If we remove political considerations, such as how we can get to a certain solution in the face of powerful corporate interests, what would be the best solution to healthcare? First, a few baseline assumptions:

1. We want to have everyone covered.
2. We want to maximize health.
3. We want to minimize costs.
4. We want the cost burden to be progressive (i.e. rich people pay more.).

Let's look at a hypothetical proposal from economist Brad DeLong, the Australian system, our VA system here in the US, and some thoughts of my own.

First, a few words on our current system: It sucks. We spend twice as much per person as just about every other industrialized country for shittier results and we leave tens of millions uninsured and most of us worry about losing our coverage if we get really sick or lose our job.

On top of this, our primarily employer based system makes us less competitive in the global economy and costs us jobs. By providing government healthcare, other countries are in effect subsidizing their industries relative to ours and giving them a competitive advantage. When conservatives talk about taxes hurting "small business" and costing jobs, they are confusing revenue with profits. When businesses don't have healthcare to pay for, that is a cost savings that makes them more competitive. When a business owner makes a profit and takes a fat salary from his business, taxing that salary does not affect the business. It's the profits that are taxed, not the revenue.

Also, an employer based system reduces the efficiency of the overall economy. Most innovation comes from startups and small companies. But our current system keeps workers tied to the bigger businesses that can afford health insurance plans. How many people would change jobs or start their own businesses but for fear of losing health insurance? I don't know how to measure this drag on our productivity, but I assume it is substantial.

Brad DeLong plan

Okay, let's look at the DeLong hypothetical healthcare utopia. Matthew Yglesias sums up the idea here:

— 1. Taxes on public health hazards (booze, sweeteners, etc.)

— 2. An army of publicly employed doctors and nurses working in clinics and vans and such roaming the country dispensing preventive care and lifestyle advice to all and sundry.

— 3. 15 percent of your income is automatically plunked into a Health Savings Account.

— 4. When you want health care services that aren’t covered by the clinics, you pay out of your HSA.

— 5. If there’s money left in your HSA at the end of the year, it gets plunked into your IRA unless you specifically fill in an opt-out form.

— 6. If you run out of money in your HSA and need more health care, the government pays for it.

— 7. On top of the 15 percent HSA deduction, there’s a 5 percent tax to pay for 6.

Because the cost-sharing is all tied to shares of income, the overall impact of this would be strongly progressive. Better-off Americans will in effect be paying for a lot of their care out of pocket (via their HSA) while poor Americans will mostly be on the dole. But nobody will ever have any financial reason to forego the basics of preventive medicine, and nobody will ever need to worry about going bankrupt over medical expenses.

Sounds good to me. The best thing about this plan is that it eliminates the parasites - the insurance industry. As Brad himself says:

Why single-payer above 20%? Because I think there's no space left for insurance companies. Insurance executives' and actuaries' incentives are horribly wrong--they are either to figure out how to exclude the sick from their coverage or to skimp on preventive stuff because twenty years hence the patient will be covered by some other company. You want doctors to have incentives to deliver necessary and appropriate care better. You don't want insurers to have incentives to deliver shoddier and cheaper care in hard-to-monitor ways.

The problem with HSAs is that they are sort of like encouraging people to save money on automotive expenses by cutting out oil changes. When people have to pay for stuff out of pocket, it's the medical equivalent of oil changes that they will skip and then they will have no choice but to go bankrupt or whatever it takes when they need a new engine. DeLong's plan takes care of this by providing free oil changes.

My amateur idea from many years ago

The DeLong plan has an element of an idea I thought of back in the early 90's. If the government pays for everything, wouldn't that make healthcare costs go crazy? Instead of having government act as a health insurance service, why not let them be a healthcare provider in direct competition with for-profit healthcare. The government already provides healthcare directly to active duty military and their dependents and to veterans. Why not expand that? Someone with plenty of money can choose to pay for a private doctor or hospital. Poor people can go to a government clinic or hospital. Those in the middle will decide for themselves. This competition from the government would force for-profit providers to deliver better more cost effective care.

Australian system

As it turns out, my idea was similar to the current Australian system, except that they have government insurance for most care also:

Australia has a system whereby primary medical care (general practice doctors), much specialist health care (for example a cardiologist) and almost all important pharmaceuticals are covered by the government but with a copayment by patient. Most the copayments are large enough to be annoying (the service is not free) but do not cover anything like the costs.... There are also government run public hospitals... a public emergency room which rations via triage. [Turn up with a sprained ankle and you might wait twelve hours, turn up with chest pains and the waters part for you.]

After admission to the public hospital [either through a consulting specialist or through the emergency room] you will get a shared ward and no doctor of your own choice – but a very high standard of care by global standards. Non-urgent procedures are queue rationed....

You can be admitted to a private hospital in the same way as the public hospital. The admission is either from a consulting specialist or through the emergency room at the public hospital. At a private hospital you have your choice of doctor, often a private room, sometimes slightly better food and distinctly less pressure to leave until you are recuperated. Most importantly, private hospitals are not highly queue rationed...

To go to a private hospital you will either need to pay for it or have private health insurance...

The VA

And how does our government do as a direct healthcare provider? They kick ass. The VA system has the highest quality hospitals in the country. They strongly outperform the for-profit health industry. And they are way more cost-efficient:

Veterans enrolled in [the VHA] are, as a group, older, sicker, poorer, and more prone to mental illness, homelessness, and substance abuse than the population as a whole. Half of all VHA enrollees are over age 65. More than a third smoke. One in five veterans has diabetes, compared with one in 14 U.S. residents in general." Yet the VHA's spending per patient in 2004 was $540 less than the national average, and the average American is healthier and younger (the nation includes children; the VHA doesn't).

Political Reality

Leaving the arena of hypotheticals, the battle now is between having a strong public insurance option or not. We need to fight hard for the public option now. If government insurance is better than for-profit insurance, than the for-profit insurance industry should whither on the vine. Once people have government healthcare, they are not going to give it up. Then, once the government is paying for healthcare, we can push for a government provider as part of the deal. If the government can get more healthcare value for our tax dollars by providing directly rather than insuring, we can push for this to be at least a part of the system then, after we win the battle for a strong public insurance option.