Supreme Court arguments on the constitutionality of the Affordable Care Act have liberals worried. The ACA is a vast Rube Goldberg contraption built around the individual mandate. Without the mandate, Obamacare falls apart. The collapse of Obamacare need not be a legislative nightmare. Here's an alternative approach that could meet constitutional requirements and potentially garner enough support to pass.
Congress could set up two tracks for health care coverage. One would be facilitated, but not operated by, the Federal government. States would decide whether to participate in that track or opt out and go their own way.
All citizens in the participating states would receive vouchers to purchase health insurance on the private market. Insurers who participate in those state's markets would have to agree to accept everyone regardless of age or condition. Citizens of opt-in states would pay a surcharge on their federal income taxes to fund the plan. They would no longer pay Medicare/Medicaid taxes as those programs would be unnecessary in their state.
The vouchers would cover a good-quality, low-deductible policy with no premium. Subsidies would be available for the very poor to assist with deductibles and co-pays.
A back-of-the-envelope calculation shows that the plan would not be cheap. It costs a company on average about $9,000 per employee to provide health insurance. There are about 114 million households in the country, so assuming no efficiencies, covering everyone would cost roughly a trillion dollars.
In 2010, Americans earned total adjusted gross income of $8 trillion. If the program were paid for through a flat tax surcharge, like FICA, the rate would have to be about 12 percent. In opt-in states, it would replace the 2.9 percent tax we currently pay for Medicare (rising to 3.8 percent next year for incomes over $200,000), coming to about 9 percent overall.
However, the most lavish and expensive health care system in the world beyond our borders (Norway) only costs about $5,000 per person, almost half what we pay. No other country on the planet spends anywhere near what we pay for healthcare and European citizens generally experience better care. The French and Dutch both make extensive use of private health insurers in their subsidized systems. Full coverage and some modest rules could potentially mitigate costs, allowing the tax rates to possibly drop near 6 to 7 percent.
It would be expensive, but it would cover everyone without gimmicks or hidden taxes. With employers freed from the massive burden of health coverage, American families could find themselves earning higher wages and eliminating the risk of being wiped out financially by an illness.
Medicare, Medicaid and several other Health and Human Services Agencies would be phased out, shrinking the Federal bureaucracy by thousands and saving more than $600 billion a year from the Federal budget. At the Federal level the system would only need a modest panel of regulators for administration.
For states that opt-in, this plan would cover everyone, preserve the private health insurance market, reduce the size of the Federal bureaucracy, respect the rights of states to make their own decisions, and remove a giant competitive disadvantage from American businesses. Five solid wins for conservatives.
States that chose not to participate would have their Medicare/Medicaid contributions returned to them as a block grant and be free to create their own health care system. Rick Perry believes Texas can do health care better than Washington. He would be free to prove it. If Mississippi wants a health care system centered on faith-healing and pocket stones, they could have it.
In essence, states could decide whether they want to pay for a fully subsidized, private health insurance scheme facilitated by the Federal government or a plan similar to recent Republican proposals. Opt-out states might stick with the current semi-private model, or they might implement single-payer proposals like Vermont and California are considering. We could end the deadlock and let the people of each state decide how they want to live.
There is no nation on Earth that provides high-quality, centralized, universal care to 300 million people. One of the strengths of the best European systems is their accountability to voters. In complex, dynamic matters, our Federal government usually operates better as a facilitator than as a final decision-maker. A health care solution that respects the rights of states could open new avenues of innovation and relieve our political gridlock over health reform.