Commenting on "Should 21-year-olds pay more " Barry Carol writes:
Several points on this.
First, in theory, the Massachusetts approach of charging older people up to twice as much as younger people for health insurance is more reasonable, in my opinion, than pure community rating because younger people, as a group, incur far lower healthcare costs. Even the modified community rating approach used in MA probably charges younger people considerably more than their actuarial risk would justify. As for employer coverage, Bob also pointed out that if the employees do not sign up when insurance is first offered, they must show evidence of insurability if they want it later.
Affordability is an increasingly challenging issue for both employers
(especially small businesses) and those seeking coverage in the individual market. I suspect that the eventual solution will likely be taxpayer financing.
On the issue of what insurance should cover, it is likely that every
provider group under the sun will lobby hard to get its product or service included in the basic package. What you say about proven vs unproven treatments, cost-effectiveness, etc. certainly has conceptual appeal, but it will likely be a tough sell.
It is probably more doable with respect to new drugs and devices just coming to market. An alternative strategy might be something like the tiered copay approach we have now for drug be in the second tier, while unproven or more expensive treatments could be
in the highest (stiff copay) tier.
Finally, I don’t think it is appropriate to force guaranteed issue on the
industry without also requiring mandatory participation by consumers. To overcome the affordability issue, taxpayer financing will probably be necessary. My preferred approach would be a payroll tax to cover the employed population and a dedicated value added tax to cover the non-Medicaid eligible unemployed and those who currently are either
self-employed or work in very small businesses (fewer than 10 employees).
The payroll tax would probably have to be about 15%-16% of wages currently subject to Social Security taxes ($97,700 in 2007). We could reform the income tax by replacing the current structure with a 28% flat rate on income (including capital gains and dividends) above the federal poverty level (FPL) with a dollar for dollar credit toward the income tax liability for the employee’s share of FICA and health insurance taxes paid. The Earned Income Tax Credit (EITC) could be adjusted to insure that the working poor are no worse off than under the current system. The VAT would probably need formularies.
The proven and clearly cost-effective treatments could be in the low copay tier, treatments that rank in the middle range for cost-effectiveness could to be about 3%-4% to cover the non-Medicaid eligible unemployed and those who work for very small firms.
We should probably also leave Medicare unchanged for the 65 and older population and convert Medicaid to a federal program with one nationwide set of rules while shifting a significant piece of other current federal spending in the areas like road construction, education, housing, etc. back to the states thereby, in effect, reallocating federal and state responsibilities.
Barry Carol