A More Equitable and Efficient Approach to Insuring the Uninsurable
This chapter argues that although concern for individuals with relatively high expected health care costs may justify significant cross-subsidization on normative grounds, it makes sense as a matter of fairness and in terms of minimizing attendant efficiency losses to sever the employment link, enacting a program through which cross-subsidization occurs within society more generally. The chapter is organized as follows. Section 2 briefly reviews the literature on labor market distortions related to health insurance benefits. Section 3 discusses how many individuals are likely to be “uninsurable” in an insurance market in which coverage is not tied to a person's employer. Section 4 lays out the proposal to move individuals requiring subsidies to a broad-based pool financed through the federal tax system, and discusses the determinants of health insurance affordability and pricing mechanism. Section 5 discusses the necessary federalization of Medicaid and the abolition of state-level insurance mandates that accompany our proposal. Section 6 examines the experience of other countries in order to shed light on the efficacy of our proposal, and Section 7 concludes.
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