In the United States, most health insurance coverage is obtained either through employment or through a government program. Few of us buy insurance privately or pay for our health care out of pocket. This approach has distanced the consumer from health expenditure decisions. As I have argued elsewhere, comprehensive, low-deductible, low-co-payment health insurance leads to over-utilization and inflation of unit costs and total costs of health care. An argument easily can be made that the problem with health care is not too little insurance, but rather too much insurance (see Appendix). Indeed, the distancing of the consumer from spending decisions has been responsible for about half of the real per capita growth in US health care spending between 1950 and 1990, according to a recent MIT study. Using the employer as the conduit for over-insurance also has caused employment and health insurance policy to become intertwined, causing losses in productivity due to reduced labor mobility and the use of inefficient staffing structures.
In this paper, we outline a simple reform of health insurance policy that will lower the aggregate cost of care and boost economic productivity. It is modeled after the Swiss health insurance reforms of 1996. In contrast to other reforms, the one proposed here could be implemented rapidly with little disruption to existing institutions. It leverages the existing insurance and provider industries, eliminates wasteful and dysfunctional micromanagement of the care delivery system and gets the employer out of the insurance business. It also reduces dramatically the role of government. Government’s current, detailed regulatory and delivery system involvement could be dismantled. Government’s role would be limited to the tasks of defining and enforcing a single, mandatory Basic Plan and developing a means of providing premium assistance to the truly needy.
About Cascade Policy Institute: Founded in 1991, Cascade Policy Institute is Oregon’s premier policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility and economic opportunity. To that end, the Institute publishes policy studies, provides public speakers, organizes community forums and sponsors educational programs.
Cascade Policy Institute is a tax-exempt educational organization as defined under IRS code 501(c)(3). Cascade neither solicits nor accepts government funding and is supported by individual, foundation and business contributions. Nothing appearing in this document is to be construed as necessarily representing the views of Cascade or its donors, or as an attempt to aid or hinder the passage of any bill before any legislative body. The views expressed herein are the author’s own. Copyright 2006 by Cascade Policy Institute. All rights reserved.