Vouchers?
The New England Journal of Medicine
March 24, 2005
Health Care Vouchers - A Proposal for Universal Coverage
By Ezekiel J. Emanuel, M.D., Ph.D., and Victor R. Fuchs, Ph.D.
Incremental reforms have been tried, but despite some successes, such as the
State Children’s Health Insurance Program, the system as a whole is getting
worse, not better. Major reform is needed but will not happen immediately. As problems mount, however, the demand for change will intensify. In anticipation of that demand, we propose a voucher system with 10 fundamental features.
- Universality
- Free Choice of Health Plan (Individuals and families would choose which basic insurance program or health plan they wanted among several alternatives.)
- Freedom to Purchase Additional Services
- Funding by an Earmarked Value-Added Tax
- Reliance on a Private Delivery System
- End of Employer-Based Insurance
- Elimination of Medicaid and Other Means-Tested Programs
- Phasing Out of Medicare
- Administration (a Federal Health Board modeled on the structure of the Federal Reserve System)
- Assessment of Technology and Outcomes
Universal Benefits Package
The universal benefits package covered by the voucher should be sufficiently
comprehensive to provide most Americans with most of their care most of the
time. It should not be designed as a safety net to serve only the poor. The
benefits provided should be those typically offered by large employers, including inpatient and outpatient hospital services, visits to physicians’ offices, well-child care and other preventive measures, mental health care, and tiered pharmaceutical benefits, typically with dollar limits. We suggest only modest deductibles and copayments to minimize access barriers for the poor. In 2004, the average annual premium for such coverage in an employer-based program was $9,950 for families and $3,695 for individuals.
Ultimately, the Federal Health Board would structure the benefits package after wide consultation with experts and involvement of the public through various mechanisms. The process would be iterative, with modifications reflecting a balance between the public’s desire for more health care services and its willingness to pay the valued-added tax.
http://content.nejm.org/cgi/content/short/352/12/1255
And an editorial from the same issue of NEJM:
Financing Health Care - Finding the Money Is Hard and Spending It Well Is Even Harder
By Richard Kronick, Ph.D.
…it is not clear whether payments should be made directly from the government to providers or whether risk-bearing intermediaries should be used. Direct payments have the great advantages of simplicity and low transaction costs. Approximately 20 percent of the resources used in health care are devoted to making payments and collecting money, and a single-payer system would allow many of those resources to be used in other ways. Direct-payment systems also promote equity and uniformity in coverage policies.
However, it is hard for the government to determine whether services that physicians provide do much to improve patients’ health. A fee-for-service structure is antithetical to the development of systems capable of providing the kind of well-coordinated, patient-centered care that is needed by the growing number of people with chronic illnesses. And direct payments make it difficult to reallocate resources, because the incumbents - providers who have received funds in the past - are able to hold on to those resources even if they would be better used elsewhere.
Paying health plans as intermediaries can potentially solve some of these problems. In theory, health plans can be more flexible in their internal allocation of resources than can governmental direct-payment systems. If changes in technology allow resources to be shifted out of the hospital into the community, it will be difficult for the government to claw funds out of hospital budgets, but it may be more feasible for private plans to do so.
Health plans may be better able than the government to determine which services are most valued by patients and shift resources to those services. In the best plans, doctors have a strong voice in the allocation of resources. A system that is based on competing private health plans could create a dynamic in which physicians and hospitals are rewarded, with more revenue and members, if they do a good job. Health policy analysts and politicians have engaged in intense disputes about whether the government should be a single payer of providers or a single payer of health plans; these debates will doubtless continue.
As messy and difficult as a publicly financed system is likely to be, the alternatives are worse. Under the status quo, expenditures are increasing at a rate that is unaffordable, many resources are used in clinical and administrative activities that do little to improve health, and accountability mechanisms are weak. Voluntary, employer-sponsored insurance will continue to recede as health care expenditures increase more quickly than workers’ wages or productivity. The resulting increase in the number of uninsured people will lead to additional health and financial catastrophes, increase the strain on the safety net, and increase political pressure for change.
We do know how to ensure universal coverage, but we do not know how to ensure that our money will be spent well. We should not let uncertainty about how best to spend money prevent us from supporting proposals for universal coverage in the context of a system that would be less chaotic and more affordable. Emanuel and Fuchs offer a thought-provoking suggestion for moving in that direction.
http://content.nejm.org/cgi/content/short/352/12/1252
Comment: Single payer advocates, merely by reviewing the list of features of the Emanuel/Fuchs proposal, will immediately recognize many disputed policy concepts. No attempt will be made to address most of them here, but rather my comments will be limited to two important issues: (1) basic benefits, and (2) the use of health plans as risk bearing intermediaries.
Last year, in a debate at Stanford School of Medicine, Dr. Fuchs presented his proposal, and I discussed the single payer approach. During Q & A, I asked him how he would define basic care; would total joint replacement in an individual with advanced degenerative hip disease be basic care? He emphatically stated that it would be.
Then what is basic care? What beneficial health care services would we exclude from basic coverage? Single payer advocates would contend that all beneficial services should be included, excluding only those for which costs clearly exceed the benefit (e.g., $10,000 per dose for an antihistamine, an exaggeration to make the point).
The PNHP model of single payer, by design, includes all beneficial services. With a voucher system, the voucher is used to shop for plans with varying benefits, but with a floor of basic coverage. Would the menu of plans include versions that would exclude coverage of joint replacement? That demonstrates the fundamental fallacy of the concept that there is a nebulous cluster of basic benefits that exclude enough beneficial health care services to bring down health care spending without resulting in impaired outcomes due to impaired access because of financial barriers. We need to reject the concept that there is a floor of basic services beyond which lower-income individuals have no entitlement. We need to proceed with reform that provides access to comprehensive services for everyone.
Dr. Kronick seems to concede that we need a publicly financed program, but
he suggests that paying health plans may improve resource allocation compared to paying providers directly. Is that a valid concept?
Integrated health systems such as Kaiser Permanente are effective in improving resource allocation when facing limited budgets. But most health plans are not integrated systems. Coverage restrictions are designed to make premiums competitive, based on market principles, and have virtually nothing to do with resource allocation.
The PNHP single payer model recognizes that a federally administered system
does not function well. That is why we recommend that the federal funds be
distributed to state or regional administrations. The funds can be more precisely directed to ensure appropriate capacity that would enable universal access to comprehensive services. Private health plans would never direct resources toward the health care infrastructure, but would remained involved in their own turf issues such as adverse selection and ratcheting down benefits. We disagree that private plans could be more effective in resource allocation. A public administrator would always have a mission of improving resource allocation for the benefit of all patients, whereas the private plans would always have a mission of enhancing their own business as a vendor of administrative services. The mission really does make a difference.
Spending health care dollars well is hard. But our own public administrators would make far better decisions on health care justice than would the boards
and administrators of private plans.