Tuesday, October 16, 2007

Some more on health care

Tyler Cowen this morning asked if there is any further government intervention that libertarians would support as being necessary to help someone. Since I am not an absolute anarcho-capitalist, and since I like to think I have a heart, I got to thinking about this question.

As I said in my McCain post, the McCain proposal strikes me as a step in the right direction; but this doesn't really answer Cowen's question, since what is good about the McCain proposal is a recognition of where government intervention has screwed up our health care system. In other words, what is good about it is primarily that it eliminates or reduces the role of government in certain areas of the system.

So, turning to Cowen's actual question, I think there is some justifiable government intervention to help the neediest of the needy. One thing that maybe would be workable would be a government program under which government agrees to reimburse insurance costs over a certain percentage of household income- this is of course effectively a tax credit, but one that is more situation dependent than an outright flat credit of x dollars. To make things fairer, we could also make it a graduated system- so, the reimbusability threshold would be, say, 10% of a household's first $25,000, 20% of the next $25,000, 30% of the next $50,000, and so on. This would be fair because it would essentially be a self-limiting program- over a certain level of income, reimbursable coverage would be effectively impossible. Moreover, the lower your income, the more your insurance is reimbursable, and vice versa. So, a household making $100,000 would have to have $22,500 in necessary insurance costs to be eligible (almost $2000 a month). On the other hand, a household making $20,000 would only need $2000 of insurance premiums before reimbursability would kick in (about $170 a month).

I acknowledge some inherent initial problems with this scenario, not least of which is the question of how long it will take for government to reimburse beneficiaries of the program. Maybe we could create the equivalent of a reverse W-4 for insurance companies, which would allow the insurance companies to deduct your excess insurance costs from your monthly bill; if it turns out that you have more gross income at the end of the year than you report to the insurance company, then you owe the government for the unreimbursed amount when you file your tax return.

Another inherent problem with my hypothetical program is the question of preventing people from gaming the system by getting more expensive insurance than they actually need (which would then create an incentive for insurance companies to charge far more for insurance than the real value of the insurance). Perhaps you could get around this by requiring particular insurance plans to be certified as reimbursable, which admittedly has its own set of problems.

I'm sure there are plenty of other inherent problems, but conceptually, I think it is a proposal that is fair and is not overly offensive to libertarian or conservative principles (although administrability may be a fatal flaw). I'm sure there will be dissent, though, which I would be happy to hear.