Thursday, February 22, 2018
How Universal Catastrophic Care Could Ease Class Tensions
I have written frequently about universal catastrophic coverage (UCC) as a possible healthcare reform compromise. Under such a program, the government would provide health insurance with a deductible scaled to household income.    The UCC policy would protect people against financial ruin caused by healthcare costs. At the same time, they would be responsible for financing their own routine care through by cash, health savings accounts, or private supplemental insurance.
My early posts provide hypothetical examples, but how would real people fare? An article by Abby Goodnough in this week’s New York Times provides two real world examples. We can see how they would fare under UCC compared to their present situation.
One is the middle-class Hurd family, who struggle to afford coverage on the ACA exchange. Both Gwen and Matt Hurd workwork but neither gets healthcare benefits. They earn about $82,000, more than four times the poverty level for their family of three, too much for ACA subsidies. Their healthcare premium is $928 a month with a $6,000 deductible per person, plus copays. The NYT article does not give full details, but based on averages, their maximum out-of-pocket healthcare costs would be about $25,800, or 32 percent of their total income.
Compare this with two possible UCC formulas. Under Formula 1, which might set the deductible at 10 percent of the amount by which income exceeds the Medicare threshold (138 percent of the federal poverty level), with a family maximum of 20 percent, the Hurds would pay at most $10,000 even if two or more of them were seriously ill in one year, or about 12 percent of their total income. Formula 2, less generous, might set the maximum at 15 percent of the amount by which income exceeds the federal poverty level. The Hurds would pay a maximum of about $17,500, ir about 21 percent of their total income. In either case, they would pay less under UCC than on the ACA exchange.
The other NYT example is Emilia DiCola, a single woman working part-time while trying to establish a career in opera. She now earns $15,000 from occasional singing gigs plus part-time driving for Uber. Her earnings are just low enough to qualify for Medicaid. Even if her state introduces work requirements for Medicaid, she will qualify because of her part-time jobs.
Under UCC she would still get for full coverage, given her $15,000 income, but she would face substantially different incentives to increase her earnings. At present, she must carefully limit her hours of work to stay under the Medicare threshold. If, say, she worked enough hours to double her income, she would need to purchase insurance on the ACA exchanges. Even with subsidies, her premiums and out of pocket costs would rise substantially compared with Medicare.
Under UCC, her out-of-pocket costs would remain lower than under the ACA even if she doubled her earnings. She would have a far greater incentive to seek additional work.
In her NYT article, Goodnough notes that the current system is a source of social tension between the working middle class and the poor. Middle class families like the Hurds are sometimes resentful of those like DiCola, who from their perspective, do not enough effort to support themselves but get everything paid for by the government. UCC could ease the tension, both by leveling the playing field in terms of heathcare costs and by providing the poor with greater work incentives.
Based on a shorter version posted earlier on NiskanenCenter.org.