Monday, August 12, 2013

More thoughts on AEI Paper: Best of Both Worlds

This AEI paper will set you to thinking.  For example . . . 

It reminded me that, back in the 1970's before the rising cost of medical care made it prohibitively expensive, many employers who sponsored comprehensive medical insurance plans achieved 100% participation by making them "non-contributory".  In other words, the plan sponsors paid the entire premium, so their employees did not have to make any "premium contribution" in order to have insurance. All employees (& their families) in these plans were automatically covered just by being employed.

This has always seemed to me a far superior way to achieve 100% participation than the heavy-handed, unwieldy, and still legally-dubious tactic of "mandating" the purchase of private insurance.

Unfortunately non-contributory plans have disappeared because rising medical cost made comprehensive insurance far too expensive.  So today, employees must enroll for insurance and "contribute" a part of the premium.  Naturally – unfortunately – as these contributions rise, a growing number of lower-paid or poorer employees find it hard to pay their contributions, decide not to enroll, and end up with no insurance at all. 

But does high medical cost leave any practical alternative to comprehensive coverage with mandates?

Of course it does. 

The plan sponsor (in this discussion that would be the single-payer government sponsor) could cover 100% of the cost for a basic set of benefits - NOT a comprehensive set.  Everyone would automatically receive these basic benefits without the high cost of comprehensive benefits,  and without the need for an insurance purchase mandate.

This idea is essentially point (2) of the AEI plan (Page 1 of the Executive Summary).

It's certainly possible to incorporate means-testing so that the poor get a fully “free” plan, and everyone else would make some contribution based on a sliding income scale. If you like taxes, you could call that a "tax".

It's also possible to allow purchase of private insurance to supplement the basic benefits.  The private supplemental insurance could also be subsidized on a sliding scale. 

Based on the experience with Medicare, the private insurance industry is able to offer lots of practical choices for such supplemental plans.  In fact this is also the experience in several other countries that provide a basic public plan and permit citizens to purchase voluntary, private supplemental insurance if they so desire.  France is a particularly good example; or Switzerland, or Chile.

This arrangement - coupled with other provisions AEI recommends - appears both simpler and less expensive than Obamacare is turning out to be.

Contrast Obamacare, which enshrines the idea of "comprehensive" insurance rather than basic coverage. On top of that, CMS regulations require yet additional coverage above that specified in the law itself.   This bias toward comprehensive coverage is one of the chief reasons Obamacare is so expensive.  (And as we are finding out - thank you, Fair Nancy - there are many other reasons, too.)
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