Almost everyone agrees that healthcare in the U.S. is way too expensive but how do we change to a better system? Douglas Holtz-Eakin and Avik Roy have laid out a roadmap to do this: “The future of free-market healthcare”. Here is the essence of their plan: 1) start with what we will soon have under Obamacare: subsidized health-insurance exchanges; 2) limit subsidies in the exchanges to incomes up to 300% of the federal poverty level as in Massachusetts and also limit the growth of subsidies to the overall growth rate of the economy; 3) use the exchanges for Medicare reform by raising the eligibility age for Medicare by 3 months each year. Retirees would then gradually migrate into the defined contribution system of the exchanges; 4) gradually shift Medicaid enrollees into the exchanges. The exchanges would allow them to move up the income ladder while maintaining their health insurance.
Eventually all low income and retired Americans would become part of a unified health-insurance system based on the exchanges which would provide subsidies as needed. I would add one additional feature to this system: remove the tax exemption from employer provided insurance. This would, of course, create healthcare cost consciousness amongst employees. Employers could still offer a health insurance package to their employees but it would become part of their taxable compensation. They might decide to join an exchange instead for a better deal.
Such a system as outlined above is based on the Swiss free market model. The Swiss choose their own doctors and have short waiting times for appointments. The cost of healthcare in Switzerland is about half as much per person as in the U.S. so we would achieve a huge savings. We have got to make big changes in the way we deliver and pay for healthcare in the U.S. and here is one way to do it!