Insurance is for unexpected expenses. One cannot insure expected costs. One can only change how payment is financed. ACA is awful for many reasons, one of which is that it encodes in law the concept of prepaid health care – that by paying up front people are somehow going to get a good deal on their health care spending. Evidence is making it clear that no such deal exists.

1. The penalty for not having insurance would be 3% of income. (we are not far from that now.)

2. Paying the penalty would give one the coverage of Medicare Part A (for hospital and surgical charges).

3. The government would not try to dictate how one pays for preventive care, or ambulatory and discretionary care.

This should not result in deficit spending. Let’s say that ten million uninsured persons
had incomes of $30,000 each and paid their 3%. This would bring in $9 billion.

Now let’s say that 5% of this younger group had a hospital event each year, i.e. 500,000 persons. For each event, Medicare Part A paid $20,000, for total payouts of $10 billion. Darn near in balance.

There would need to be collection mechanisms for the self-employed uninsured, and there would need to be adjustments for family uninsured coverage.

I think this would get rid of the worst kinds of Obamacare policies, which wind up being an insecure and expensive version of catastrophic insurance.

Of course there will be protests from libertarians. My response would be that America has an extensive system for emergency care, which is effectively open to all, and everyone should pay for it in some fashion, either through buying insurance or paying their penalty. Everyone pays for the fire department, too.

The state would provide insurance to all Americans but the annual deductible would be equal to the family’s trailing year adjusted income minus the poverty line income (say $25,000 for a family of 4) + $300. So a family of 4 with a trailing year adjusted income of $30,000 would have a deductible of $5,300. A family of 4 with a trailing year adjusted income of $80,000 would have a deductible of $55,300. Middle class and rich people could fill the gap with private supplemental insurance but this should be full taxed. This would encourage the middle class and rich, who are generally capable people, to demand prices from medical providers and might force down costs. They could opt to pay for most health-care out of pocket while the poor often less capable would be protected.
It is not a perfect plan but it might help. Some deregulation of health-care would also help the poor gain access. The gauntlet that Doctors have to run these days to get to practice seems like an anachronism in today’s world. Let smart people get to practice medicine after on the job training. Let the medical businesses decide who is qualified to practice medicine. 12 years of training to tell if my child has an ear infection is overkill and reduces access to health-care for the poor.
Another benefit of my plan is that it would encourage capable Americans (the rich and middle class) to be a counter weight politically against the providers.

Does ‘catastrophic health insurance’ also need to be ‘wealth insurance’?

Yes, there are incentive problems if you penalize those who saved relative to those who consumed. But there are also solutions for the problems.

Still, if I a procedure isn’t worth $X to you for saving your own life, then why is it worth $X to everybody else?

And speaking of incentive problems, are we talking household income or individual income? Distortion or System-gaming is possible either way.

Once someone can’t pay over the long term, I agree with Andrew that we shouldn’t use insurance companies and hospitals as instruments of political distribution, so government should pay for anything that we demand be provided by law.

Once the consumer no longer pays, any discussion that doesn’t tackle the decisions on what is and isn’t consumed, and who gets to decide is of little or no value. At the heart of the matter is always who plays the role of the buyer, weighing the tradeoffs in the various value propositions, and acting accordingly. Any plan that doesn’t define that is no plan at all. “Insurance” should play no role in healthcare.

I agree.

I have one suggestion to offer for both of your considerations. And I offer this suggestion only as a slight improvement on what I consider the already brilliant suggestions you’ve made.

Megan, you said, “The government would pick up 100 percent of the tab for health care over a certain percentage of adjusted gross income—the number would have to be negotiated through the political process, but I have suggested between 15 and 20 percent.”

My suggestion is intended to support that, but possibly even further reduce the complication.

I suggest the “government” pick up 100 percent of the tab for health care – but do so, ultimately, only by way of the government foregoing its right to tax private income that is actually spent on health care, or even health insurance.

This is NOT a new concept. The current system of business paid health insurance is the foundational working model. Business does not get “subsidies”, or “tax credits” for doing this. It is merely an “adjustment to gross income” artifact, that in all respects merely reflects that income (from any source) will not be taxed, if it is diverted to health care insurance. Part of the problem, as you note, is that pre-existing “adjustment to gross income” immunity from taxation is only extended to and through business – not to individuals. Just extend it to individuals, ALL individuals. And as an “adjustment to gross income” – the bottom half of the first page of the 1040.

To address those who might note that “poor” people do earn enough income to either pay their medical bills OR even have to file a 1040, I would respond: It doesn’t matter. As long as I, or anyone else, who DOES have an income can pay for their health care treatments, AND gain an “adjustment to [my] gross income” for having done so, I (and all other Americans) will do it.

Under current law, I can only get a tax deduction for MY incurred health care costs, and only to the degree that those actually realized costs exceed my gross income by 10%, and then only if I itemize. The tax code doesn’t preclude me from helping with other people’s health care costs directly, it merely taxes the income I could/would divert to that purpose, and precludes me from receiving any tax benefit from having done so – a tax privilege it does extend only to business.

Why doesn’t the tax code reflect a far more efficient, effective and moral basis of not taxing any income, irrespective of who earns the income, or how much they earn, as long as that income is diverted/spent on actual incurred health care costs? No complicated formulas, no “tax credits”, no “subsidies”, no income limitations, no “rich”/”poor” moralization. We, the American people will do it, if the “government” merely agrees to forego its right to tax the income we have to generate and divert to actually doing it.

Incidentally, I’ve already provided some supporting foundational theory for doing this and doing it this way: It is available here and here.

(I was commenting under the name “shayne” at the time.)

In practice, I suspect this would result in further weighting of healthcare away from prevention toward end of life as patients and hospitals have little incentive not to pursue heroic low probability of success measures.

This will inevitably result in NICE-style political control of healthcare rationing.