The Covert Rationing Blog

Can a Voucher System Fix American Healthcare?

March 21st, 2008 by DrRich

A previous post considered the main problem with current healthcare financing as described by Drs. Fuchs and Emanuel, namely, that individuals are actually paying for their own healthcare today, but are led to believe that the cost is actually “shared” by businesses and government. Since they believe they are getting something for nothing, there is no incentive for Americans to limit their demands for healthcare.

It should be no surprise, therefore, that the solution proposed by Fuchs and Emanuel offers to make individual Americans aware of how much of their own money is being spent.

Under their plan, every American will be given vouchers by the government to purchase health insurance from private companies. The vouchers will be paid for from a Value Added Tax (VAT) on purchased goods. Insurance companies would be required to sell a basic insurance plan (fully covered by the vouchers) to any individual American, regardless of any underlying medical conditions.

Furthermore, individuals would not be limited to the insurance they receive under the voucher plan. Instead they would be free to purchase whatever additional healthcare coverage they choose.

The Fuchs/Emanuel plan is therefore universal, but also intends to preserve Americans’ freedom of choice. In DrRich’s estimation, it is the explicit nod to freedom of choice that makes this proposal interesting.

The “basic health services” that would be required under this plan (i.e., the services that insurance companies would have to provide to anybody with a voucher) would be determined by a federal health board, specifically modeled after the Federal Reserve Board.

Notably, Senator Tom Daschle has recently published a book that also recommends a federal health board modeled after the Federal Reserve Board. How much of this idea he may have received from Fuchs/Emanuel (who have been writing about this for a number of years) is not known to DrRich. But Daschle’s call for a federal health board has been endorsed - at least to the extent of supplying “blurbs” to spur book sales - by several disparate political figures including Senator Bob Dole and Senator Barack Obama. So, apparently, the “federal health board” may be an idea that is gaining in popularity. (It is perhaps unfortunate that both the Fuchs/Emanuel proposal and the Daschle proposal were advanced well before the current credit crisis made the Federal Reserve Board seem far less omniscient and sure-footed than in happier days, and perhaps less welcome as a role model than it might have been a few short months ago.)

In any case, the fact that a federal health board has been championed by a noted American progressive makes DrRich suspicious that the idea of such a board is not inextricably tied to the notion of individual autonomy, as it is under the Fuchs/Emanuel plan. In the Daschle plan, the federal health board is the centerpiece; it is the whole idea, and is the means by which a centralized authority will control American healthcare. In the Fuchs/Emanuel plan, the voucher-supported basic coverage supplemented by individually purchased insurance is the centerpiece; the federal health board is “merely” the mechanism that will define what we mean by “basic coverage.” At least, that’s how DrRich understands it. And understanding it this way, DrRich will formally reject the Dasche plan as simply another way of turning the American healthcare system over to the feds, (so there, Tom!) and will consider the Fuchs/Emanuel plan more closely.

Will a scheme based on the Fuchs/Emanuel universal voucher plan work?

Now, DrRich has advanced his own plan for fixing American healthcare, thus joining the not-so-exclusive ranks of Fuchs, Emanuel, Daschle, Clinton, Obama, (maybe McCain - DrRich is not really sure), and thousands of others. And it would be all too easy and all too unproductive to dive into a long tract comparing the particulars of these many plans (possibly designed to show why none of them would work as well as DrRich’s).

But in truth, DrRich does not pretend to really know what the “best” plan for solving our healthcare problems might look like, and does not wish to try to drag his readers through the mud in a vain attempt to find out.

There are, however, some basic principles that will need to be decided upon - whether implicitly or explicitly - in any plan that offers to fix American healthcare. These principles will determine not only what kind of healthcare system we are to have, but also what sort of society we will become.

So in evaluating the Fuchs/Emanuel voucher plan (which was DrRich’s original assignment), he will do so within the framework of three basic ideas that must be addressed in any system that proposes to fix American healthcare. These ideas are:

1) Should the healthcare system be universal?

2) Should the healthcare system be designed to enforce equality, or should it instead permit Americans to exercise their autonomy as individuals?

3) Where’s the rationing?

We will explore each of these three questions in subsequent posts.

Note: This is the second in a series of posts that discuss healthcare economics, and the three basic questions we will have to answer before we can devise a way to fix American healthcare. The third post in this series, “Should the Healthcare System Be Universal?” can be found here. The first post in this series can be found here.

Posted in Fixing American Healthcare, Healthcare economics, New business models for healthcare

3 Responses to “Can a Voucher System Fix American Healthcare?”

1. Tamer Mahrous wrote on 03/22/08 at 10:31 am :

   Dr Rich: I proposed an ebay type voucher system where unused expiring vouchers could be bought and sold for pennies on the dollar:

   http://thehappyhospitalist.blogspot.com/2007/11/health-bay-my-version-of-market-force.html

   http://thehappyhospitalist.blogspot.com/2007/11/health-bay-ii.html

2. Tamer Mahrous wrote on 03/22/08 at 10:33 am :

   Oh yeah, and my 1 trillion dollar experiment was kind of fun too:

   http://thehappyhospitalist.blogspot.com/2007/11/my-one-trillion-dollar-experiment.html

3. DrRich wrote on 03/22/08 at 12:22 pm :

   HH,

   As usual, you have come up with an excellent scheme (or schemes). Your system in outline is actually fairly close to the one I proposed in my book (except I wasn’t brilliant enough to come up with an e-bay-like voucher exchange mechanism - imagine: a healthcare plan with an element of fun!).

   The trick, I think, is to come up with a system in which everybody can be covered, but that preserves the basic freedoms and individual autonomy that makes us different from, say, Cuba. You’ve invented such a system, I’ve invented such a system, and so have Fuchs/Emanuel. Probably so have a few hundred others. Unfortunately, none of them seem to hold office, or to be interested in doing so, or to be electable if they are.

   As you are fond of reminding us, it’s tough to beat FREE. Anyone who suggests anything other than FREE is toast.

   Rich

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