After criticizing Obamacare at a party, another person said something like "well you can't criticize it without suggesting an alternative." This of course is total bullsh*t. The passage of a bad law to imperfectly achieve objectives with which I disagree does not obligate me to craft alternative legislation to achieve those objectives.
But I decided to take a swing at it anyway. Taking a step back, I said that I thought there were two overriding problems in health care that the government might address.
The first is a problem largely of the government's own creation, that incentives (non-tax-ability of health care benefits) and programs (e.g. Medicare) have been created for first dollar third-party payment of medical expenses. This growth of third-party payment has eliminated the incentives for consumers to shop and make tradeoffs for health care purchases, the very activities that impose price and quality discipline on most other markets.
The second problem that likely dominates everyone's fears is getting a bankrupting medical expense whose costs are multiples of one's income, and having that care be either uninsured or leading to cancellation of one's insurance or future years.
So my suggestion I made up on the spot (and I am a little fuzzy on the details as my friend had actually cracked open a bottle of Van Winkle bourbon for a few of us, my first taste of that magic elixir) was to scrap whatever we are doing now and have the government pay all medical expenses over 10% of one's income. Anything under that was the individual's responsibility, though some sort of tax-advantaged health savings account would be a logical adjunct program.
I obviously make policy better when I am drinking absurdly rare and expensive bourbons, because Megan McArdle (who knows a hell of a lot more than I about health care economics) has apparently been advocating something similar for quite a while
How would a similar program work for health care? The government would pick up 100 percent of the tab for health care over a certain percentage of adjusted gross income—the number would have to be negotiated through the political process, but I have suggested between 15 and 20 percent. There could be special treatment for people living at or near the poverty line, and for people who have medical bills that exceed the set percentage of their income for five years in a row, so that the poor and people with chronic illness are not disadvantaged by the system.
In exchange, we would get rid of the tax deduction for employer-sponsored health insurance, and all the other government health insurance programs, with the exception of the military’s system, which for obvious reasons does need to be run by the government. People would be free to insure the gap if they wanted, and such insurance would be relatively cheap, because the insurers would see their losses strictly limited. Or people could choose to save money in a tax-deductible health savings account to cover the eventual likelihood of a serious medical problem.
The missing piece here, as was in my plan, is I have no idea how much this would cost.