November 18, 2003
The Universal Cure
he public has good reason to be worried about health coverage. After five years of relative stability, insurance premiums, prescription-drug prices and other costs have soared. This year, premiums went up nearly 14 percent, with those paid by employees increasing nearly 50 percent since 2000. The number of Americans without health insurance increased more than 5 percent just in the last year. And strikes by workers in Los Angeles and elsewhere showed that health coverage is the flashpoint of labor discord.
As a solution, many policymakers are advocating small reforms like a Medicare prescription drug benefit and expansion of the Children's Health Insurance Program. Unfortunately, more services for some groups may increase costs and force reductions in coverage for others.
What we need is a fair proposal that is simple, efficient and appealing to disparate constituencies. For more than a decade, as members of the medical and economics communities, we have advocated such an alternative: universal health care vouchers.
In a morally responsible country, everyone should have health insurance. Each family or individual would be given a voucher to purchase a policy that covered basic services, including doctor visits, hospitalization, pharmacy benefits, some mental health and dental care, and catastrophic coverage. People who want more services, like wider choices of specialists, could pay a premium over the basic voucher.
This would continue to be a decentralized system with existing health plans contracting with providers, but their insurance would no longer be employment-based. That Americans receive insurance from their employer is a relic of World War II wage controls. It has one advantage — pooling people to reduce premiums — but many disadvantages, including locking people into jobs so they can continue to receive health coverage and allowing employers to choose insurance providers. It has also become an albatross for businesses. Without costly insurance worries, companies could compete for workers by offering higher wages and better working conditions.
A voucher system would also enable the government to end Medicaid and phase out Medicare. Having multiple health care systems squanders resources. All Medicaid recipients would receive vouchers. Each year, those who normally age into Medicare would be enrolled in the voucher plan instead. Current beneficiaries who preferred traditional coverage would not be forced to switch, although after total Medicare enrollment dropped sufficiently, the program would be amalgamated into the voucher system.
One consistent concern about vouchers is that health plans would have financial incentives to avoid the sick. But requiring each insurance company to offer a basic package with catastrophic coverage would insure that individuals with greater needs would not be excluded. More important, the voucher system would pay insurers part of their cost as a lump sum and part as a reimbursement fee for actual services rendered, reducing the incentive for insurers to avoid sick patients.
A national health policy board would administer the system, including certifying health plans and insurance companies, managing the vouchers and payments and collecting and disseminating data on the quality of care.
The United States now spends about $1.4 trillion on health care. The government already pays about 45 percent of that. In 2003, the average health insurance premium for a family of four is about $9,000. Using that figure and population numbers, a universal health care voucher system would cost about $840 billion, excluding Medicare. That would leave substantial sums for individuals to pay for out-of-pocket expenses and services not in the basic package.
More important, using an earmarked tax to pay for the vouchers would limit cost increases. The level of the tax would determine the value of the voucher. If the public began demanding an increase in the voucher value, it would be directly linked to higher taxes, moderating these demands and health care inflation.
Obviously, many details need to be elaborated. Nevertheless, vouchers hold the promise of securing wide support. Democrats have long favored the notion of universality, while Republicans instinctively favor voucher plans and have longed for the demise of Medicare and Medicaid. Businesses want to stop providing health insurance, and Americans want guaranteed health coverage with choice.
With the inexorable explosion in health care costs and the increase in the number of uninsured, a crisis seems at hand. The universal health care voucher can secure both widespread support and finally establish a fair, functional health care system in the United States.
Ezekiel J. Emanuel, oncologist and bioethicist, is author of "No Margin, Nor Mission." Victor R. Fuchs, professor emeritus of economics at Stanford, is author of "Who Shall Live?"
