How Not to do Universal Coverage

January 23, 2023

Summary: An appealing-sounding proposal for universal health insurance envisions a “social floor” “basic bundle” of medical care, to be supplemented by those that can afford more. It thus needlessly sacrifices the efficiency, equity, and unity available with single payer.

Achieving Universal Health Insurance Coverage In The United States: Addressing Market Failures Or Providing A Social Floor?
National Bureau Of Economic Research
January 2023
By Katherine Baicker, Amitabh Chandra, Mark Shepard

Abstract

The United States spends substantially more on health care than most developed countries, yet leaves a greater share of the population uninsured. We suggest that incremental insurance expansions focused on addressing market failures will propagate inefficiencies and are not likely to facilitate active policy decisions that align with societal coverage goals. By instead defining a basic bundle of services that is publicly financed for all, while allowing individuals to purchase additional coverage, policymakers could both expand coverage and maintain incentives for innovation, fostering universal access to innovative care in an affordable system.

Approaches grounded in addressing market failures in the current system are perhaps the path of least resistance in the short run, minimizing disruptions to care while marginally increasing coverage. But it’s worth noting both the limited effectiveness of such approaches over the last 50 years and the shortcomings that such patches would perpetuate.

Rather than beginning with the presumption that the main need is addressing market failures, an alternative approach to expanding coverage begins with the explicit presumption that covering everyone with some form of insurance is a social goal.

We discuss three key policy decisions in a system of guaranteed universal basic coverage: 1) What health care does the basic bundle cover, and how generous is that coverage? 2) What mechanisms are used to limit spending, and who decides? 3) Are people permitted to purchase top-up or supplementary coverage beyond the basic bundle? One goal of this article is to provide a framework that may help guide future research to help inform answers to these questions.

Few would argue that the current US health care system is serving everyone well. We are surely spending too much on the provision of health care that is delivering too little benefit to too few people. Reconceptualizing what we mean by universal coverage to ensure that public resources are devoted to care with high health benefit offers the opportunity to ensure universal access to innovative care in an affordable system.

Comment by: Don McCanne & Jim Kahn

Off hand, it seems that the question addressed by this paper has an obvious answer.  We have been attempting to expand health insurance coverage for everyone by addressing market failures, and it has, in itself, been a failure. Providing a social floor in health care coverage for everyone should lead to just the results we have been seeking. So where have these academics missed the target in describing the much needed pathway to health care justice for all?

Their first step in recommending abandoning those approaches that have led to market failures is certainly correct. Then establishing a social floor for coverage for everyone is also correct. That basically is what the PNHP single payer proposal is. The problem is that they define the social floor as covering the “basic bundle” for everyone,  and, then, “Once the parameters of a basic, guaranteed plan are established, a policy decision needs to be made about the allowability of supplemental plans for private purchase.” There could be a wide variety of benefits that could be “topped up” including patient cost sharing, add-on services such as dental or vision, private providers beyond those in narrow networks included in the basic bundle, or other important products or services considered to be beyond basic. That is, the basic bundle should not have to be topped up to reach the level of routine health care.

The idea of a “basic bundle” fails. First, how do you decide what to exclude? Is dental care really optional? Are narrow networks satisfactory for those who need a specialist? Second, how do you administer it efficiently? The authors propose capitation or ACOs to control spending. These have a dismal track record, and using for-profit intermediaries (as in Medicare Advantage) substantially increases overall costs while reducing care.

It’s not only inefficient, it’s inequitable. Topping up would allow wealthier individuals to receive the higher level of care to which everyone should be entitled. Instead of receiving greater benefits, they should be receiving the same comprehensive benefits as everyone else, but they should be paying a higher amount through progressive taxes. The extra funds that the wealthy put into the health care system should not be paying for privilege, but they should be funding an egalitarian health care system instead.

We’d all benefit together. Single payer bringing us together. An antidote for current political divisiveness.