Catching Up on BaucusCare

A few takes for the day ...

Martin Feldstein

Private health insurance today fails to achieve these goals. It is also the primary cause of the rapid rise of health-care costs. Because employer payments for health insurance are tax-deductible for employers but not taxed to the employee, current tax rules encourage most employees to want their compensation to include the very comprehensive "first dollar" insurance that pushes up health-care spending.

A good system should not try to pay all health-care bills. That would lead to excessive demand, wasteful use of expensive technology and, inevitably, rationing in which health-care decisions are taken away from patients and their physicians. Countries that provide health care to all are forced to deny some treatments and diagnostic tests that most Americans have come to expect.

Here's a better alternative. Let's scrap the $220 billion annual health insurance tax subsidy, which is often used to buy the wrong kind of insurance, and use those budget dollars to provide insurance that protects American families from health costs that exceed 15 percent of their income.

Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family's income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family's health bills in excess of $7,500 a year.

Tracy Velasquez:

People with mental illnesses often end up in prisons, jails and juvenile facilities when they are unable to access treatment in their communities. According to the Department of Justice, one in four people in state prisons experienced mental health issues in the year preceding incarceration, and nearly two-thirds of people in local jails live with mental illness. Untreated mental illness often leads to public order offenses, crises that cause law enforcement to intervene, and "self-medicating" with alcohol and illegal drugs. Parents of children with serious emotional disturbances who are uninsured or under-insured sometimes turn their own children in to the police, because their kids will get at least a minimum of treatment in the juvenile justice system. Prisons, jails, and juvenile facilities are now some of the largest providers of mental health services in the country.

There's also two takes by Ezra Klein worth checking out, one good, another less good.

Taking up Feldstein first, I think that his argument may very well hold up as a mathematical model, but being the economist that he is, he doesn't quite address the matter of how insurance companies might go about assembling risk pools in a purely free-agent health-care-consumer model. Mind you that the nearest examples we have of such insurance markets (auto, renter, homeowner, etc) there is still ample regulation on both the insurance dealer side and even on the consumer side. Those regulations can - and often do - lead to the same side effect of subsidizing the employer-based health care model. So I'm not sure it's worth even considering a mathematical model that ignores reality. But his point about the effect that it has on the type of insurance bought is well worth noting.

The Velasquez op-ed is rather interesting in that it's not an argument seen much these days. At least not in terms of the health care debate. It has been discussed for quite a while in law enforcement discussions, however. Probably not a bad thing that those two strands would connect.

As for Klein's takes, they're part and parcel of how I view the latest bills - a mix of good and bad. I'd love to see something sailing through that I could say nothing but nice things about. But the individual mandate is the biggest obstacle to that. The fact that the remaining reforms rely on that crutch to solve universality rather than push for market mechanism to do so, is a function of the same hangup.

ADD-ON: And for whatever it's worth, Bob Dole is on board with BaucusCare.