The typical setup for the provision of health care involves three parties. The patient who demands health care, the provider that can supply this health care and the insurer who mediates the payment for the service. Unnecessary overuse of health care services, large administrative costs, difficulty to find socially optimal price levels and increased costs for businesses are only some of the difficult issues that policy makers have to address. Often the measures that are taken to alleviate any of these problems do not reach the desired outcome (as can be seen by the example of the German “Praxisgebühr” which failed to decrease unnecessary doctor visits https://novaworkboard.wordpress.com/wp-admin/post.php?post=3306&action=edit).
In the US, an unconventional suggestion on how this structure can be revised has existed for a number of years without getting attention in broader public debates. It proposes that every citizen receives a “medical debit card” which has a certain amount on it at the beginning of the year (e.g. $5000). People can use the money on their card to pay for health care that they consume during that year. A certain part of this amount (e.g. $1000) would be reserved for preventative health care (regular dentist appointment, checkups etc.) while the rest would be reserved for any additional health care that the individual wants to or needs to consume. In case the individual spends less than the remaining $4000 during the year, he or she will receive the difference as a rebate at the end of the year. On the other hand, the $1000 for preventative care need to be thought of as “use it or lose it” and are not subject to any rebate in case of not-spending. A social security program would cover the additional cost for any health care that an individual requires in excess of the money that is available on the medical debit card. Finally, the medical cards are topped up to the initial amount at the beginning of the next year.
The system would create a more efficient health care market in which providers freely set prices and patients freely choose providers based on prices and services offered. While people should have the free choice to purchase insurance on top of the medical debit card it can be expected that the insurance industry would be vastly diminished since patients and doctors interact directly concerning payments.
One of the most important benefits of this approach is that it would decrease overall costs in health care on several fronts including the following. Firstly, it allows doctors to free resources which they currently spend on dealing with insurance companies. Secondly, it would reduce the total administrative costs that the current system is causing. Thirdly, individuals would have a real incentive to keep costs down. Finally, it would reduce the costs that businesses face under the current system.
A major drawback of the system is the increased incentive for doctors to induce demand for unnecessary services. Nevertheless, I believe it is an interesting proposal that should at least get some attention in policy maker’s debates on health care.
Nikolas Weiss #340