Can insurance costs be limited to 10% of income?
April 30th, 2009 | by Brian Schwartz |Devon Herrick, PhD of the National Center of Policy Analysis responds to this sentiment: “Families should not be required to contribute more than 10 percent of their income toward their health coverage or out-of-pocket medical costs (5 percent for low-income families).”
Why is this unrealistic? Herrick writes:
What individuals do not pay in the marketplace must be covered by government. In other words, taxes would substitute for out-of-pocket premiums. Americans currently spend about 17 percent of gross domestic product (GDP), or nearly 20 percent of personal income, on medical care. Limiting out-of-pocket health care spending to 10 percent of income would not reduce costs. Instead it would disguise the true cost of medical care to consumers. Since a lavish policy would cost no more than a frugal one, families would have an incentive to over-insure and over-spend at taxpayers’ expense. Moreover, even if subsidies reduced the cost of coverage for a year or two, premiums would soon begin to grow again. Currently, health spending is rising at twice the rate of workers’ income, and would continue to do so. Subsidies would increase and, eventually, health care would be rationed to control costs.
For more, see Herrick’s Exposing the Myths of Universal Health Coverage.
tags: Overtreated
