Time for Health Care Credit Cards?
Filed Under (Health Care) by Jeffrey Brown on Feb 8, 2010
Yes, I know that credit cards have gotten a bad name given the fact that so many families have gotten themselves deep into personal debt by not managing them effectively. But a couple of interesting ideas have come across my desk recently that have me thinking that a “health care credit card” is an idea worth considering as part of an intelligent health care reform.
As background, my colleague Nolan Miller made a post last week about “The Health Reform House of Cards” in which he highlighted the difficulties in tackling reform. He walks through the steps that one could take in order to put together a reform that actually works, highlighting how one reform element must be accompanied by other reform elements if it is all going to work.
As luck would have it, I recently received a proposal from a good friend of the College of Business, Jerry Carson. In his proposal, which is much more detailed than what I will provide here, he outlines a system that appears to have many of the elements that Nolan calls for - and his approach has a role for health care credit cards. I probably will not do Jerry’s proposal justice, but here are a few of the highlights …
First, require that everyone purchase a catastrophic loss health insurance policy. In Jerry’s proposal, anyone could sell this insurance, including private insurers or the government. Premiums would be based on the risk pool of the entire nation, which, in Jerry’s words is “the only true economical form of insurance - the broadest possible base with high deductibles.” Policy terms would be the same without consideration of pre-existing conditions, and premiums would be tax deductible. if insurers want to provide policies that wrap-around this catastrophic coverage by providing benefits that are more generous, they may do so, but such policies would not be tax deductible. This would help limit the “Cadillac plan” problem that leads to inefficient over-utilization of health care services. It also limits the tax burden arising from the “tax subsidy” of these plans.
Second, Jerry suggests allowing individuals to use a “health care credit card” that can be used at point-of-service. These cards are with full recourse to the individual. Private lenders can issue the cards, and again, if someone cannot get one then the government can issue one. In the case that the government issues one, all services would be reviewed by a federal agency, and unpaid costs would be deducted from federal/state benefits. As Jerry puts it, it would be “socialized health care without the free lunch.”
Jerry is certainly not alone in trying to come up with creative ways to solve our health care dilemma by providing incentives for individuals to care about the cost of care (a focus on incentives and individual responsibility) while still protecting them from catastrophic losses (a focus on social insurance). A few months ago, the esteemed economist Martin Feldstein (former President of the NBER and former CEA Chair for President Reagan) wrote an op-ed in the Washington Post that called for us to replace the current tax subsidy approach with a health care voucher system. Interestingly, he also calls for “the government to issue a health-care credit card to every family along with the insurance voucher.”
Health care reform is an enormously complex topic, and as Nolan’s blog and Feldstein’s op-ed both suggest, the solution requires a number of inter-locking pieces to work. Both Jerry Carson’s and Marty Feldstein’s creative ideas may be the kind of innovation we need to get out of the current health care reform quagmire.
