Posted by stig86 on 03/28/09
Last updated 03/28/09

Since there aren't enough supporters to bring us back to private healthcare, here is a possible idea for gaining widespread support of a plan that could allow for a return of some health freedom. It's still a rough draft, but it's just meant to communicate a basic idea so far:

A Multi-Solution Healthcare Compromise

Imagine if America could be divided down the Mississippi, with one half socialist, and the other capitalist. Which one would be better off in the long run? Unfortunately, we can't do that, but here's an idea that might allow us to start trying similar things.

First off, I understand that the biggest obstacle to making this idea a reality is finding a governor and enough state legislators who have the guts to initiate a constitutional challenge against the federal government over 10^th Amendment rights, even if it's just on one specific issue like healthcare.

Secondly, I like to draw a parallel between what can happen in market oriented, unregulated healthcare and what has happened with cell phones over the last two to three decades. In other words, I predict that market oriented healthcare will become better, faster, and less expensive over time if not hampered by government interference. Maybe not Moore's law fast, but I think a similar trend will happen.

There are surely many details that would have to be worked out in order to implement this plan successfully, and this initial paper is simply meant to illustrate the basic concept I have in mind.

The idea is to have a state run, socialized healthcare system, and also have room for a private, unregulated, market oriented healthcare sphere. People can have a state healthcare ID number (something other than SSN might be desirable) with which state care providers can identify those who pay healthcare tax dollars and thus qualify for state care. Those who take a write off on their state healthcare tax dollars have their ID number nullified so they don't receive services from the state any year that they take the write off. However, the number is kept available in case someone wants to opt back into the socialized system and starts paying healthcare tax dollars again to do so.

Nobody is forced to be in either the state program or a private one. No one is forced to have healthcare at all if they don't want to - they can just opt out and keep their money. That and the ability of people to switch from one option to the other ensure freedom of choice among state residents.

The way it works is that healthcare is completely run at the state level - no federal intervention. The state funds it all with taxpayer dollars from within its own state. If someone would rather engage in a private contract to manage their healthcare, or forgo healthcare altogether, they can take a write off on their taxes in order to reclaim all of their tax dollars that would have gone to state healthcare, up until they are claiming the per capita funding amount (ex: if state spends $10,000 per year per person, the maximum deduction for anyone is $10,000, even if paying more than that towards state healthcare annually). For that year, the person's state healthcare ID number is nullified, but still kept on record for possible further use.

Since people are not forced to use private options, and since they can opt back into the state option if they want by paying their healthcare tax dollars, the government has no need to regulate market healthcare options under the pretense of "keeping the people safe". Obviously, if there is a crime like breach of contract occurring, a patient could use the courts to ensure justice for oneself. But in a private, market oriented agreement, the state would not be able to micromanage the doctor-patient relationship, and force things like doctors having to use a bureaucrat mandated checklist when seeing patients.

Liberals, moderates, and conservatives all win with this plan. Liberals get to keep their socialized medicine, and conservatives get the bureaucrats out of their medical records and can have truly confidential relationships with their doctors again. Moderates can do which ever option they would prefer.

Rich, middle class, and poor all win. While the rich have a limit on how much they can deduct, private healthcare options are still made more affordable for them than they would be if the wealthy were forced to pay full taxes. Private healthcare is also more affordable to those with less money, especially as private, free market healthcare options develop over time - the beauty of this idea is that people are given choices in healthcare! In America, we shouldn't have the government ramming what it thinks is "best" down our throats against our will, especially for something as personal as healthcare.

I predict that as private healthcare becomes less expensive and higher quality than state care through patronage of wealthier people, it will become more popular and affordable to more people over time, until nearly all can afford private healthcare for themselves, and the few who can't will be able to maybe receive pro bono services or charitable donations for their healthcare. This is roughly analogous to the development of cell phones over the last 30 years. As fewer and fewer people use state healthcare, the rich become ripped off less and less. This is because as fewer people are in the state healthcare system (with constant or very slowly rising annual per capita spending), less total money is needed for healthcare. Assuming the number of rich people stays steady, and their level of wealth is fairly steady, the same number of rich people will be financing a steadily smaller state healthcare burden over time.

Let's work out a sample situation. First, let's say, hypothetically, that we'll spend $10,000 per person per year on state run healthcare. We'll have an imaginary group of people listed below to illustrate this with how much each person pays for state healthcare.

Dale pays $22,000 in healthcare taxes each year - he's filthy rich.

Jennifer pays $17,000 in healthcare taxes each year because she makes quite a bit of money.

Sally pays $13,000 in healthcare taxes each year.

Larry pays $12,000 in healthcare taxes each year.

Jim pays $10,000 in healthcare taxes each year.

Joe pays $9,000 in healthcare taxes each year.

Kim pays $6,000 in healthcare taxes each year.

Jeff pays $1,000 in healthcare taxes each year.

