How about a universal catastrophic plan

Great Debates
1

Yay, another health care thread.
Assume the government (the very one that invaded Iraq and gave tax cuts out while the levees in New Orleans started developing cracks) decided to implement a public catastrophic coverage plan. The terms would be any medical expenses over $5000 a year per person would be covered by a public plan. Everyone who is a US citizen would be covered under this plan.

It seems a plan like that would be good because it would eliminate medical bankruptcies (if you get huge bills, you can pay them off over a 10-20 year period). Plus if pre-existing conditions were forced to be covered in the private market, it would allow more job mobility.

So how much would that plan cost? How much would it save?

Something like 70% of the country either has private insurance or is uninsured, the other 30% is on public plans so they do not count in this.

So catastrophic coverage for 210 million people. I’d assume (due to bulk purchasing power, lower administration and negotiation rates) that might come to about $1500 per person per year as a rough estimate. So $315 billion annual price tag, roughly.

However, how much would this save in private insurance premiums?

The average families premiums are $1100 higher due to cost shifting from the uninsured. So a catastrophic plan should lower costs for everyone else.

John Kerry had a plan in 2004 to cover all costs over $50,000 under a public plan. He claimed it would save $1000 per family per year in health insurance costs. Health costs are higher in 2010 though, no idea what the savings would be now.

http://www.ontheissues.org/2004/John_Kerry_Health_Care.htm
The plan would cost more in taxes, but save people more privately on private insurance, so it should even out on the whole. Plus it’d provide more security and mobility than our current system.

If the max private health insurance had to cover was up to a maximum of $5000 per person (assuming a top of the line private plan with no deductibles and co-pays that paid everything from $1-5000 a year), I’m guessing/hoping that private insurance would become dirt cheap. So whatever new taxes are levied would be offset by the private savings. An individual plan with a $1000 deductible and a 20/80 copay after that (from $1001-5000) would cost an insurance company a maximum of $3200 a year assuming the person maxes it out in a year. So premiums might only be $30-50/month per individual.

Plus it might be good for business by taking some of the insurance weight of the private market off of them. Of course those saving would be offset by new taxes.

With medicare set to bankrupt the treasury over the next 75 years, its not feasible. But it’d be better than what we have now.

2

Plus maybe it’d force private insurance companies to offer higher efficiency. The idea of paying $1 to health insurance companies and getting $0.80 back in treatment (with the other $0.20 going to administration and other expenses) wouldn’t be worth it if you could afford the $5000 yourself. You could just bypass private insurance altogether, which would force them to actually work to get and keep customers. But a problem with that is that everyone who is healthy would just opt out and use only the catastrophic plan while those with expensive conditions would still get private insurance, which would drive up the costs and make it more expensive.

If that is the case and the catastrophic plan makes everyone who is fairly healthy totally forgo any health insurance outside the catastrophic plan, driving the cost of private insurance up for everyone else, maybe a higher deductible catastrophic plan like $10k per individual, 20k per family per year would be better.

3

I think some type of catastrophic plan is good,and mentioned it in another thread. I think your $5,000 is a joke though, woefully too low. It would have to be more in the $50 - $100,000 range.

4

The problem is that one of the main economic advantages of a public health plan is that it encourages people to seek preventive medical care - treat health problems when they’re small and inexpensive.

This proposed plan would have the opposite effects. It would encourage people to blow their medical problems up into a bigger and more expensive problem, either by simply lying about it or by waiting until the problem became genuinely more serious.

5

Not if the $5,000 (or whatever) is treated as a deductable. If you get a flu shot, you’re out the cost of the shot; get the flu and your costs are capped at $5,000. Sounds like the incentive is still there.

I’ve heard something like this proposed before, that medical insurance be more like other forms of insurance. Routine, maintenace stuff would be paid out of pocket (and hopefully with reforms that allow competitive shopping) and the insurance would only kick in when something particularly bad happens.

At first blush, I like it, but I know I don’t foresee all the consequences (good and bad) and haven’t heard from enough people who’ve thought it through.

6

It’s oneof the more palatable alternatives I’ve heard. I, too, would want to see morediscussion, but my firstreaction is positive.

7

The problem is if it is too high there will still be medical bankruptcies. So the annual or lifetime maximum has to be something people could pay off over a 20-30 year period (like the size of a 2nd mortgage).

An annual deductible of $20,000 up to a lifetime maximum of $100,000 would be feasable.

8

Catastrophic insurance is a great idea except your numbers are off. It would be more like $2500 a year per person with a $5,000 deductible. This is more or less what is being suggested by both sides except for the inclusion of a government backed insurance alternative. Currently the suggested incentive for not enrolling is to pay a fine.

9

This is something I would wholeheartedly support. The exact deductible is debatable, but that’s exactly the type of thing that lends itself to Congressional compromise and wheeling and dealing. It also would have a positive effect on the functioning of the private market–rescissions occur very disproportionately for those high cost treatments, since those are the ones insurance companies have the most incentive to drop. It makes it

Pair it with an abolition of the employer-provided insurance deduction, and you’ve got the ideal plan for reforming the structure of health care. For the lower end additional reforms can be anything from either subsidies for lower-income people to HSAs to even subsidized HSAs. (I’d take the universal catastrophic coverage alone without any of those additions, too.)

