Universal Health Care Voucher System Could Be a Solution to US Health Care Financing Dilemma

ABSTRACT: An article in the New England Journal of Medicine (Emanuel EJ, Fuchs VR: 352:1255-1260, 2005) proposes a dramatic alternative to our current health care financing system—universal health care vouchers offering basic medical coverage for all Americans. Cancer Care & Economics (CC&E) spoke with one of the authors, Ezekiel J. Emanuel, MD, PhD, about the financial and political realities of this proposed new system. Dr. Emanuel is chair of the Department of Clinical Bioethics at the Warren G. Magnuson Clinical Center, National Institutes of Health. He is also a breast oncologist.

CC&E: How does your proposed universal health care voucher (UHV) system work?

DR. EMANUEL: The UHV system is based on 10 fundamental features (see Table). Every American under the age of 65, regardless of medical history or ability to pay, would be given a voucher to purchase basic health insurance (including a drug benefit) from a qualified private health insurer or plan of their choosing. Individuals who wanted additional coverage beyond the basic package could purchase this out of pocket.

With vouchers, health care coverage would no longer be tied to employment. There would be no means testing for the vouchers, which would eliminate a costly administrative burden of the current system. The means-tested Medicaid system would be eliminated (except for long-term and nursing home care), and Medicare would be phased out. As people turned 65, they would simply continue to receive their vouchers.

CC&E: What is the estimated cost of implementing a UHV system?

DR. EMANUEL: The simplest way to estimate the cost is by multiplying the cost of a typical employer-provider insurance plan by the number of Americans who would be covered. The cost of extending equal coverage to all 250 million Americans under age 65 would be about $713 billion. I'm leaving Medicare out of the calculation, since it would be gradually phased out and wouldn't be affected at the onset. If we adjust the number up 7% to account for the fact that the uninsured tend to have more expensive medical needs than the average worker, it brings the total cost to $763 billion. That sounds like a huge amount until you balance it against the $800 billion employers and the government spend on a health insurance system that still leaves 45 million Americans without coverage. The universal health care voucher system offers everyone in the country basic insurance for about the same amount we're currently paying.

CC&E: How would the health care voucher system be funded?

DR. EMANUEL: We would fund the vouchers through an ear-marked value-added tax. Ear-marking, which is a mandatory linkage between a specific tax and a specific public expenditure, serves as an adjustable cost-control mechanism. Further, a value-added tax is more efficient to administrate and offers fewer opportunities for evasion.

CC&E: Our multi-tiered payer system generates enormous administrative costs. Would your system alleviate some of this administrative burden?

DR. EMANUEL: Absolutely. One of the main problems with our current system is that there are roughly 1,300 insurers, not including Medicaid and Medicare. That creates an administrative monster with no justifying rationale. We estimate our system would need about 50 to 60 insurers nationwide, with any individual region having only about seven or eight competing insurance plans. And that streamlining action would be hugely advantageous in terms of reducing administrative costs.

CC&E: What kind of administrative oversight would you implement?

DR. EMANUEL: Our system would be administered by a newly developed board called the Federal Health Board (FHB), which would contract with health plans, define and update the basic benefits package, reimburse health plans, collect quality outcomes data, and disseminate information about health care options. To ensure accountability, the FHB would report regularly to Congress. Also, by accomplishing many of the activities done at the state level, the FHB would actually reduce the overall size of government bureaucracy.

CC&E: How would the universal health care voucher system pay for expensive new drugs and technologies?

DR. EMANUEL: To a large extent, competitive forces within the marketplace will sort out the cost issue. Private health plans would have to decide how to tailor their coverage to ensure that their customers got the most efficiently delivered health care. New medicines or technologies quite often offer marginal benefits but add wildly inflated costs to health plans. Our voucher system calls for a Technology and Outcomes Assessment Institute that would focus on assessing the effectiveness and value of different interventions and treatment strategies. Funding for the institute would come from a set amount of the financing tax, such as 0.5% of the total.

We believe that American society has an obligation to provide its people with a basic benefits package. However, our society does not have an obligation to provide people with every medical option they want simply because it exists. If we wanted to ensure that everyone in the country owned a car, it wouldn't be a Mercedes-Benz, and, similarly, that distinction holds true with health care. Moreover, it is a very ethically justifiable distinction, one that needs to be made. Quantifying the amount of universal basic coverage is going to be determined by how much people are willing to pay into the value-added tax vs what services they can purchase for that tax?

CC&E: How would the system affect the way in which oncologists are reimbursed for services and drugs?

DR. EMANUEL: One virtue for oncologists is that with the voucher system, there would be fewer payers, so they would not be billing as many different insurance companies. In any one region, they would probably contract with three to six insurance companies, which would greatly streamline their business operations. Overall, with the voucher system, I think there would be more critical evaluation and adherence to guidelines to ensure better dollar value. The end result would be good for our patients.

CC&E: How do you think physicians will receive the voucher idea?

DR. EMANUEL: Most oncologists know we need a change, but they realize it won't happen until the financial situation reaches proportions that the government will no longer be able to ignore. Universal vouchers would make the financing of health care more efficient and simple; it would also provide a template for improving the delivery of care. All doctors want that. As support for major reform grows, we think the efficiency and equity offered by the UHV system should make it the system of choice.