Linda pays little to nothing (maybe $100 or less) in healthcare taxes each year because she's dirt poor.

So, we see that we have a total pool of $90,000 in annual healthcare tax money and nine people in our imaginary state healthcare system. Again, that's $10,000 per year per person. Now, let's say that Dale, Sally, and Larry all decide to get out of state healthcare in favor of private arrangements for their healthcare. Anyone who opts out of the state system has their healthcare ID number nullified (at least for the year) by taking a tax write off for their healthcare tax dollars. Remember, the tax write off is for all of one's healthcare tax dollars up until they've deducted the per capita spending amount. In other words, since Dale, Sally, and Larry all pay more than $10,000 in annual healthcare tax dollars, they can only deduct $10,000 a year for themselves. We'll get to this later on.

When Dale, Sally, and Larry opt out for their own healthcare, each takes $10,000 worth of deductions out with them. So, in total, three people leave the system, and $30,000 also leaves the system. That means that with 6 people left in the state healthcare system, there is still $60,000 annually to go around, or $10,000 per person per year. So, even though most of the rich folks have left the system for private alternatives, per capita spending remains steady in the state program. While some liberals will undoubtedly clamor for more spending and control with each passing year, I predict that most common liberal people would support my idea, as long as they can keep their state run healthcare and not have per capita funding diminished. This is based on the assumption that average liberals really think that big government is best for us as a country, but they aren't personally interested in micromanaging the lives of others.

One might ask what good this does for any of these three individuals. Why don't they just stay in the state system and "get their money's worth"? Well, perhaps they like having doctor-patient confidentiality, or they have special needs that they feel can be better met with a private healthcare arrangement. In any case, while Dale, Sally, and Larry are unable to get all of their money back, private healthcare is still more affordable to them than it would be if they were forced to keep all of their tax money in the system and then pay for private care on top of that.

The reason why the maximum allowable deduction is the per capita spending amount is so that even if rich people leave the state healthcare system, per capita spending stays constant, and thus liberal politicians have less to cry about. While the rich are still being ripped off some, at least they are able to make some headway towards private healthcare, should they want it.

What happens if some of the poorer people opt out of the state health care system? Well, that's even better than when rich people opt out! Let's say that Jim, Joe, and Kim all opt out because they prefer private healthcare and found good doctors for themselves at $7,000 per year each. Kim will pay an extra $1,000 in healthcare each year by leaving state run healthcare, but to her the new healthcare is worth the extra cost.

Each person who opts out of the state healthcare system gets to deduct all the money they put into the system until they reach the per capita spending amount. In this case, neither Jim, nor Joe, nor Kim pays more than $10,000 per person per year, so they would receive all of their state healthcare tax money from their write offs. Jim, Joe, and Kim go on their merry ways and take responsibility for their own healthcare, without state interference.

What happens to the overall state system when they leave? Jim took $10,000 from the system with his write off. Joe took $9,000 from his, and Kim took $6,000 from hers (see above table). Three people left the system like in the previous example, but guess what? They didn't take $30,000 out of the system - they only took $25,000 out of $90,000 from the system! That means that the remaining six people have more than $10,000 per person! In fact, they would have $10,833.33 available per person ($65,000 for six people). With this money, either the state can afford to spend more on its socialized healthcare, or it can offer larger deductions to rich people who opt out of the system, or do some combination of those two things.

I recommend that the extra $5,000 (65,000-60,000=5,000) in this instance to be split between expanding tax write off amounts and increasing per capita annual state healthcare spending. Why? Well, a key idea in this system is to allow a maximum deduction equal to the per capita state spending rate. That way, while deductions aren't arbitrarily expanded, they're not arbitrarily contracted either. And saying that state healthcare spending can increase under this system (aside from inflation adjustments) will hopefully further pacify liberal opposition to the plan. Conservatives can also take comfort in the fact that as state healthcare per capita expenditures increase, more people will be in a position to opt out with all of their money; as private healthcare gets cheaper than the steadily more expensive state healthcare, I predict that people will leave the state system at an ever increasing rate.

To split the extra $5,000 over the remaining six people evenly, annual per capita state healthcare expenditures will increase from $10,000 to $10,416.67, and the maximum allowable write off will also increase from $10,000 to $10,416.66 for the year. We'll let the state have that extra penny for this example. If opt outers have taken their write offs already, the expansion of their maximum write off amounts may have to be refunded later on in the year, for those who qualify (assuming someone takes a $10,000 write off on their taxes right before the deduction goes up some that year).

This idea is certainly far from perfect, and has a lot of details that would have to be worked out. There are tremendous obstacles that supporters of this idea would have to overcome. But, it might be a useful first step in restoring some of our lost freedoms.

Posted 08/24/09 nordog Bovey, MN

Make it a Health Care Coop run by citizen Boards rather than a Socialist bueracracy run by public employees and I think we have something workable. We don't need the nanny state to run health care for us, we need them to get the heck out of our way and let us run it.