How Health Insurance Should Be

How would you structure our health insurance program if you had your way? If I had my way, I would structure it very similar to this:

Insurance really only works well when it is somehow mandated. There’s no homeowners’ insurance crisis or auto insurance crisis (well maybe just a little). That’s because nearly all homeowners and drivers are required to carry it. You can’t get a mortgage without insurance. In most states, you can’t own a car without it, either.

With health insurance, however, people hang back. Young couples don’t buy coverage until they decide to have a baby. People don’t start looking for it until they get sick. That’s not how insurance works. It’s all the people who are well who are paying for those who are sick. Insurance companies used to compensate by “rating” customers, but then the legislatures stuck their noses into that and mandated “community ratings” and other forms of “non-discrimination.” Now people pay the same rates whether they’re old or young, sick or well. So young and healthy people go without it.

SO HERE’S WHAT WE DO. Congress should mandate health coverage. Everybody has to buy a no-frills $500 policy — high deductibles and high co-payments but protection against catastrophic accident or illness. However, half the cost — $250 — comes as a tax credit, which essentially means the government pays for it. The insurance companies will come up with a decent policy. Because this is a federal program, the state legislatures can’t intervene.

After that, employers can add whatever additional coverage they want but without the tax exemption! That way we can accomplish one of the most noteworthy goals of tax reform — eliminating the exemption for health benefits — without reducing anybody’s well-being. People without employee coverage can start Medical Savings Accounts — which already have a requirement for buying basic coverage but without the tax credit.

All this would give us “national health insurance” without having the government take over the medical profession or the insurance industry. It might even substitute for Medicaid — which state legislators would trade in a heartbeat for the thrill of writing insurance policies.

The article can be found here. Economist Arnold Kling, however, thinks it would never get implemented.

37 Responses to “How Health Insurance Should Be”


  • I like the thory. A couple of logistical questions in the details.

    One part is this – “Everybody has to buy a no-frills $500 policy — high deductibles and high co-payments but protection against catastrophic accident or illness.”

    The issue to me is – what is a catastrophic illness – is diabetes a catastrophic illness, how about a heart condition, kidney disease there are multiple illnesses that require recurring treatments/medications in order to avoid death. If a diabetic can not afford his insulin, a kidney patient his dialysis or a heart patient his medication due to the high deductibles, he will quickly fall into the critical group in which case, the governmet will then pay to get him this medication/treatment. Thus making this as costly as medicare is now.

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