Tuesday, April 19, 2011

The Purple Health Plan

Laurence J. Kotlikoff, Professor of Economics at Boston University, has devised a bipartisan health care reform plan--The Purple Health Plan. (Red and blue make purple, get it?) The plan would do away Medicare, Medicaid, and the tax deduction for employer provided health care. In its place, everyone would get a voucher for basic insurance coverage. The plan counts five Nobel Prize winning economists among its signers.

Frequent readers of this blog may recall that I made the exact same proposal over year ago with my own Proposal for Bipartisan Health Care Reform. I still recall how I came up with the idea. I was preparing to teach about health care to my Public Policy class at Marietta College and our nation was in the midst of a debate on health care reform. As Republicans and Democrats were both offering ideas on reform, and I was doing research on our current health care system, the following thoughts occurred to me:
  • Three of the biggest drivers of our health care costs are Medicare, Medicaid, and employer subsidized health care. 
  • We spend a lot of money on Medicare and Medicaid, which are grossly inefficient and contain a massive amount of fraud. And, a lot of revenue could be raised by doing away with the tax deduction for employer provided health care.
  • The US government does simple programs well, such as Social Security, which is basically sending people a check each month. The US government does complicated programs poorly, such as Medicaid, which is basically running an insurance company. 
  • Democrats mostly want universal coverage. Republicans mostly want to bring costs down through market based reforms. Can both sides get what they want?
The obvious solution flowed from these basic points. It doesn't surprise me, therefore, that a bunch of big-time economists would, essentially, come up with the same idea.

The Purple Health Plan does contain some variations to my original plan. Take a look at it and tell me what you think in the comment section below.

Related posts:

Do We Need a Heath Care Mandate?

A Proposal for Bipartisan Health Care Reform 

Liberal versus Conservative health care policies 



Anonymous said...

I have a problem with step 1. This means that we would still have to send "tons" of money to DC. That invites corruption down the road.

Step 2 & 7 seem in conflict to me.

The rest I am okay with.

However, if I could wave a magic wand I would move 70% of Americans to an individual or family HSA.

Then the extreme cases could move to a different system like the one described. This would limit the ability to manipulate and game the system in DC.

Napp Nazworth said...

Why do you think 2 & 7 are in conflict?

This may not be what you would do with a magic wand, but do you think it's better than the status-quo?

Anonymous said...

For the majority of Americans it would not be better than the HSA's.

Step 2 gives the gov't total control and management in deciding and distributing the money. (I think the relationship between private/public corporations to gov’t is the most significant challenge we face when reforming government, not the price of healthcare.)

So Step 2 puts the money in the hands of the feds, but Step 7 allows the plan providers to incentivize in what way? Are they going to send me a rebate? Who sends it? Are they going to contact the feds and say I live a healthy lifestyle so I should get a tax deduction? Do I get to purchase a cheaper plan and pocket the difference? I would bet the cheapest plans will price out exactly to be the price of the cheapest voucher.

My power in the system comes from being a consumer and a voucher gives me some power and is not all bad in my opinion, but essentially the federal government is deciding the size of the voucher I have to work with.

Specifically, Step 2 and 7 are in conflict because the fed’s decided about the voucher and then the Insurance company decides how I benefit from an incentive. The money is in 2 different pots and I have control over neither.

The HSA is powerful because it has finally given me control over “more” of the money I do or don’t spend on health care. It has saved me about $3,000/year for the last 8 years. Forcibly take that money away from me and I lose my influence in the system.

And then if I don’t like the system what State do I move to?

We need reform, no doubt but look what centralizing most of our tax dollars in DC has gotten us. What would make you think healthcare would be different?

I do not think we need to tackle this problem at the federal level. People cite examples like the European countries, which are more comparable to one of our states rather than the country. California has half the population of France. Sweden is about the population of New York City. Japan is different but they have a very homogenous society which we do not.

Napp Nazworth said...

HSAs are not the status-quo for most Americans. Medicare, Medicaid, and employer-provided health insurance represent the vast majority of us. This plan would do away with all 3 of those. So, given the choice, would you prefer to stick with those 3, or move to the purple plan?

Step 2 doesn't give "total control" to the fed gov't. The choice of which company and plan would still be yours and you could still purchase a plan that cost more than the voucher. HSAs would not be prohibited.

You say, "I do not think we need to tackle this problem at the federal level." The problem is (mostly) at the federal level. So, shouldn't you tackle it where it exists?

Anonymous said...

We need the Federal Government to enact the health care plan, retirement plan, and the "spread the wealth around" plan outlined in the Constitution.

Let me know when you find it.

Paul B.

Napp Nazworth said...

Paul B: Our Constitution was intended to give a framework for the design of our government, not the policies that would be enacted by that government.

Anonymous said...

Napp -
There is a long standing perspective argument over where the Constitution defines what Congress can do (based on Art 1 Sec 8) or defines what Congress cannot do (based on Art 1 Sec 9). I tend to think it defines the limits of what Congress is allowed to do summing it up with - the powers of Congress are outlined in Article 1 Sec 8 and limited by Article 1 Sec 9 and Amendment 10. I find no Constitution grounds for many federal programs unless you really stretch the meaning of the last statement of Art 1 Sec 8.

I believe that is a more important argument, although often less compelling, than "Do you want your healthcare administered by the same people who run the DMV?"

Paul B.

Napp Nazworth said...

PB: Sec 8 gives Congress the power to tax and provide for the general welfare of the US (among other things). Sec 9 gives Congress the power to spend money. I don't see where in there it says Congress can't give me a voucher to buy health insurance.

Also, under the Purple Plan, the fed gov't would not be administering healthcare, only private insurers/doctors/hospitals/etc would. Indeed, it would do away with the gov't's current healthcare administering through Medicare and Medicaid.

As a conservative, why would you oppose a plan that abolishes Medicare and Medicaid?