The Agenda

Odds and Ends, Plus A New Health Safety Net

On Friday, I wrote about Florida Sen. Marco Rubio’s new proposal for overhauling the safety net. I also have an article in the new National Review on the two gender gaps — the “high-end” gender gap between highly-educated women and men in professions in which the returns to long hours are nonlinear (i.e., work twice as many hours, get more more than twice as much compensation) and the emerging “low-end” gender gap, in which moderately-educated women are adapting relatively well to the changing labor market while their male counterparts are struggling. 

But the new issue has a number of other excellent articles, including J.D. Vance’s critique of higher education as a barrier to entry:

You can imagine the reaction if, tomorrow, Congress passed a worker-identification law with the following provision: “Only those who carry their federal ID card may apply for jobs that pay more than $45,000; ID cards may be obtained from government vendors for $100,000.” The country would erupt in protest. Yet this is what college does. When two people apply for a job, and they’re alike in every way except schooling, the employer will almost always hire the more educated. That’s true even of the many jobs that don’t require a college degree. As economists Neeta Fogg and Paul Harrington recently found, a shocking 39 percent of new graduates are working such jobs.

And I recommend David Goldhill’s call for a national catastrophic coverage plan as the best way to allow market competition to drive down the cost and improve the quality of medical care. At first glance, Goldhill’s proposal seems quite radical. But when we fully appreciate the complexities of the existing U.S. health system, and the ways in which medical providers exploit these complexities, Goldhill’s proposal starts to look very attractive indeed — please forgive the long excerpt:

One of the blessings of the ACA is that the layers of insurance, tax subsidies, public aid, and mandated care that are supposed to magically create “affordability” are being seen for what they are. Ever more Americans are realizing that we’re putting a lot more into the system than we’re getting out of it, and this has created fertile ground for a new approach.

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.

The risk of any national-insurance program is that it will lack accountability and become a driver of excess care at high prices, as became the case with Medicare and Medicaid. But there are a number of ways to reduce this risk. The program could be structured like Singapore’s, in which the government subsidizes certain types of care but individuals always make the purchasing decisions directly. The benefit could be defined based on diagnosis, with participating providers required to accept patients at this fixed price (similar to the initial conception of Medicare’s payment system). Premium growth could be limited by statute (for example, held to the rate of inflation), and the national insurer required to balance its books each year.

The transition to a national catastrophic plan and privately funded basic care would take time. At first, the plan would sit on top of current public and private insurance schemes, essentially reinsuring them for catastrophic loss. Over time, as the benefits of running more of our dollars through a “many payers” normal marketplace became clear, we could accelerate the transition to a consumer-driven health-care economy.

Goldhill’s vision for the health system is, in my view, the most viable alternative to single-payer over the long-term. The problem with the status quo is that the public sector plays an unacknowledged role as insurer of last resort, and various players within the healthcare marketplace take advantage of the opacity and confusion that results. Goldhill’s system clarifies matters, and by greatly empowering consumers, it promises to give rise to new, more constructive and value-creating business models.