The Healthcare Fix: Universal Insurance for All Americans Review

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Book Review: The Healthcare Fix
Laurence Kotlikoff is an economics professor at Boston University. Mr. Kotlikoff thinks he's the Man with the Plan for universal healthcare in the U.S. The book he's written is a short, fast read which presents a straightforward message:
Medicare and Medicaid, because of their billing policies are bankrupting the country by feeding healthcare inflation. The fix, according to Kotlikoff is to scrap the two federal programs and replace them with universal health adjusted medical insurance vouchers. A young healthy individual would receive a small voucher say $5000 per year while an older less healthy individual would get a voucher of say $50,000 to buy a full private insurance policy.
This would incentivize private insurers to write policies for these insured as follows. If the oldser only needed $10,000 in health spending for the year the insurer profits by $40,000. OTOH if the youngster was hit with a $30,000 medical expense the insurer would take a -$25000 hit. The latter is less likely than the former. Also, the vouchers would be health history adjusted so that the older patient might get a lower voucher for having a good year.
What's attractive about Kotlikoff's fix is that the voucher system has a built in mechanism for monitoring spending, it eliminates cherry picking of patients and it's universal. However, as is the case with a short somewhat glib book Kotlikoff glosses quite a bit. He even glosses in error.
In one example he mischaracterizes Mitt Romney's role in signing a law that charges $300 per employer annually to fund health insurance for all in Massachusetts. The $300 fee was passed OVER Romney's line item veto. The main part of the bill is a punitive mandate that requires all taxpayers* acquire health insurance. Those who don't face monthly penalties enforced by Massachusetts' version of the IRS. The MA health insurance law funding comes in part from the $300 fee but mostly from shifting uncompensated healthcare funds to subsidizing premiums for poor and lower wage workers. The Massachusetts law does little to contain the soaring costs of the commonwealth's pet industry.
This kind of glossing is what troubles me about this otherwise interesting and provocative book. Kotlikoff is hardly naive about the economic and political realities facing his proposal. Libertarians don't like government programs. Healthcare professionals feel entitled to unlimited compensation. Patients want the best healthcare others' money can buy. Hospitals love their high tech profit centers. Then there are the miriad of big and small suppliers that profit from over priced products, waste and techno-churn.
America's healthcare problem is not the lack of universal healthcare. It's the lack of universal fairness in health insurance. Employer ensured workers, especially high income professionals, have their premiums paid. But they pay no taxes on this imputed income. An uninsured taxpayer showing up at the hospital had better have a bunch of high balance credit cards and be prepared for bankruptsy. Yet his taxes compensate for the lower taxes of his fortunate and better paid neighber. Kotlikoff would do away with this asymmetry and use the 'higher taxation' to help fund his scheme. One could expect Republicans to rail agaist this while Democrats knee-jerk against vouchers. He also suggests savings and thus funding could be found in reducing administrative costs in the healthcare system. Good luck on reducing hospital fat and red tape. One other loose end in Kotlikoff's plan is where do the insurer's profits go? Shareholders? High CEO pay? Into lower premiums?
Notwithstanding its holes and loose ends Kotlikoff has made a provocative case that is a must read piece of food for thought. Regardless what you think of his proposed fix, Kotlikoff is right about one thing ... Our profligate healthcare industrial complex is threatening our fiscal future.* In Massachusetts a young tax cheat can earn buy one of the special subsidized young person's
policies which doesn't require proof of income.


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