TW: McArdle is a conservative but a thoughtful one. She has actually suggested an alternative approach to reform. It sounds interesting on first blush but once exposed to the scrutiny all alternatives must eventually face (much different than just saying NO!!!) begins to unravel and raises more questions than it answers. But at least she is trying as opposed to most in the Republican party. We have real problems, we need solutions.
From Economist:
"MEGAN MCARDLE has a plan:
'Raise the Medicare tax by half a percentage point, and eliminate the tax-deductibiity of health insurance benefits for people making more than $150K a year in household income, $100K for singles. Then make the federal government the insurer of last resort. Any medical expenses more than 15% or 20% of household income, get picked up by Uncle Sam.
I think this is a reasonablish plan. It would be interesting to see how the CBO would score it. But here's the problem: having Uncle Sam pick up all medical expenses over 15% or 20% of household income wouldn't just be extremely expensive, it would essentially mean single-payer government catastrophic health insurance for everyone.
Why's that? Well, catastrophic illness always costs more than 20% of a household's income, apart from the very rich. There aren't that many people in the country who earn five times as much each year as radiation therapy costs. Obviously, what Ms McArdle means is that the government would pick up the tab over and above whatever your private insurance covers. But that means the obvious incentive for private insurers is to make sure they never cover any medical expenses above 20% of your income. They'll try to shift all of those expenses to the government. And since you'll know the government is picking up the tab anyway, you won't care. In fact, it will become impossible for private insurers to offer policies that cover expenses running higher than 20% of your income. You would have no interest in paying the extra premiums to buy such a policy; your care will already be covered by government.
The effect on policies and premiums could be complicated, and without more details it's hard to say exactly what happens. (Do premiums count as "health expenses" towards that 20% of income? What about if your company pays part or all of the premium?) But the general effect will be to have insurance cover very little of the kinds of costs associated with catastrophic care, so that the costs quickly mount to 20% of the patient's income and everything new is shifted onto the taxpayer. And you'll have no private insurer who covers the cost of procedures or drugs that in and of themselves cost more than $25,000 or so, since the federal government will pick up most or all of the tab for almost all patients. If you could buy a policy that was $1,000 a year cheaper but didn't cover cancer or transplants, but you knew the maximum cost to you of such treatments would be just 20% of your income anyway, you'd buy the cheaper policy. So private catastrophic insurance will all but vanish.
Once that happens, every harm which Ms McArdle and conservative-leaning critics have claimed would result from single-payer insurance will ensue. The taxpayer will be paying for almost every cancer patient in the country. That means the government will likely regulate how cancer is treated: what treatments are warranted and reimbursable under what circumstances. (Did someone say "death panels"?) The government will decide how much to pay for expensive drugs, and will negotiate the prices of, for example, biologics like some kind of MedPAC on steroids. Market pricing for biologics, transplants, and other expensive drugs and procedures will largely cease to exist, since the government will be the only buyer.
I frankly don't have a problem with this. I think America would be much better off with single-payer health insurance than with the system it has now. So I say, great, creative idea. Of course it'll never get anywhere, since unions and big business will never allow the elimination of tax deductibility for health insurance for people making more than $150,000 a year. And the insurance companies will kill it too, since it would incentivise large numbers of people and businesses to drop out of the private insurance market entirely and just rely on the government's 20% maximum guarantee. Still, if conservatives did widely embrace such a plan, it would serve the important function of protecting them against accusations that they don't have a plan."
http://www.economist.com/blogs/democracyinamerica/2010/01/libertarian_health_care_proposal_single-payer
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