ANSWERS….to some of your questions from the comment threads:
Why don’t we want people to take vouchers directly to doctors and hospitals?
That is the notion of individual medical accounts. They completely undermine the notion of cross-subsidization and are very harmful to sick people. If we rely on catastrophic insurance we will suddenly see a lot of people in that category because some medical procedures are, if not optional, then at least can be scheduled to game the system. A problem with catastrophic coverage is that it encourages discretionary use of tests and procedures to get over the threshold. It also shapes research of technology companies ? to encourage services that will be covered.
Why isn’t malpractice cited as a cause for inflation?
Simply because every study that is done has shown that it does not cause health care inflation. Malpractice is a problem. Many people who are harmed get no compensation and many people who are not really harmed get huge compensation. It needs to be reformed substantially but not because it drives health care inflation.
What is the incentive for small insurance companies to buy in?
Currently there are about 1300 health insurance companies. A lot are small market players that don’t add anything. Under vouchers there will probably be substantial consolidation, with many of the small companies bought out or bankrupt.
By the way, we have presented this idea to many places and probably the coolest reception we have had was at Kaiser. This is certainly not a Kaiser plan. Whomever thinks that this is a Kaiser plan because Vic Fuchs is the Kaiser professor at Stanford knows little about the world. His professorship was donated long before and by a foundation that was not affiliated with the health plan of the same name. Conspiracy theories may be true in some cases, but not this one.
What is the incentive to provide quality service for health plans?
First there is market pressures. People will have vouchers and can vote with their feet. It is important that today most Americans have no choice of health plan or insurance ? only their companies choose, and they typically choose on cost not on service. Vouchers therefore expand market input. Second, the Federal Health Board will systematically monitor satisfaction and outcomes and will be able, like the Federal Reserve Board with banks, to make adjustments to provide incentives for good performance.