A health-care plan Ryan, Obama, and Romney should all get behind

Health-care spending in the United States is on an unsustainable path. Because it is growing much faster than our incomes and our economy, it threatens to dominate the budgets of households, businesses, and governments, crowding out other priorities.

As we contemplate the future and debate what to do, we need to recognize that we face a fork in the road. One path leads to a privatized system. The other path leads to a public system. The path we take will have enormous consequences for our society.

No wonder debates over health care have become so fierce. But here’s the good news: A sensible compromise is not only possible but may be the best outcome. In a hybrid system, everyone – whether young or old – would have access to both private insurance and a public plan.

Right now, Medicare is primarily a public system. The government pays providers for whatever care is deemed necessary. In contrast, working-age Americans are in an essentially private system. Most of them are employed and covered by a private insurance plan that is heavily subsidized by their employers. The larger debate should be about which of these two systems makes more sense. Medicare for all? Or subsidized private insurance for all?

Let’s stipulate that the amount of subsidy provided to the individual is the same in both cases. In addition, let’s assume that the subsidy is adjusted for an individual’s age, health status, and income. Finally, there has to be a cap on total spending growth as there is in most other advanced countries and in the Affordable Care Act beginning in 2015.

These assumptions are both reasonable and allow us to focus on the major differences between the two systems. Note that under these assumptions, benefits for the elderly are more related to income than under Medicare but there are also more subsidies for the non-elderly, as in the Affordable Care Act.

The pros and cons of a public system

A public system has some obvious advantages. The government has enormous leverage to use its buying power to secure low prices and adequate coverage for recipients. Its administrative costs per person are likely to be low, with marketing costs and profits out of the picture. Other advanced countries with public systems spend far less on health care than the US and get just as good health outcomes.

On the other hand, in a public system, innovation and efficiency might be compromised. Politics would also almost surely play a role in establishing how providers are reimbursed and benefits designed. For example, in the Affordable Care Act, evidence about what works to improve health cannot be used to set reimbursement rates for providers, and the powers Congress has given to the independent board whose job is to help control costs are strictly limited.

But what really kills the idea of Medicare for all is the fact that government budgets for health care would more than double and taxes would have to rise to European levels or beyond to pay for the expanded public system. Can anyone imagine Congress – even a Democratic Congress – voting to roughly double the size of the federal government and the taxes needed to pay for it?

Where Paul Ryan's 'private' plan falls short

One alternative is to move Medicare, which is essentially a single-payer public system, to look more like the private system used by most working-age Americans. Why should only older Americans benefit from a guarantee to health care at government expense?

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