A 10-Point Plan for Universal Healthcare Coverage


By Laurence Kotlikoff

Published August 08, 2007, issue of August 10, 2007.
  • Print
  • Share Share

Our country faces three terrible and worsening healthcare crises.

First, 47 million Americans, including 8 million children, have no health insurance coverage. In 1987 the uninsured totaled 32 million. In two decades, we’ve seen nearly a 50% rise in those without health insurance.

Second, Medicare and Medicaid costs threaten to bankrupt the country. Today’s elderly are now on average receiving more than $15,000 per year from these programs. When all 77 million baby boomers are fully retired, the average benefit will exceed $25,000, in today’s dollars, if benefit growth is not restrained. The two programs’ inflation-adjusted annual costs will run close to $1.5 trillion.

These huge pending annual healthcare costs are largely responsible for the roughly $70 trillion fiscal gap, in present value, separating projected federal expenditures and receipts. This fiscal gap provides the true measure of our nation’s indebtedness, because it puts all future obligations, implicit and explicit on an equal footing. Seventy trillion dollars is a whole lot of money, even in an economy as large as ours. It goes well beyond anything the nation can pay.

The third healthcare crisis involves enormous healthcare obligations facing employers, many of whom are drowning in healthcare bills. General Motors, for instance, is sitting on a $15 billion healthcare liability that may ultimately spell its bankruptcy.

The three crises are interconnected. Employers are reacting to the high cost of healthcare by eliminating their health plans. This is swelling the ranks of the uninsured.

In 2000, 66% of non-elderly Americans were covered by employer-based health insurance. Today’s figure is 59%.

Those employers that continue to offer health insurance are asking their employees to pay for ever-larger shares of the premiums. But millions of American workers are saying “no thank you” and declining coverage in their employers’ plans.

As the uninsured run out of funds to cover their healthcare bill, more and more end up on Medicaid. Since 2000, Medicaid enrollments have soared by 35%.

And, to close the circle, the fee-for-service reimbursement system used by Medicare and, to a lesser extent, by Medicaid has contributed significantly to the overall rise in the price of healthcare and, consequently, to the healthcare costs employers now face.

The major presidential candidates are advocating policies that address only one of our three healthcare problems: the 47 million uninsured. Their campaign-trail solutions entail sticking the uninsured in what is best described as a loser’s insurance pool, in which participants receive third-rate insurance coverage thanks to significant co-payments, high deductibles, exclusions and ceilings on coverage. Since the expected healthcare costs of this population are much higher than average, the insurance companies will provide coverage only if they are compensated at a higher price than they would charge the general population.

To finance this higher price, the candidates propose offering direct government subsidies and forcing all employers who don’t provide health insurance coverage to pay a special fee per worker. Those uninsured who don’t work, including many very poor people, will be required to buy a health insurance policy. Finally, to limit the size of the losers’ pool and the costs of the per-loser premium, the candidates propose substantially expanding Medicaid coverage. As for Medicare, they propose no changes.

The proposals might play well on the campaign trail, but they are hardly the answer to America’s healthcare problems.

Worsening Medicaid’s finances and letting Medicare’s further hemorrhage will leave no money for anything else, let alone massive government subsidies for losers’ insurance. And rather than help employers exit the health insurance business, these schemes permanently trap all employers in it. Worse yet, they may suggest to employers that they dump their plans and simply pay the loser’s insurance tax for all their workers, lest the government pass a law that compels them to indefinitely maintain their current very expensive plans.

As for forcing the uninsured poor to pay for their own coverage, good luck. There is no way to force someone who is poor to buy health insurance, meaning we’ll still end up with an army of uninsured when all is said and done.

What’s needed is a universal healthcare plan that provides a single fix for all three of our crises. I call the solution the “Medical Security System.” The 10-point plan is simple.

First, the plan provides universal coverage. The “Medical Security System” would replace our current Medicare, Medicaid and employer-based healthcare systems. Second, the plan annually provides each American with a health insurance voucher.

Third, those with higher expected healthcare costs receive bigger vouchers.

Fourth, each year participants use their voucher to purchase a basic health plan.

Fifth, participants can change their health plans annually.

Sixth, the government defines the basic policy.

Seventh, the basic policy will cover drugs, home healthcare and nursing home care.

