Health care vouchers

After food and housing vouchers, here comes health vouchers. It has been argued for some time that vouchers are a less distortionary and more efficient way of delivering subsidies to a category of citizens.

Ezekiel J. Emanuel of the National Institutes of Health and Victor R. Fuchs of the Stanford University, have come up with a proposal for a Universal Healthcare Voucher System (UHV), (PPT here) which seeks to achieve universal health coverage by entitling all Americans to a standard package of benefits comparable to that received by federal employees.

Enrollment and renewal are guaranteed regardless of health status, as is the individual's right to buy additional services beyond the standard benefits with aftertax dollars. Health plans would receive a risk-adjusted payment (i.e, you get a lot more money for a diabetes patient than a healthy 23-year-old) based on their enrollment. Under this virtual single payer system, the actual provision of health insurance is contracted out to competing private companies. All existing plans, including private plans, get subsumed into the single payer (Government payer) system.

UHV is proposed to be funded entirely by a dedicated value-added tax (VAT) with the rate set by Congress, so as to cover costs. A VAT of approximately 10 to 12 percent would insure all Americans under age 65 at a cost no greater than current public and private health care expenditures. By funding it fully from VAT, the citizens will have to make a choice between paying more VAT or more expansive insurance options.

Ezra Klein sums up the plan, "The government gives you a voucher. Various insurers compete to offer such good coverage that you'll give your voucher to them. The insurers then give your voucher to the government, and the government pays them some money, raised through a type of national sales tax."

The link between your job and your medical coverage is forever severed. People now secure care by giving a voucher to the private insurer that best fits their needs. The private employer has no role in employee insurance and all tax breaks given for providing employee insurance can be withdrawn. Private insurers can't deny coverage to anyone, they can't price folks out. Since the government pays them on a risk-adjusted basis, it doesn't even make much sense to discriminate based on conditions.