Becker on on what healthcare reform should look like

March 30, 2010

An amazing piece of healthcare analysis by the University of Chicago’s Gary Becker. The whole analysis deserves reading, but a few key points:

1) Out-of-pocket spending accounts for only about 12% of total American spending on healthcare, whereas the share of out-of –pocket spending is over 30% in Switzerland, a country considered to have one of the better health delivery systems. Partly because of this major difference, health care takes 11% of Swiss GDP compared to the much higher American percentage. … As far as I can discover, nothing in the new bill really tries to raise the out-of-pocket share, and some changes would reduce it even further.

2) Another desirable reform is to reduce the reliance of the American health system on tax-deductible employer-based insurance since tax deductibility has encouraged low deductibles and low co-payments. … The bill does propose to phase out tax deductibility for the more expensive plans by 2018, but who knows if that will ever be implemented.

3) Health savings accounts (HSAs) have been one of the most important innovations in the health care field during the past decade. … There is little mention of HSAs in the new bill, and certainly no encouragement to their expansion.

4) The American health care delivery system needs greater transparency and easier access to medical information by consumers. The bill takes a valuable step in this direction by encouraging the development of online medical records and medical histories for all individuals, no matter how many doctors they have seen, or how often they have moved.

5) Proponents of the bill claim it will save hundreds of billions of dollars during the next ten years from cuts in Medicaid and Medicare, but it is far from obvious how such cuts will materialize. … . I do not see how the bill will lead to Medicare savings since there is no increase in out of pocket payments by Medicare enrollees, and Congress is likely to continue to override any scheduled cuts in payments to Medicare doctors and others.

6) The only truly efficient way to handle the pre-existing condition issue is to try to develop an insurance system in which young adults, who generally have few serious existing medical conditions, can take out long-term healthcare insurance.

7) Although the impact on the costs to taxpayers of the more than 40 million uninsured persons in the US is usually greatly exaggerated, I do support a requirement that everyone has health insurance that covers medical catastrophes.

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