Mandatory Health Reform Proposals

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Mandatory Health Reform Proposals (last updated 1.19.17)

Overview

All of these approaches retain a role for private health insurance, but differ in their degree of government regulation and involvement in the health insurance system.  While all are designed to achieve universal health coverage, they are listed in approximate order of the degree of government involvement in perfecting health insurance or health services markets.

Legislative Proposals

Other Proposals

Catastrophic Health Insurance

Major Risk Insurance

  •  History. First proposed by Martin Feldstein in spring 1971. Subsequently updated by Feldstein and Jonathan Gruber in September 1994.
  • Summary. MRI would provide a standardized major risk (catastrophic) health insurance plan to everyone under the age of 65; this plan would offer comprehensive benefits, but would include 50% cost-sharing for individuals or families up to a maximum annual out-of-pocket limit of 10 percent of income. See further details here.

Progressive Cost-Sharing

  • History. This was first proposed on April 1, 2007 by Jason Furman (currently chairman of the Council of Economic Advisors) in a Brookings Institution discussion paper.
  • Summary. This proposal would require typical families to pay half of their health costs until they reached 7.5 percent of their income; low-income families would not have any cost sharing.
  • Analysis.
    • Jason Furman. The Promise of Progressive Cost Consciousness in Health-care Reform. Brookings Institution Discussion Paper, April 2007. The analysis shows that this template could reduce total health spending by 13 to 30 percent, reducing premiums by 22 to 34 percent without hurting health outcomes. Moreover, low- and moderate-income families would face less cost sharing than they do under typical plans today while the premium savings would be more than enough to compensate middle- and upper-income families for the modest increase in their exposure to small risks.

Responsible National Health Insurance

Heritage Foundation Proposal

  • History. First proposed in 1989 by Stuart Butler, Peter Ferrara, Edward Haislmaier and Terree Wasley in their book A National Health System for America published by Heritage Foundation. The proposal was substantially revised in November 1993. Stuart Butler has subsequently explained why he no longer supports an individual mandate.
  • Summary. In order to guarantee universal health care coverage, everyone would have to obtain insurance, either through a government program or from a private insurer. The states would be charged with enforcing the mandate and would have to arrange coverage for people who did not do so themselves. The minimum insurance would cover “catastrophic” health care expenses-that is, those exceeding $1,000 a year for an individual or $2,000 a year for a family. (Those amounts would be adjusted for inflation after 1997.) To help make the coverage affordable for people who did not qualify for Medicare or other government programs, the proposal would establish a new, refundable tax credit that would depend on a family’s health expenses as a percentage of its income. The credit would equal 25 percent of that portion of health expenses that were less than 10 percent of adjusted gross income (AGI), plus 50 percent of that portion of expenses between 10 percent
    and 20 percent of AGI, plus 75 percent of that portion of expenses that exceeded 20 percent of AGI. Fuller summary in Appendix A.
  • Analysis.

Best of Both Worlds: Uniting Universal Coverage and Personal Choice in Health Care

  • History. This consensus proposal developed by 8 health economists–Jay Bhattacharya (Stanford), Amitabh Chandra (Harvard), Michael Chernew (Harvard), Dana Goldman (USC), Anupam Jena (Harvard), Darius Lakdawalla (USC), Anup Malani (Chicago) and Tomas Philipson (Chicago)–was released by American Enterprise Institute on 8.6.13.
  • Summary. Key aspects of the proposal include a “Basic Plan” available to all individuals at no cost, eliminating the tax exemption for employer sponsored insurance premiums, eliminating most of the Medicaid program, and instituting a safety net for the uninsured, among others. A central feature of the proposal is income-related deductibles that reach 100% of annual income for families with incomes in excess of 10 times the poverty level.
  • Analysis.
    • AEI. Best of Both Worlds: A Look At the Numbers (August 2013). This analysis by the proposal’s authors concludes it will be $61.5 billion less expensive than the ACA over its first 10 years and in contrast to ACA (designed to cover at most half the uninsured) would provide universal coverage. All households with low health expenditures and all sicker households with incomes lower than 500 percent of the FPL would come out ahead versus the ACA. Only the wealthy sick, who can afford to cover more of their care, would be asked to pay more.
    • Center for Health and Economy. CHE scored this proposal on 2.19.15. The proposal is projected to lead to 19 million more insured persons by 2025 relative to current law. Compared to current law, the insurance coverage provisions of the plan will increase the federal deficit by $940 billion between 2016 and 2025.
  • Commentary.

Universal Health Care Vouchers

Purple Health Plan

  • History. This was originally proposed in September 2007 by Lawrence Kotlikoff in his book The Healthcare Fix (MIT Press). As part of Prof. Kotlikoff’s campaign for president in 2012, it was renamed the Purple Plan, placed online and subsequently received the endorsement of 884 signers, including 5 Nobel laureates.
  • Summary. All Americans would receive health-risk-adjusted vouchers to purchase private health insurance; carriers cannot deny coverage but premiums can be experience-rated so that sicker individuals pay more.

Universal Healthcare Voucher System

Use of Mandates in Social Policy Legislation

The use of mandates to achieve social policy objectives is not uncommon. A 2013 CBO review concluded:

  • Of the nearly 9,000 legislative proposals for which CBO has prepared mandate statements since UMRA (Unfunded Mandates Reform Act) was enacted, 16 percent contained private-sector mandates.
  • Among the proposals with mandates, 25 percent were estimated to result in total annual costs for private-sector mandates that would exceed the UMRA threshold (originally $100 million; $150 million in 2013 with inflation adjustment), and 59 percent were estimated to impose mandate costs below the threshold. The other 16 percent included mandates whose total costs could not be determined, generally because the scope of a particular mandate would not be known until specific regulations were issued.
  • Between 2001 and 2011, lawmakers enacted roughly 2,300 public laws; 12 percent of them contain at least one mandate on the private sector. Of the laws with mandates, 26 percent include at least one mandate whose annual costs were estimated to exceed the UMRA threshold sometime in the first five years, 57 percent impose mandates whose total annual costs were below the threshold, and 17 percent contain mandates whose costs could not be estimated.
  • Put another way, about 3 percent of all public laws enacted during the 2001–2011 period contain at least one private-sector mandate whose annual costs were estimated to exceed the UMRA threshold sometime in the first five years, 7 percent include mandates with costs below the threshold, and 2 percent impose mandates whose costs could not be determined.

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