Tuesday, June 07, 2005

Washington Monthly has an interesting article on the idea of Universal Healthcare Vouchers.

The idea as presented is terrible. It claims it can reduce bureaucratic cost -- by creating an even bigger bureaucracy! (Note to editors: bureaucracies don't benefit from "economies of scale" because they aren't economic entities; the bigger a bureacracy gets the less efficiently it operates). The bigger failure, though, is not recognizing the true driver of inefficiency: lack of any incentive for consumers to keep costs down.

But there is a grain of common sense buried in the idea: a UHV plan based on personal accounts could work wonders. Here's how it would work: The federal government allocates every person $X dollars per annum for healthcare costs into a gov't-maintained account. Anything you don't use rolls over into the next year until your death, at which time you can pass the remainder on to your heirs' accounts -- but the account can only be spent on healthcare.

Why is this plan better? Because it encourages people to look for cost-effective medical solutions, esp. prevention. We could reduce healthcare costs by 50 - 70% over most people's lifetimes if they practiced commonsense preventative measures; as it stands now, the perverse reverse lottery of health insurance dictates that the more you do to stay healthy, the worse return on investment you reap. Under this modified UHV system, people who stay healthy will be rewarded.

I know some people will raise objections based on the idea not all sickness is preventable. True, but so much of it is. And we're not doing anything to encourage people to prevent it.


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