How to fix healthcare

This came up yesterday in class. This is my idea of how to set up a working system of healthcare. If we want to fix healthcare, these are the objectives:

1. Universal coverage. This should also be mandatory, given that empirically most people do not have the self-discipline or foresight to save up for a rainy day and are when injured usually left without coverage unless covered by a mandatory system.
   
2. Prevention is better than healing. A system must set incentives persons to seek healthy lifestyles and to not let problems exacerbate. Similarly, as a matter of justice, persons should reap the benefits of living healthy and bear the costs of smoking and drinking.
   
3. Avoid socialism. We must avoid the system in which everyone contributes to a big pot and takes out as much as they need. This has been proven to lead for people to contribution the minimal amount possible and to take the largest amount possible. It also creates no incentives for objective B.
   
4. At the same time, certain procedures ought to be covered by society at large. But this must not extend far enough to negate the incentives set in B.
   
5. Minimize administrative costs. Fighting insurance companies in the courts for treatment and complex coverage schemes should be avoided as far as possible.
   

And this is how it’ll work:

1. Every working person will automatically have $1,000 deducted from his paycheck per year. $1,000 is around the amount which the average citizen spends on medication, doctors, etc per year. This money does not go into a central pot but is paid into a personal bank account. Every citizen has a personal healthcare bank account which can only be accessed by doctors and pharmacists and hospitals. This creates universal coverage.
2. Every person can choose for him- or herself what to do with this money, whether to see an ophthalmologist or dermatologist or dentist or none that year. This is preferable for a number of reasons.
   1. First, it eliminates the middle man of the insurance company or the government dictating what is and is not covered by the healthcare system. This practically eliminates administration costs and gives power to the people.
   2. Second, consumers have the most information on what they actually require. This limits waste. Although it can be argued that individuals have insufficient medical knowledge to look after themselves, this is incorrect. Firstly, knowing when and how to see a doctor is not difficult to understand. A car requires maintenance, as does a human. Secondly, it is common economic knowledge that it is in the interest of the seller to supply the consumer with honest and accurate data. [http://www.jubileeresearch.org/finance/The_lemon_dilemma.htm] This is a system which emphasizes personal responsibility.
   3. Third, this will create open competition between doctors and pharmaceutical companies, which improves quality and lowers costs.
3. The bank accounts at all times are property of the individual. This prevents the state from using the money for anything else, as it happened in Germany with the generation-contract. Upon death of an individual, the money passes to the next of kin, but again only to their healthcare accounts.
4. Given that the accounts cannot, by definition, never default, they will be highly attractive to banks, which will in return have an incentive to provide high interest on these accounts. It is up for discussion whether every bank or only one bank should be permitted to host such special accounts.
5. Given that by and large people get sicker the older they get, expenses can be expected to be low in the first few years. Compound interest accrues. After twenty, thirty, forty years of annual payments and compound interest the bank account can have grown respectably. Once a person goes into retirement, the healthcare account may also be used to finance retirement, but again not for luxuries but only for housing and healthcare, which are the two biggest expenses which seniors face.
6. This system creates real incentives for people to eat their vegetables and exercise, as they have hard-cash motivational carrots dangling in front of them. Moreover it also avoids the injustice of having people cover other people’s expenses.
7. A small communal side-pot for expensive treatments, such as car accidents and organ transplants must be created at a cost of about 1-3% of income. These procedures are likely to exceed the individual account’s capacity, but are comparatively rare. There is no injustice in this under the Rawlsian social contract – the person in the car accident could be me or you and such an accident cannot be avoided by not smoking or working out regularly. It is fair in these instances to rely on society to bear the costs.
8. It is true that some people are born sturdier, healthier than others who have notoriously higher blood pressure or inclination towards certain illnesses. The point of this system is not to provide equality in genes, but to provide healthcare. Some people are born tall, others are born short. Everyone has to make the most of what they have got and a healthy lifestyle goes a long way to change your odds of sickness.
9. That said, as a matter of the social contract, we will want certain disabilities to be cushioned by society. Most people would agree that a child that was born blind should receive help from the community; this could be your child, this could be you. Where exactly the line ought to be drawn between what the community should compensate and what an individual ought to live with will depend on the culture of the society and democratic process.
10. Having dealt with the employed, we must turn to those not covered under this scheme: children and those without salaries. This is probably where the largest discussion and disagreements may be voiced. Regarding children, it is probably advisable to have them covered under a communal system; the same may be true for the unemployed.

Yes, this system relies on a working banking system and lack of hyperinflation. This point of this system is not to fix or explain the banking system but to provide healthcare.

-- TheodorBruening - 27 Feb 2009