Blog Home

«
»

REFORM: Hamilton Project Enters The Health Policy Debate



April 10th, 2007

The Hamilton Project at the Brookings Institution was founded to advance opportunity and prosperity through broad-based growth, economic security, and effective government. Perhaps no issue is more important in all of these regards than health care.

Today we are releasing three specific proposals to promote affordability and effectiveness in health care. This summer we’ll release several alternative ways to achieve universal coverage. And we’ll continue to make health policy an important part of our research agenda thereafter.

The challenge of affordability is large enough that it defies any single solution. But one important part of a broader solution, I argue in a new paper, would be to introduce more cost-consciousness in a progressive manner. Health savings accounts (HSAs) have a lot of flaws, including unnecessary tax breaks on top of an already problematic tax system. Moreover, the one-size-fits-all deductible in these plans is too large for many low- and moderate-income families and may be too small to affect the behavior of high-income families.

A better alternative, I argue, would be to relate cost sharing to income as proposed by people as diverse as Martin Feldstein and Thomas Rice and validated by the extensive RAND health insurance experiment. Specifically, I propose that households pay 50 percent of their expenses up to 7.5 percent of income, with no cost sharing for low-income households and a $15,000 limit for high-income households. According to my simulations, such an approach could lower premiums by 22 to 34 percent. Even after higher average out-of-pocket expenses, total health spending would fall by 13 to 30 percent. Carving out exceptions for high-value prevention and prescription drugs would only offset a small portion of these savings while potentially improving health outcomes.

Another Hamilton Project discussion paper, by Jeanne Lambrew of George Washington University and the Center for American Progress, is a more focused and ambitious attempt to expand preventive care. Lambrew argues that a variety of behavioral and institutional factors combine to frustrate the utilization of highly effective preventive care. She proposes an ambitious “Wellness Trust” to overcome these obstacles, develop and promulgate more highly effective preventive protocols, and ultimately separate out preventive care from the rest of health insurance, funding it through a dedicated trust fund. The result, she argues, would be to remove cost and other obstacles to anyone getting preventive care.

Finally, we were lucky enough to entice Harvard University’s Richard Frank and Joe Newhouse to turn their prodigious abilities to the equally prodigious task of fixing Medicare Part D’s drug benefit. While the most visible problems have passed, serious shortcomings remain that make the plan needlessly complex, unnecessarily expensive, and ineffective at providing year-round insurance due to features like the notorious donut hole. Frank and Newhouse propose a comprehensive reform that would retain private insurance and choice while expanding competition, restraining costs, and closing the donut hole.

But, as readers of this blog all know, health is a big topic. The Hamilton Project is excited to be joining the discussion. Stay tuned for more . . .

Email This Post Email This Post Print This Post Print This Post

4 Trackbacks for “REFORM: Hamilton Project Enters The Health Policy Debate”

  1. solutionhealth.org » Archives »
    April 12th, 2007 at 3:20 am
  2. Health Care BS » Blog Archive » Health Saving Accounts: A Progressive Alternative?
    April 10th, 2007 at 9:54 pm
  3. Health Insurance » Health Insurance April 10, 2007 12:25 pm
    April 10th, 2007 at 1:10 pm
  4. University Update
    April 10th, 2007 at 12:16 pm

No Responses to “REFORM: Hamilton Project Enters The Health Policy Debate”

Leave a Reply

Comment moderation is in use. Please do not submit your comment twice -- it will appear shortly.

Authors: Click here to submit a post.