If you’re just looking at the catastrophic coverage, who are the entrenched interests who’d be unhappy with it? Economists from Krugman and DeLong to the late Milton Friedman all seem to be fans of the idea, but there assuredly has to be someone who’ll be screwed by it.

10

The number (5k, 50k) can be discussed, but I think that’s the best way to do some sort of UHC, i.e. prevent bankrupting people.

11

To address both of these issues, you could have the catastrophic coverage kick in after some percentage of income, and you could have co-payments for the cat coverage above that limit. E.g., no coverage up to 1/4 of income, 75% coverage up to 1/2 of income, and full coverage thereafter. And obviously, these particular numbers are just placeholders picked out of the air.

12

That’s a pretty good plan. I wonder if it could get passed.

13

I think a catastrophic coverage plan could be doable and beneficial. It could potentially cure the problem of medical bankruptcy, and give millions of people peace of mind. It would also remove some of the pressure on private insurance companies that drives them to drop or deny coverage. While I don’t condone them dropping/denying coverage for any reason whatsoever, I can understand their motivations for doing so. If they were off the hook for highly expensive treatments, they might be more apt to uphold their end of the agreement.

However, I think a catastrophic coverage plan would have to go along with a mandate. Everyone pays in, and if you should find yourself with an illness that requires exorbitantly expensive treatment, the money comes from this public fund. Unfortunately, I’m not sure how feasible this is. If I’ve learned anything in the last six months, it’s that there are droves and droves of people out there who either :
a) refuse to let the government force them to make any individual decision for them, no matter what the public benefits
or
b) are convinced that they will never get more than the sniffles, and they’ll be damned to hell before they pay a cent for a fellow citizen’s welfare.

14

I’ve talked about this in other threads about UHC

The largest issue with a government-backed/paid indemnity plan is that indemnity plans don’t have cost control as a feature of the product. There is nothing, absolutely nothing, in a catastrophic plan that will reduce the costs of medical services.

The cost of medical services is a big problem, related but nonetheless distinct from the issue of universal access.

15

I too like this plan. The other big advantage of this plan is that it could be implemented pretty quickly after which Congress could seriously look at changing the structure of Medicare to use the Govt’s purchasing power to drive changes in the current healthcare fee structure.

16

I just recently was looking at the Missouri Health Insurance Pool, so I have the link handy.

The Pool offers a plan with a $5,000 deductible. After that it pays 80% of treatment expenses from a preferred provider and 70% of the prescription drug costs. There is a $1 million lifetime cap on all benefits.

Rates are age-based. For a male age 18-29, the premium is $190/mo – $2,280/yr. For a female, it’s $336/mo. – $4,032/yr. Premiums increase by age so that a male age 60-64 pays $832/mo. and a female pays $801/mo. ($9,984 and $9,612 respectively). The pool doesn’t cover people over 65, who have access to Medicare.

The pool is only 60% paid for by user premiums. The remainder of the funding comes from assessments to insurance companies and HMO’s. So that means the actual cost of the program is nearly double the rate shown.

Crunching the numbers here – anyone feel free to double-check my math.

Missouri population = about 6 million. It’s 51.3% female, but for our purposes, let’s say the male-female split is 50/50. The median age is 36.

The rates for a 36-year old are $248/mo. for a male, $405 for a female. Averaging the two works out to $326.50 per month. Remembering that the premiums account for only 60% of the total cost, that works out to $587.70 per month or $7,052.40 per year per person.
And that’s with 80% coverage after a $5,000 deductible and a $1 million lifetime cap.

I don’t claim that the numbers for a high-risk insurance pool will scale up perfectly for the entire U.S. population, but I think those who are suggesting a cost of say $1,000 a year may be underestimating.

17

What about all the illegals? We still have the problem of paying for their worthless asses and for their dozen booger-picking children.

18

Sure it does. I have my family on a similar type plan. The likelyhood that we hit our $5000 deductible is actually pretty low for any given year, so when things come up, I call around to find out the best price. It actually varies pretty widely. Any money I save by doing so goes straight into my own pocket.

These types of plans are the only plans that have any sort of true cost control measure, because they are the **only **ones that give people a personal incentive to find the best deal for their own care.

19

I would like to see more of this. Why don’t we see advertisements for doctors? “Office Visit $30!”

For most simple things, a nurse practitioner should be able to see the patient and prescribe medicine.

20

and you’re not going to get cost savings by having you call around to save 20 bucks on an office visit - that’s, frankly, nickel and dime shit.

for very serious ailments, surgeries, and treatments, the ones that are, surprise, driving the cost increases in medicine, they are guaranteed to exceed the 5k deductible and people will stop price shopping.

having a deductible at a price point that ensures people receive the desired social benefit (i.e. not going bankrupt and unable to afford care) is going to mean that for vast majority of ailments, there will be no price shopping.