Friday, October 11, 2013

The "Purple Health Plan": Better Than Single-Payer, but It's Not a Real Market Solution

Paul Mulshine, a libertarian-leaning conservative columnist for the New Jersey Star-Ledger, said in a recent column:

When the [ObamaCare] system goes broke, many people will call for a single-payer system based on Medicare. [Boston University economist Laurence] Kotlikoff has a better idea. Under the "Purple Health Plan" he devised with other economists, we’d get rid of the current system of employer-based health care as well as Medicaid and Medicare. Everyone would get a voucher for a basic policy to be bought on the open market. If you want extras, you pay extra.
"Sounds good to me," said Mulshine, "And it will sound good to a lot of other middle-class people when they find out what’s in store for them Jan. 1."

I did a quick read of the Purple Health Plan, and left these comments:

Whatever the Purple Health Plan is, it doesn't create an open market in any sense that means a free market. By my reading, the plan requires heavy controls and mandates on insurers. The plan may be less bad than outright single-payer socialism, but not by much. It's more akin to fascism, which is socialism through the back door.

ObamaCare is indeed unworkable. Then again, it's not intended to work. It's just a step toward single-payer or Medicare-for-All, as Harry Reid readily acknowledged recently. It's about time the Right came up with a true free market alternative. The pre-ObamaCare status quo was a government controlled monstrosity. ObamaCare makes it worse, so moving toward a free market will take time. But it can and must be done, and the third-party-payer system is a great place to start. It is a prime cause of many of the problems ObamaCare was supposedly designed to fix. Why not simply repeal all of the tax and regulatory policies that spawned it, and simply let people spend their own money on their own healthcare as they see fit.  

Remember that the employee's health insurance is part of his compensation. The money spent by the employer is money earned by the employee. That money could simply be deposited in an individual HSA for the person who actually earned it to manage in accordance with his own situation. This should be relatively easy and very popular, once people find out how much of their own money they'll have to spend on healthcare. Why this convoluted voucher scheme? The Right—which rules out many Republicans—should be finding ways to get government out of healthcare, rather than shuffle government controls from one scheme to another. 

There are also contradictions and omissions in the plan. For example, part 1 #3 states: "All who can pay for their health plans should do so through a combination of existing tax payments and health plan co-payments." But part 2 #1 says: "All Americans receive a voucher each year to purchase a standard plan from the private-plan provider of their choice." If an individual can pay with his "existing tax payments," why does he need a voucher? And how will the voucher be funded if the government no longer collects existing tax payments? This is a double contradiction.

In this regard, there is a huge omission in the Purple Health Plan. If the individual keeps his "existing tax payments" and co-pays to fund his own basic health policy, as per part 1 #3 of the Plan, what happens to the money the employer spends on the health insurance for his employees? Suppose the employer currently spends $10,000 per employee on health insurance; $8,000 paid by the employer and $2,000 in co-pays, deductibles, and so on by the employee. Along comes the Purple Health Plan. The employee gets the $2,000 + "existing tax payments (whatever that is)," which he uses to buy the government-approved policy. The employer is now off the hook. What happens to the $8,000 bucks? Apparently, the employer pockets it. Since employer-paid health insurance is part of the employee's compensation, this means that the employee gets an $8,000 pay cut, and the employer a windfall.

This plan will raise the same kinds of objections the Left always relies on: Why have private insurers at all. If the government is going to pay the premiums, why not cut out the middleman, and have the government pay healthcare costs directly? We're back to single payer. 

The choice is ultimately either or; single payer or a fully free market.

Related Reading:

Get ready for the Coming Post-ObamaCare Battle

The Left's False Alternative on Health Care

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