Eighth, each plan must cover the basic policy and accept any and all Americans who wish to join the plan or buy the policy.

Ninth, health plans are free to compete for participants via co-payment rates and deductibles, as well as incentives to exercise, reduce weight, stop smoking and otherwise improve health.

Tenth, the government fixes its total annual voucher budget as share of GDP so that the nation can’t go broke due to healthcare expenditures.

The best part of the plan is that it requires very little new financing. Add up everything federal and state government now shells out on healthcare — both directly and indirectly via tax breaks — throw in some significant administrative savings, and you arrive at roughly 90% of the money needed to pay for the “Medical Security System.”

In addition to resolving three terrible problems, the plan is highly progressive. It eliminates huge tax breaks to the rich and provides vouchers based on medical condition — and the poor are, on average, in much worse medical shape than the rich.

Finally, the healthcare fix preserves and would in fact greatly strengthen our competitive healthcare industry. The plan institutes universal health insurance, not universal healthcare per se, although universal healthcare is the end result. The distinction is important.

What’s being proposed here is not a government-run healthcare system. It is a plan for the government to redirect its current expenditures to a new system that is efficient, equitable and highly competitive — and that won’t drive our nation broke.

Laurence Kotlikoff, a professor of economics at Boston University, is the author of “The Healthcare Fix” (MIT Press).

The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.

Find us on Facebook!
  • "My wife and I are both half-Jewish. Both of us very much felt and feel American first and Jewish second. We are currently debating whether we should send our daughter to a Jewish pre-K and kindergarten program or to a public one. Pros? Give her a Jewish community and identity that she could build on throughout her life. Cons? Costs a lot of money; She will enter school with the idea that being Jewish makes her different somehow instead of something that you do after or in addition to regular school. Maybe a Shabbat sing-along would be enough?"
  • Undeterred by the conflict, 24 Jews participated in the first ever Jewish National Fund— JDate singles trip to Israel. Translation: Jews age 30 to 45 travelled to Israel to get it on in the sun, with a side of hummus.
  • "It pains and shocks me to say this, but here goes: My father was right all along. He always told me, as I spouted liberal talking points at the Shabbos table and challenged his hawkish views on Israel and the Palestinians to his unending chagrin, that I would one day change my tune." Have you had a similar experience?
  • "'What’s this, mommy?' she asked, while pulling at the purple sleeve to unwrap this mysterious little gift mom keeps hidden in the inside pocket of her bag. Oh boy, how do I answer?"
  • "I fear that we are witnessing the end of politics in the Israeli-Palestinian conflict. I see no possibility for resolution right now. I look into the future and see only a void." What do you think?
  • Not a gazillionaire? Take the "poor door."
  • "We will do what we must to protect our people. We have that right. We are not less deserving of life and quiet than anyone else. No more apologies."
  • "Woody Allen should have quit while he was ahead." Ezra Glinter's review of "Magic in the Moonlight": http://jd.fo/f4Q1Q
  • Jon Stewart responds to his critics: “Look, obviously there are many strong opinions on this. But just merely mentioning Israel or questioning in any way the effectiveness or humanity of Israel’s policies is not the same thing as being pro-Hamas.”
  • "My bat mitzvah party took place in our living room. There were only a few Jewish kids there, and only one from my Sunday school class. She sat in the corner, wearing the right clothes, asking her mom when they could go." The latest in our Promised Lands series — what state should we visit next?
  • Former Israeli National Security Advisor Yaakov Amidror: “A cease-fire will mean that anytime Hamas wants to fight it can. Occupation of Gaza will bring longer-term quiet, but the price will be very high.” What do you think?
  • Should couples sign a pre-pregnancy contract, outlining how caring for the infant will be equally divided between the two parties involved? Just think of it as a ketubah for expectant parents:
  • Many #Israelis can't make it to bomb shelters in time. One of them is Amos Oz.
  • According to Israeli professor Mordechai Kedar, “the only thing that can deter terrorists, like those who kidnapped the children and killed them, is the knowledge that their sister or their mother will be raped."
  • Why does ultra-Orthodox group Agudath Israel of America receive its largest donation from the majority owners of Walmart? Find out here: http://jd.fo/q4XfI
  • from-cache

Would you like to receive updates about new stories?

We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.