A New Strategy for National Health Insurance
SEIDMAN, LAURENCE S.
AN EQUITABLE ALTERNATIVE A New Strategy for National Health Insurance BY LAURENCE S. SEIDMAN Nearly two decades after the the enactment of Medicaid and Medicare, and following over a decade of...
...The credit card would give every household in the country a permanent, inviolable credit line, thereby guaranteeing that medical providers receive payment...
...For higher income households, the deductible and the ceiling would steadily increase, while the percentage of costs written off by the credit dropped...
...The NHI, in addition to still protecting the poor, would then continue to provide coverage in the case of catastrophic illness...
...But the health credit card could become the means of final payment...
...Then the credit might be limited to 90 per cent, and not reach 100 per cent until the family had payed $6,000 (10 per cent of annual income) out-of-pocket...
...deductibles and coinsurance—the medical tax credit would naturally be rendered superfluous...
...the other, market-oriented competition and consumer incentives...
...These inequities, it is widely maintained, cannot be eradicated without simultaneously improving health sector efficiency to contain ever-rising costs...
...As for default on health credit card "loans," this can in numerous ways be held to a tolerable level...
...Another CBO investigation estimated that in 1978 6.9 million families incurred out-of-pocket (after reimbursement by an insurer) medical expenses in excess of 15 per cent of their income...
...A potential problem arises in respect to the chronically ill, where health care costs may be high for many years in succession...
...AN EQUITABLE ALTERNATIVE A New Strategy for National Health Insurance BY LAURENCE S. SEIDMAN Nearly two decades after the the enactment of Medicaid and Medicare, and following over a decade of debate on developing a full-fledged national health program medical bills continue to cause millions of Americans severe financial hardship...
...The IRS would reimburse the HCCA for this amount, and the HCCA would send the household a reasonable repayment schedule for the remaining $400 plus interest...
...New tax incentives would be offered to steer insurees toward cost-sharing medical plans or pre-paid health maintenance organizations...
...Sharp disagreement exists, however, on the best way to accomplish this...
...The tax credit is not meant to replace private insurance for those who can afford it, merely to pick up where that might end in the event a serious illness strikes...
...Suppose a family with a $10,000 annual income and no private insurance is faced with a medical bill of $15,100...
...the IRS and the HCCA would "go last...
...Nor is the problem of meeting doctor and hospital bills restricted to those officially living in poverty...
...For example, a family making $60,000 a year (and for some reason lacking private insurance), might not receive any credit on the first $3,000 (5 per cent of income...
...Similarly, use of the credit card would be limited to the share of the bill not assumed by the insurance company...
...Upon receipt of the first invoice, our model family would pay its entire bill with its health credit card, and the creditors would receive swift compensation from the newly established Health Credit Card Administration (HCCA...
...The fruitless bickering over one of our nation's most fundamental injustices has gone on too long—because of each side holding out for a "complete" health policy package...
...Although 80 per cent of these households registered annual earnings of less than $10,000,1 million had incomes between $10,00020,000, and some 400,000 were in the $20,000 and up bracket...
...But the injustice can easily be righted by allowing a lower ceiling for families that have run up the maximum bill in some immediate past period...
...The following April 15, the household would claim a medical tax credit of $14,700 (98 percentof$15,000...
...The household and the insurer would "go first...
...The belief that we have adequately safeguarded the health of most of our country's needy is a myth...
...Of course, these groups would be able to claim a tax credit only for the expenses they bear directly...
...This more affluent household would retain an incentive to avoid extraneous expenditures until its bill totalled $33,000...
...The tax credit would place an absolute limit on a patient's out-of-pocket medical expenses...
...A very broad constituency, therefore, stands to gain from what would also be a government-sponsored back-up in the event of catastrophic illness...
...Our whole scheme, moreover, would have been a first step on the way to a more comprehensive Federal health care umbrella...
...But it is possible meanwhile lo independently fashion a plan that would be compatible with either major approach to cost containment, and would assure every U.S...
...The sliding scale of deductibles and other charges would be set high enough to assure that independent coverage would still be advantageous for the middle and upper classes...
...Should the champions of regulation and planning win out and succeed in going so far as to do away with all consumer cost-sharing—i.e...
...Since 1965, Medicaid has provided treatment to a sizeable fraction of the nation's poor...
...In no event would it have to pay more than $500...
...Even though its share of the payment is much larger, the $60,000 household could also charge its entire bill to the credit card...
...To make sure the card is not abused as a source of cheap credit, the HCCA's interest charges would be kept comparable to market rates...
...A great many of the underprivileged, though, do not qualify for benefits...
...We can end much of the suffering now—with a credit and a credit card...
...The first is a universal "last resort" medical tax credit indexed to income...
...One school advocates government regulation and planning...
...Actually, its two basic elements are hardly new...
...Laurence S. Seidman, a past contributor, is Associate Professor of Economics at the University of Delaware...
...They have been put forward before by various policy analysts in various contexts, and have on occasion been incorporated into more complex health insurance bills...
...As the stalemate between the two persists, the humanitarian reforms that both sides agree are urgent have in effect been held hostage...
...Among other options, the IRS tax withholding system could be used to secure gradual collection of outstanding loans...
...Should proponents of market-oriented reform prevail, individuals would be responsible for a slice of their own medical costs...
...Action on the efficiency front certainly is vital, too, and must be pursued...
...Under the proposed system, it would be entitled to a tax credit equal to 98 per cent of any bill in excess of 1 per cent of its income ($100), and to a 100 per cent credit once it has paid out 5 per cent of its income ($500...
...Obviously, despite the progress made in the area of private coverage, serious gaps persist...
...citizen affordable medical services...
...Like the welfare programs to which it is closely linked, Medicaid is administered jointly by the Federal and state governments, with the states determining the eligibility requirements...
...Before that amount was reached, it would pay $100 out of every $ 1,000 charged...
...Millions more simply cannot afford needed treatment altogether...
...A national blight more pernicious than is apparently generally appreciated can be confronted now...
...It would be unfair to demand that such people continue paying up to the standard ceiling for their income category...
...The step would allow a new strategy for achieving national health insurance (NH1...
...Verification would be a simple matter for the IRS...
...The key to instituting a dual-purpose NHI is recognizing that decoupling the equity and efficiency issues is feasible...
...Note that it would qualify for the full 100 per cent credit only if the cumulative medical charges exceeded $20,100...
...Up to that point, every $1,000 on the bill would cost the family $20—a modest yet by no means trivial incentive to avoid unnecessary spending...
...Thus, on the bill of $ 15,100 it would bear the first $100 plus 2 per cent of the remaining $15,000, or $300, for a total of $400...
...What is most important, in regard to decoupling, is that the innovative form of NHI suggested here would integrate with whichever approach is ultimately adopted for holding down health care costs...
...That it in fact is should become clear from the program outlined below...
...the second, a universal health credit card...
...It is time, then, to decouple equityand efficiency in dealing with the health care problem...
...According to a recent Congressional Budget Office (CBO) study, approximately 12 million, or fully half, of all Americans whose incomes fall below the Federal poverty line ($8,450 annually in 1980 for a non-farm family of four) are not covered...
Vol. 66 • February 1983 • No. 4
