Saturday, July 25, 2009

Answering My Own Question. Maybe.

A while I asked if any of our blog readers knew of an actual proposal to bring universal health care through the free market. I honestly thought at least one reader would know of at least one such proposal. So far no such luck.

However, being as I am interested in economics and health care, I spent some time searching myself and I found one. (Maybe.) It is touted as being as universal as the current plan being voted on in congress. It won't cover everyone uncovered, but will cover most. It isn't detailed enough to be voted on in congress currently but is more detailed then some op-ed saying nothing more that "Obamacare is socialized medicine."

It was proposed by John Cochrane, an economist at the University of Chicago. It's complicated but here is what Forbes says:

Congressional Republicans have criticized Obama's approach... But as of yet they've failed to offer an alternative that meets Obama's criteria for a successful health care reform.(Ain't that the truth!)

Enter John Cochrane, an economist at the University of Chicago Booth School of Business. Professor Cochrane has long advocated a proposal he calls "health-status insurance," an approach that could guarantee long-term health security while also freeing medical insurers to compete for customers...

So how does Cochrane reconcile robust competition with health security? In addition to medical insurance, he proposes that individuals and families purchase health-status insurance. In the event that one develops a chronic illness, the health-status insurance policy would pay for the lifetime increase in medical insurance costs. Medical insurers would be free to adjust premiums upwards, but the consumer would be insulated from the economic shock. For those who already suffer from chronic conditions or other expensive ailments, the government could step in and deposit money in a health-status insurance account to cover the higher costs.
Here is a 12 page more detailed explanation of what exactly he is proposing.

I would appreciate if our readers would read that 12 page summary and comment whether or not they think it is a reasonable "free-market" based approach to universal health care and explain why. Brownie points if you can provide data to back up your claims.


  1. This is an interesting proposal and I think it is a viable one, but it does not address one key component of the health insurance problem - the uninsured. People without health insurance are a major drain on medical providers, the government, and, indirectly, those who do have insurance. This plan doesn't address that problem and the only way I see it being resolved is either by the government requiring everyone to buy health insurance (and penalizing those who don't) or government directly taking over the health care system. I don't like either option, but I don't see any other way to deal with the 10% of Americans that lack health insurance.

  2. Health-status insurance does seem like a great way to make health insurance portable. My wife and I have struggled with that as we have switched insurance providers due to job and school changes, especially when dealing with the dreaded "pre-existing" condition label. Luckily many current plans don't resort to the pre-existing condition label unless (a) you didn't have insurance previously or (b) your pre-existing condition is going to be really expensive. We made the transitions without too much trouble but it had us worried for a couple weeks when we were trying to switch health insurance.

  3. Also, I wouldn't call this universal coverage - but then again the plans bouncing around D.C. aren't truly universal either.


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