On the Soapbox

A couple nights ago (I meant to post this earlier, but I kept forgetting :P), libertarian Megan McArdle of The Economist, writing under the "Jane Galt" pseudonym, proposed this interesting healthcare reform plan that is seductively simple and that tries to strike a balance between the moral argument for government payment and the need for market forces.

Have the government pay for all health care expenditures above 15% of adjusted gross income, and cover 100% of health care expenditures by people living under 200% of the poverty line.

The justification and reasoning for this plan is laid out in a series of four blog posts (1, 2, 3, 4), though if you do not feel like reading all four, the last of the four might work as an executive summary. It's not perfect, and the author admits it. For starters, there is an incentive disconnect at the 200% of poverty line, but that is a minor technical problem that can be easily fixed by either using a sliding scale instead of a flat 0% that steps up to a 15% or by exempting any income below that point from this cap calculation. There is the potential problem of freewheeling spending after the 15% cap is reached, but people generally do not visit hospitals for fun and there can always do some basic rationing (no botox injections on the coverage). There is also the problem of how one defines and tracks income, but for better or for worse, we already have that infrastructure in place, thanks to the IRS. (I went into a wee bit more detail on these points in some comments on her fourth post) There are other problems too, but not nearly as many as HSAs or single-payer. Overall, I think it's a pretty nice idea: a nice balance between free market and government, don't you think?