Universal Coverage on a Budget

A new proposal, published in the Journal of Policy Analysis and Management, lays out a plan for health care reform based on a progressive, universal health insurance system that reins in healthcare spending, ensures all Americans are guaranteed basic protection from catastrophic health care costs, and provides first-dollar coverage for preventive and high-value care.

Written by noted health economist Dana Goldman and venture capitalist Kip Hagopian, five goals drive their plan:

  1. Make coverage universal and progressive;
  2. Build on, but do not replace, the private insurance system;
  3. Keep it affordable and sustainable;
  4. Reduce incentives for adverse selection (avoidance of health risks); and
  5. Create incentives for prevention and long-term investment

They recommend a universal catastrophic insurance plan (administered through private health insurance companies contracted with the government) that would be available to everyone. It would be means-tested, meaning deductibles and premiums would be tied to income, thereby containing the out-of-pocket burden for low-income and vulnerable individuals. Furthermore, certain preventive-care and high-value services- like prenatal care, statin drugs to avert heart attacks, and certain treatment and drug regimens for chronic illnesses- would be provided free or at a very low cost.

“Health insurance, like other forms of insurance, should perform one fundamental function,” write Goldman and Hagopian, “protect against serious or catastrophic financial loss.” It shouldn’t pay for maintenance expenses (much like one’s car insurance doesn’t pay for new breaks). “By limiting the breadth of coverage and by spreading risk over a massive pool, we minimize the cost of insurance while protecting people from financial loss,” they write.

Financing the plan would predominantly come from employers who currently provide health insurance to their employees and their families or those with incomes more than 300 percent of the federal poverty line. Goldman and Hagopian propose eliminating the federal tax exclusion for employer-paid plans. All told, they estimate the plan would cost the government no more than the ACA and cover everyone.

Their plan provides:

  1. Universal insurance coverage that protects everyone from catastrophic loss and removes many of the incentives for insurers to avoid bad health risks;
  2. Means-tested deductibles and premiums, so the plan is quite progressive;
  3. Affordable premiums (about 40 percent lower than the ACA Silver plan);
  4. Required multi-year contracts to encourage long-term health investments; and
  5. A better deal for taxpayers (about 15 percent less than the ACA despite insuring millions more).

“Pursuing catastrophic health insurance would allow us to overcome many of the obstacles that have stood in the way of a rational health-care system for decades,” they conclude. “And it could point the way to a market-friendly and practical means to universal coverage– without breaking the bank.”

Dana Goldman is the Director of the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California.  Kip Hagopian is the Co-Founder of Brentwood Associates and a Managing Partner at Apple Oaks Partners.