Public Policy

Voucher Debate

There was an interesting post on the Economist’s Free Exchange blog regarding the Health Insurance voucher debate (A veto for…).   The  post contains a critique of a healthcare voucher plan put forth by Ezekiel Emmanuel and Victor Fuchs in The New Republic.  The pros and cons of the plan are certainly interesting but the blog’s author makes an even more universal point when commenting on government pricing.  The author specifically examines the case where private health insurance plans would be paid (via a voucher) for providing a basic level of health insurance to private individuals.  The value of the voucher, however, would depend on the health level of the individual patient.  Can the government accurately price this underlying health risk?  The author claims that this is doubtful and one of two scenarios will result:

  1. “The government will generally underprice, in which case insurance companies will compete to make themselves as unattractive as possible to sick people through their mix of benefits and customer service.  (If there is no mix, then why have even this ersatz competition?)
  2. The government will generally overprice, in which case insurance companies will compete to make themselves as attractive as possible to sick people.  I assume that this will be done through encouragements to overdiagnose and overtreat, which will cause costs to skyrocket.”

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