Summary of A New Deal for Health: How to Cover Everyone and Get Medical Costs under Control (PDF).

Suppose you'd joined an imaginary betting pool that gambled on if and when the United States would insure all its citizens for medical care. Anytime during the last century or so, you'd have been smart to take the "never" or the "over."

Just a dozen years after the failure of the Clinton health plan, the smart money should be switching sides. What's changed? First, a specter is haunting U.S employers: the problem of medical costs. These have risen 59 percent for employers since 2000 alone. A recent survey of chief financial officers found these costs to be their single biggest concern. General Motors and other large automakers are in especially dire straits. Facing a $5 billion yearly health care bill for current workers and over $63 billion in future health care obligations for its retirees, GM recently announced that it would reduce its hourly U.S. workforce by 20 percent.

Second: the cost of new medical technologies—drugs, medical devices, and procedures—is outrunning our ability to pay for them. This is one big reason insurance premiums have been rising steadily for private and public payers. Some of this care makes people healthier, but at a very high price. For many drugs and therapies, we have no idea whether their impact is large, small, or even counterproductive.

In the past, most Americans have been pretty satisfied with their own health insurance coverage, even as they sympathized with the plight of the uninsured. The latter, who now number around 45 million, have always faced crushing out-of-pocket costs for health care. Now, as employers pare back coverage, this pocketbook concern is affecting even insured Americans. According to a December 2004 poll, Americans are personally more worried about their health costs than about terrorism or paying their rent or mortgage.

There's a silver lining to this growing crisis of employer-based coverage. We have a chance to get rid of our expensive and inefficient health care system and to replace it with a fairer and more sensible one.

The U.S. is the only developed country that bases health coverage on employment status, thanks to a chain of events that began with a decision not to tax health benefits during the Second World War. The system hurts those least likely to get health coverage through the workplace—the young, minorities, and those who work for small businesses. It hampers the ability of U.S. companies to compete in global markets, creates unnecessary administrative costs, and drives people to seek expensive and unneeded care in hospital emergency rooms.

Thousands die each year because they lack health insurance. Many more are endangered by, and fed up with, a patchwork system that cobbles together employer benefits and government programs. Take Chuck, a young man from Virginia who suffers from diabetes and called the American Diabetes Association for help. Laid off in July 2003, he wasn't eligible for coverage under his old workplace plan. Despite finding a new job, he faced a waiting period of almost a year before he could qualify for coverage. Given his prior medical condition, trying to buy coverage as an individual would have cost him $900, or over half his monthly paycheck. However, Chuck still made too much to qualify for help for buying the daily drugs he needed through pharmaceutical assistance plans.

Chuck and millions of others like him need access to a health care system that makes sense. What would it look like? We should end the tax policies that encourage insurance to be offered through employers and require American families and individuals to purchase their own health insurance coverage. Each American would receive a government payment to help pay for the premium of a private insurance policy. These subsidies would make a good basic health plan affordable for everyone. Older, poorer, and disabled Americans would get a larger payment.

The federal government would sponsor several different insurance options, establish minimum benefit packages, and negotiate with insurers on their price. All plans would offer good coverage of proven benefits. However, those Americans who want new and expensive or unproven procedures would pay more to join higher-end insurance plans. The pipeline for new and innovative medical treatments should remain open. But it's not fair to keep driving up premiums by covering expensive services of uncertain value while others can't get access to the most important treatments at an affordable price.

This proposal would keep intact the existing relationship between doctors, insurers, and patients; preserve U.S. leadership in medical innovation; and allow Americans to see the doctors of their choice. In many respects it resembles the way Congressmen get their current coverage. How would it be paid for? Mostly through the same ways in which today's system is financed, and for only a modest additional cost. Some new spending would be added to improve public health and to encourage Americans to stay healthy, which will lower medical spending over time.

As health costs rise, the predicament of both the uninsured and the currently insured will grow worse. There will be calls either to expand "consumer-directed" employer plans that transfer much greater risk to workers, or to embrace much greater federal government control over the financing and delivery of health care. This sensible and affordable approach for universal coverage, which combines federal regulation with individual choice, is a much better bet.

How the Plan Will Work

The principal elements of the proposal are the following:

• American families will be required to purchase their own health insurance, and government subsidies will be offered to make insurance coverage affordable for everyone.
  
  
• The existing federal tax subsidy for employer-based insurance under which employers can deduct the cost of health insurance from their tax base and employees do not count their benefits as taxable income will be phased out. The new revenues from eliminating this subsidy will pay for a part of the financing of this proposal.
  
  
• For every American household, the government will make a contribution to the purchase of a premium for a basic health insurance plan (premium support). The level of this contribution will be set to allow each household to enroll in a basic plan at a modest premium or, in some cases, at no additional cost. Older Americans, the disabled, those with low incomes, and veterans will receive a larger subsidy that allows them to purchase a midlevel plan.
  
  
• The federal government will establish and sponsor three national health insurance options and will specify a minimum level of benefits that must be offered at each level of coverage. It will negotiate premiums annually for each insurance package with national and local health plans.
  
  
• Purchasing at least the basic level of coverage will be mandatory for individuals. Individuals will be able to change plans on an annual basis and will not pay higher premiums upon entering or switching plans based on preexisting medical conditions.
  
  
• Medicaid will be phased out, along with all other government insurance plans based on categorical eligibility, such as the Veterans Health Administration. Medicare will continue to function for current beneficiaries, but it also will be phased out. Current Medicare beneficiaries will have the option of joining the new national health program.
  
  
• Subject to federal approval, insurers will be allowed to offer different plan designs, such as restricted physician networks and copayments. At any level of coverage, insurers may offer a benefit package that exceeds the federally mandated minimum. They must, however, offer all tiers of insurance coverage should they choose to offer any one of them. Moreover, they may not pay providers different amounts for medical procedures based on the patient's level of insurance coverage.
  
  
• An independent government board will be created to evaluate the cost-effectiveness of medical therapies and procedures, with a focus on assessing new technologies.
  
  
• A large new investment in the public health system will be made to encourage Americans to practice healthier lifestyles. Each of the insurance programs will require generous coverage of preventive care, including vision and dental coverage.
  
  
• The plan will be paid for through a payroll tax, a dedicated corporate tax, general revenues, and the revenues from eliminating the employer-based tax subsidy.

Download A New Deal for Health: How to Cover Everyone and Get Medical Costs under Control (PDF), for a complete discussion of the rationale behind the plan, how it can be achieved, and how it compares to other reform proposals.