American healthcare: (1) many people are uninsured, (2) those who have insurance worry that if they lose their job they might become locked out of the system because of a preexisting condition, and (3) many people are frustrated with increasingly intrusive insurance companies that treat patients more like criminals than customers. (Note that the skyrocketing cost of healthcare is not one of the Top 3 problems – more on that later.)

Any plan that doesn't address these three problems is inadequate. Any plan that requires nationalizing healthcare is excessive and prone to failure.

To get everyone in the system without mandating coverage, we should enact a national sales tax – 6 percent would be sufficient – on all goods and services. This revenue would pay for a voucher that every American citizen could use to buy a catastrophic health insurance policy.

Vouchers for healthcare? Absolutely. Vouchers work. We solved the hunger problem in America with vouchers in the form of food stamps. This program is efficient because it is simple, transparent, and works with, rather than against, market competition.

By significantly increasing competition, a voucher program will give us better service and cost control while dealing directly with the problem of the uninsured once and for all.

Those who don't exercise their vouchers would be randomly assigned healthcare insurance. Since catastrophic policies have high deductibles and copayments, the program would also provide a health savings account for poor people.

Such accounts provide money for deductibles and copayments, and any money not used each year can be claimed as cash. That incentive has been shown to turn patients into cost-conscious – and health-conscious – consumers.

For the working poor, most of the sales tax burden would be offset by the elimination of the Medicare tax, because this voucher program would supplant Medicare and Medicaid.

The rich spend more, so under a sales-tax plan they would obviously pay more. What do rich and middle-class people get out of this? They get an even better private healthcare system that, because it deals with the problem of the uninsured, would probably foreclose future efforts to nationalize healthcare.

To work properly, this program would require other changes:

First, remove the tax deduction for employer-provided health insurance. This delinks insurance from employment, so people will no longer have to fire their employer to fire their insurance company. This will increase competition between insurance companies.

Second, mandate that all policies accept people with preexisting conditions. Many health economists argue that this will push the sickest people into the most generous plans, so most people will end-up buying catastrophic policies. That's fine because these policies are more efficient and they largely obviate the need for intrusive insurance company oversight. After all, little oversight is needed when patients bear most of the cost of their decisions.