Better Health Care Reform

It’s been over a week now since Barack Obama signed health care reform into law. Although it’s far too late to change anything, let me outline a conservative vision for health care reform which would not only do a better job at containing our health care crisis but also leave more choice in the hands of the individual and refrain from extensive government meddling.

Let’s start with the goal of any health care reform effort. There are three things which reform must address: access to care, cost of care and quality of care. The ultimate goal is to achieve universal or near universal access while maintaining high standards of quality and lowering the price. Obamacare achieves the first two but fails miserably on the third by simply mandating an extension of existing health systems to the uninsured. A better solution would be to lower the price of health care, which would allow more people to purchase it, thereby achieving increases in access.

What is the best way to control costs? As with any product or service, the answer is competition. Increasing competition forces companies to provide the highest possible quality at the lowest possible price. Companies that fail to do this will go out of business: those that succeed will earn more profits. Simple free-market economics at work.

At the same time, we cannot allow the health care sector to be completely unregulated. Insurance companies have an incentive to not pay out full benefits: after all, they lose money whenever they have to pay out benefits. This means that insurance providers would commit unfair practices such as refusing to provide for people with preexisting conditions or other high-risk people. If the market were completely free, such individuals would find it impossible to receive insurance as providers would only accept healthy, relatively low-risk individuals. How can we protect against such practices while simultaneously proving for the free-market principles that would lower costs?

The answer is a federal voucher system. Under such a system, the federal government would pay for individuals’ insurance premiums, or at least a portion of them. The exact amount the government would provide would depend on the person’s socioeconomic status and health risk. Let’s use 10,000 dollars as a starting point. The average American would receive a 10,000 dollar voucher each year for insurance. You could sign up for any insurance plan you wanted, and the federal government would pay the first 10,000 dollars for your premiums. If you signed up for a plan that exceeded the voucher amount, the rest would come from your pocket.

The voucher system provides two important advantages over the current employer-based system or a single-payer system. First, it gives insurance providers an incentive to pick up individuals regardless of their health status. High-risk individuals would receive more federal assistance, which means a higher guaranteed income for the providers for such people, meaning providers would not want to avoid such people. Sure, the individual is a higher risk, but they also receive a higher guaranteed payment in premiums, meaning the overall financial risk to the company is minimized. Second, vouchers provide positive incentives for the consumer. Since the 10,000 dollars is yours no matter what health plan you select, it frees consumers to look for plans that provide services they really want. If you have dental problems, you could select a plan that has better dental coverage. If you have hearing problems, you could select a plan that offers better hearing services. This means that people would stop paying money for services they will rarely use and would promote efficiency within the health care sector. Our current system takes choices out of the hands of consumers and into the hands of the government or their employer, meaning people are paying for coverage they don’t need or want. Putting choice back in their hands would promote responsible health choices and increased efficiency in the health care sector in general.

The voucher system would also increase competition. Because consumers can choose whatever health provider they want, it would force companies to compete for the voucher dollars. Companies would be encouraged to provide efficient, cost-effective care because they would earn profits by providing care below the 10,000 dollars per person average. If the company failed to provide efficient coverage, they would lose money and go out of business. At the same time, the voucher system protects against low-quality care because consumers would be free to switch providers if they felt they were receiving low-quality care. Companies would be incentivized to choose cheaper health care alternatives because it would make them more money. At the same time, they would be incentivized not to choose ineffective health care because they would lose customers. Companies that could achieve a healthy balance of low cost and high quality would succeed; others would fail.

Obviously, such a scheme is much more complex than what I have outlined here. Due to space restrictions, I have only been able to discuss the general themes of a voucher system. However, I believe that if we were to implement such a system, we could control the costs of health care through competition while simultaneously providing for near-universal health care coverage while maintaining quality.