The Universal Cure

November 18, 2003

The public has good reason to be worried about health
coverage. After five years of relative stability, insurance
premiums, prescription-drug prices and other costs have
soared. This year, premiums went up nearly 14 percent, with
those paid by employees increasing nearly 50 percent since
2000. The number of Americans without health insurance
increased more than 5 percent just in the last year. And
strikes by workers in Los Angeles and elsewhere showed that
health coverage is the flashpoint of labor discord.

As a solution, many policymakers are advocating small
reforms like a Medicare prescription drug benefit and
expansion of the Children's Health Insurance Program.
Unfortunately, more services for some groups may increase
costs and force reductions in coverage for others.

What we need is a fair proposal that is simple, efficient
and appealing to disparate constituencies. For more than a
decade, as members of the medical and economics
communities, we have advocated such an alternative:
universal health care vouchers.

In a morally responsible country, everyone should have
health insurance. Each family or individual would be given
a voucher to purchase a policy that covered basic services,
including doctor visits, hospitalization, pharmacy
benefits, some mental health and dental care, and
catastrophic coverage. People who want more services, like
wider choices of specialists, could pay a premium over the
basic voucher.

This would continue to be a decentralized system with
existing health plans contracting with providers, but their
insurance would no longer be employment-based. That
Americans receive insurance from their employer is a relic
of World War II wage controls. It has one advantage -
pooling people to reduce premiums - but many disadvantages,
including locking people into jobs so they can continue to
receive health coverage and allowing employers to choose
insurance providers. It has also become an albatross for
businesses. Without costly insurance worries, companies
could compete for workers by offering higher wages and
better working conditions.

A voucher system would also enable the government to end
Medicaid and phase out Medicare. Having multiple health
care systems squanders resources. All Medicaid recipients
would receive vouchers. Each year, those who normally age
into Medicare would be enrolled in the voucher plan
instead. Current beneficiaries who preferred traditional
coverage would not be forced to switch, although after
total Medicare enrollment dropped sufficiently, the program
would be amalgamated into the voucher system.

One consistent concern about vouchers is that health plans
would have financial incentives to avoid the sick. But
requiring each insurance company to offer a basic package
with catastrophic coverage would insure that individuals
with greater needs would not be excluded. More important,
the voucher system would pay insurers part of their cost as
a lump sum and part as a reimbursement fee for actual
services rendered, reducing the incentive for insurers to
avoid sick patients.

A national health policy board would administer the system,
including certifying health plans and insurance companies,
managing the vouchers and payments and collecting and
disseminating data on the quality of care.

The United States now spends about $1.4 trillion on health
care. The government already pays about 45 percent of that.
In 2003, the average health insurance premium for a family
of four is about $9,000. Using that figure and population
numbers, a universal health care voucher system would cost
about $840 billion, excluding Medicare. That would leave
substantial sums for individuals to pay for out-of-pocket
expenses and services not in the basic package.

More important, using an earmarked tax to pay for the
vouchers would limit cost increases. The level of the tax
would determine the value of the voucher. If the public
began demanding an increase in the voucher value, it would
be directly linked to higher taxes, moderating these
demands and health care inflation.

Obviously, many details need to be elaborated.
Nevertheless, vouchers hold the promise of securing wide
support. Democrats have long favored the notion of
universality, while Republicans instinctively favor voucher
plans and have longed for the demise of Medicare and
Medicaid. Businesses want to stop providing health
insurance, and Americans want guaranteed health coverage
with choice.

With the inexorable explosion in health care costs and the
increase in the number of uninsured, a crisis seems at
hand. The universal health care voucher can secure both
widespread support and finally establish a fair, functional
health care system in the United States.

Ezekiel J. Emanuel, oncologist and bioethicist, is author
of "No Margin, Nor Mission." Victor R. Fuchs, professor
emeritus of economics at Stanford, is author of "Who Shall