But while more of us are seeing the cost and administrative mess of our current system, we continue to worry about whether we can pay for treatment of a health catastrophe. This concern can be allayed with a national catastrophic-care insurance plan: cradle-to-grave protection of all Americans against the most extreme health crises. It should be single-pool, since much of the complexity of our current system — and therefore the unreliability of our current safety net — comes from the endless transitions between forms of coverage. Such a system should be seen as a safety net much more than as traditional insurance, because bad luck in the genetic lottery will always sentence some share of our population — sometimes from birth — to crippling medical problems. Premiums would be charged, but they should be roughly the same for all, with slight variations according to the age of the consumer.
At the same time, we should try to shift as much funding of health care as possible to individuals. That means building into the national plan an intelligent definition of what is catastrophic, and reducing its coverage benefits over time as Americans build up personal health accounts. In the near term, this means revising the tax code so that it treats individual health accounts more favorably than insurance premiums. This would reduce the incentive to over insure. It also means providing more of our aid to the needy in the form of cash transfers to personal health accounts, so that all individuals can participate equally in the new system. Medicare and Medicaid, by contrast, segregate the old and the poor as second- and third-class customers. For perspective, consider that the cost of subsidized care in our current system — roughly $1 trillion — is enough to grant 100 million people the funds to pay catastrophic-insurance premiums and enjoy a substantial health savings account as well.