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Edwin G. Dolan holds a PhD in economics from Yale University. He has taught in the United States at Dartmouth College, the University of Chicago, George Mason University and Gettysburg College. From 1990 to 2001, he taught in Moscow, Russia, where he and his wife founded the American Institute ... more

What a good conservative health care plan would look like

Date: Wednesday, July 12, 2017 8:10 PM EDT


Senate Republicans have fallen short in their first attempt to attract 50 votes for their health care bill. Small wonder. The Better Care Reconciliation Act, as it is called, is remarkable in many ways, but perhaps most remarkably of all, it fails to draw on a large body of constructive conservative ideas about what real health care reform should look like. As a result, it fails to fix the flaws of Obamacare that conservatives most often complain about.

Now the Senate’s Republican leaders have a second chance. Instead of more secret meetings and backroom deals, they could use the extra two weeks they’ve given themselves in August to hold hearings on health care reform. If they did so, they would have a chance to hear day after day of testimony from conservative scholars and policymakers on serious proposals for improving the US health care system. Here are some key points that testimony would make, if it had a chance to be heard.

Some of that testimony would focus on the top end of the spending curve. As the chart below shows, just 1 percent of the population accounts for 20 percent of all personal health care spending, and the top 5 percent of population for half of all spending. Many people in that range suffer from one or more chronic conditions like diabetes, kidney failure, or AIDS that require expensive treatment year after year. Their medical needs are literally uninsurable by traditional standards. They are not just at high risk of needing care; they are certain to need it. And even if an insurer could be persuaded to cover them, an actuarially fair premium would exceed the annual income of all but the very wealthiest among the chronically ill.

A chart showing that only a small proportion of people accounts for most health-care spending

Preserving coverage for people with preexisting conditions is popular among both liberal and conservative voters. A recent poll from Politico showed that only 42 percent of Republicans favored allowing states to opt out of a requirement to cover people with such conditions.

Conservatives policy experts have made some very reasonable proposals for dealing with those at the top of the cost curve. One of the most attractive is universal catastrophic coverage, or UCC for short. UCC would cover the top-of-the-curve health care needs of all Americans, subject to a deductible that limited out-of-pocket expenses to a substantial, but not impossibly high, percentage of their income.

Universal catastrophic coverage has an impeccable conservative pedigree. It was proposed back in the 1970s by Martin Feldstein, who would go on to serve as Ronald Reagan’s chief economic adviser. In 2004, Milton Friedman, then a fellow at the Hoover Institution, endorsed the concept. An up-to-date version, specifically designed to address the problems of the ACA, is outlined by Kip Hagopian and Dana Goldman in National Affairs.

What a universal catastrophic coverage plan might look like

The exact parameters of the program would be subject to negotiation, of course, but let’s sketch some possibilities, for the sake of discussion. Suppose the deductible is set at 10 percent of the amount by which a household’s income exceeds the Medicaid eligibility level, now about $40,000 for a family of four. Under that formula, a middle-class family earning $85,000 a year would face a deductible of $4,500 per family member, with a cap of twice that amount for households of more than two people. By the same formula, the deductible for a household with $1 million of income would be $96,000.

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Duanne Johnson 1 year ago Member's comment

Very thorough, thanks.