Taylor v. Feldstein: comparing catastrophic plans

(cross posted at samefacts)

I have been blogging about the path to a health reform deal that I offer in my book: universal catastrophic coverage implemented via Medicare. Martin Feldstein, chair of the Council of Economic Advisors under President Reagan, offered a universal catastrophic coverage proposal in October, 2009, that would:

  • provide tax credits to purchase a catastrophic private health insurance policy, with catastrophic defined as costs above 15% of income (financed by ending the tax exclusion of employer paid insurance; people could purchase additional coverage with after tax dollars)
  • issue each person/family a “health care credit card” that could be used to purchase care in the deductible amount

A few quick comments about Prof. Feldstein’s proposal and how it compares to mine.

  • Defining catastrophic as a percentage of income makes conceptual sense, but introduces some technical challenges. All of the issues related to timing, what happens if your income changes, and perverse incentives related to loss of subsidy if your income increases that have been raised with respect to the income-based subsidies in the ACA apply to Prof. Feldstein’s proposal as well (and to just about any public policy that provides a differential government expenditure/subsidy based on income).
  • Prof. Feldstein’s proposal provides a guaranteed means of financing needed care if someone makes a bad choice in choosing catastrophic coverage only, while mine does not. A huge concern under my proposal is what will persons who choose to only have catastrophic insurance, but who get sick, actually do? Will some avoid the care they need? If so, this will likely increase the catastrophic costs that Medicare will incur down the road if they spend through the catastrophic coverage amount.

Which of these approaches is preferable? It depends upon what aspect of our current system bothers you the most. My plan could provide true universal coverage. Prof. Feldstein’s op-ed claims his plan would create universal coverage, but that is unlikely without a mandate or auto-enroll procedure of some sort that he does not mention, leaving us with the question of what happens to people who didn’t sign up? Aggressive auto-enroll could likely get close to universal coverage. Medicare is the largest risk pool around, so would be the most efficient means of providing catastrophic coverage and would therefore be my preference as the catastrophic insurance vehicle, but others will prefer using private insurance. His proposal is preferable if you most worry about people making a bad choice in level of insurance coverage and being unable to finance care.

Achieving catastrophic health insurance coverage will not fix all of the inter-related problems of coverage, cost and quality of care. However, if we could manage an agreement to provide a clear route to how all persons could be guaranteed at least basic coverage, we could remove one variable from the mix and focus on other aspects of the health care system. A step like this seems politically impossible given the nature of our nation’s discourse, but at some point we will have to return to serious public policy making to address our many problems, and it will take compromise. The recent news stories about the lack of a coherent and unified Republican “replace” strategy shows they very much need a health reform deal and are unlikely to drive toward a plan on their own. Health reform remains a key interest for Progressives.

I continue to think the route to the needed deal goes through universal, catastrophic insurance coverage of some sort. If we could agree on that as a goal, the details should be tractable.

About Don Taylor
Professor of Public Policy at Duke University (with appointments in Business, Nursing, Community and Family Medicine, and the Duke Clinical Research Institute). I am one of the founding faculty of the Margolis Center for Health Policy, and currently serve as Chair of Duke's University Priorities Committee (UPC). My research focuses on improving care for persons who are dying, and I am co-PI of a CMMI award in Community Based Palliative Care. I teach both undergrads and grad students at Duke. On twitter @donaldhtaylorjr

5 Responses to Taylor v. Feldstein: comparing catastrophic plans

  1. steve2 says:

    Query- Has anyone ever sat down with an insurance broker to figure out what catastrophic coverage would cost for those with major illnesses? When we tried to get coverage for a family member with a h/o multiple PEs (pulmonary embolisms) we could not find coverage of any sort at any price. I called our (corporate) insurance broker and he could/would not quote a price for any coverage. He told me no one would touch this coverage. Same thing with everyone we tried.

    Steve

    • Don Taylor says:

      @steve2
      I haven’t….would like to see an actuarial analysis of what this would look like writ large. Cata cover for the young well should be very inexpensive…enough in the pool is the key to enfold those who are sick

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