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As promised last week, the subject of this column will be a concept for universal health care coverage that neither depends on the patchwork of public and private plans that currently cover most Americans most of the time nor a “Medicare for All” approach that puts private insurers out of business. It’s an idea called universal catastrophic coverage, it’s been kicked around for decades, and it’s the kind of thing that could have bipartisan appeal if given a chance.
Here’s the concept, as explained in a white paper issued by the traditionally libertarian Niskanen Center in June:
“The objective of UCC is to relieve the threat of financially ruinous medical bills for the very poor and very sick while requiring those who can to pay an affordable share of the cost of their own non-catastrophic care.”
How? Well, UCC would also enlist both public and private insurance, but not in a patchwork. Instead, the government would provide every American with a layer of coverage for the kind of financially ruinous health care expenses that are relatively rare for most of us. This would be mandatory and funded by taxpayers. (While the idea of letting private insurers offer these very specific catastrophic plans crops up, I think a single government payer is more likely and easier to grasp conceptually.)
For very low-income households — think poverty level or slightly above, as with Medicaid and Medicaid expansion — this UCC policy would provide first-dollar coverage. Households with income above that threshold would pay a sliding deductible. The exact formula would be a political decision, but Ed Dolan, senior fellow at the Niskanen Center, suggested a deductible of 10% applied to income above the federal poverty level, which is about $25,000 for a family of four.
“A family of four with total income of $50,000 would then have eligible income of $25,000 and a deductible of $2,500,” Dolan explained, “A family with total income of $100,000 … would have a deductible of $7,500. A family with total income of $1 million would have a deductible of $97,500, and so on.”
That would be a hefty deductible for some families — certainly enough “skin in the game” to encourage smart consumer behavior but possibly more risk than a family would want to take year after year. That’s where the second layer would come in: private gap insurance. Consumers who want to pay an additional premium in order to reduce their deductible could buy policies from private insurers. I can imagine a vast, responsive and competitive market for those, unburdened by the need to offer cookie-cutter group plans. Since no consumer (or carrier) would risk catastrophic expenses, thanks to the UCC blanket, these gap policies could be more like adjustable “name your price” auto insurance, tailored to the individual’s needs and financial decisions.
Other advantages of UCC: No employer would have to make coverage decisions for all employees, and no employee would be shackled to an employer for fear of not having coverage for catastrophic medical expenses. As a longtime member of my company’s benefits committee, I can’t imagine that many businesses really relish having this responsibility, but those that do could offer gap insurance as an attractive employee benefit.
So can we afford UCC? Dolan concluded that dollars currently spent on health care would be adequate, and Jodi L. Liu of the Rand Corp. came to a similar conclusion. But, assuming we all agree that health care in the U.S. costs too much in the first place, Dolan also included suggestions for lowering costs:
► Increasing the supply of providers by adding capacity to medical schools, relying more on nurse practitioners and physician assistants and attracting more foreign-trained doctors;
► Incentives for providers to control costs, including outcome-based payments;
► Reform of patent laws that contribute to the high cost of pharmaceuticals; and
► Savings on administrative expenses by streamlining the payment system. “Even without going all the way to a single-payer system, a move to UCC could greatly reduce this problem,” Dolan wrote.
I’ve long had faith in the idea that higher deductibles incentivize smarter consumer behavior, so part of Ed Dolan’s policy paper on UCC came as a surprise to me: The National Bureau of Economic Research, a private nonprofit think tank in Cambridge, Massachusetts, found in 2015 “no evidence of consumers learning to price shop after two years in high-deductible coverage.”
Instead, the NBER concluded, consumers were more likely to just reduce the amount of health care services they accessed, including preventive care and other “appropriate care.”
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Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com and follow her on Twitter at @gwenmoritz. |