How to improve Medicare

I’m a free enterprise sort of a bloke but I do realise that  political  reality means some area will remain under the control of the state. However that does not mean we can’t have  choice and competition.  The Howard’s government privatizing of  the old CES through the Job Network is a fine example . Now John Humphreys has come out with an article proposing Medicare be opened up to competition:

What does work is competition. Besides a handful of pro-bureaucracy ideologues, most people understand why competition leads to a better outcome. The threat of losing customers drives providers to offer better quality care and lower prices, while the lure of making profits drives providers to do things in the most efficient way possible and quickly adapt to new innovations. Without competition there is little incentive for high quality, low cost, and efficient service.

The difficulty with reforming health care is that many people fear a more competitive system may not adequately protect the poor. But there is a solution that ensures everybody will have adequate health care while still allowing the benefits of competition.

First, everybody would be required to take out a minimum amount of health cover. This should at least cover catastrophic events, and perhaps other benefits currently provided by the government such as subsidised visits to the GP, subsidised hospital visits, and subsidised pharmaceuticals.

Health insurance can be provided by a range of suppliers, including a government supplier (a “new Medicare”) in an open and competitive market. People will still be able to purchase the same government cover they already have now or switch to a private competitor in search of lower premiums, better quality health care, or both. Regulations can be put in place to ensure that health firms do not discriminate against high-risk customers.

On the basis of current government spending, the “new Medicare” would initially cost about $3,000 per year to provide all the benefits currently available. Competition would result in a range of pricing options, allowing people to match their health cover to their health needs so long as they at least have the mandated minimum cover. Or they could just stick with “the devil they know”.

But how will people be able to pay for this?

The answer is that the government can provide each person with $3,000 per year. People who pay tax can have their tax lowered by $3,000 per year and use that money to purchase health insurance. Unemployed or low-income earners can receive $3,000 as a transfer payment to purchase health insurance.

For people who don’t want the hassle and are happy with their current arrangements, they can agree to have their $3,000 go directly to the government “new Medicare”. So the worst case scenario is that people will be in the exact same position as they are now…..
The main problem I see is that the $3000 is just an average, older people are more costly to ensure while younger people less so. So perhaps the tax cut/credit would need to linked to the individuals age group.
Anyway I like it, free market when ever possible, pro market when not, thats what I say.

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