A conservative alternative to the healthcare reform bill

I like Megan’s plan, if only because it mirrors to some degree the plan Brad DeLong talked about a while back, and because it’s a whole lot simpler and more likely to contain costs than the one being proposed now.  Here’s the gist:

Raise the Medicare tax by half a percentage point, and eliminate the tax-deductibiity of health insurance benefits for people making more than $150K a year in household income, $100K for singles.  Then make the federal government the insurer of last resort.  Any medical expenses more than 15% or 20% of household income, get picked up by Uncle Sam.

It would also help to bring about some real market reforms to the insurance industry itself.  Why not set up national exchanges?  Insurers in these exchanges would have to comply with various transparency rules and regulations, but individuals and small businesses would have a much easier time choosing affordable plans on a competitive exchange.  The exchanges were the best part of the Democrat’s bill, and they could still be implemented much more conservatively and work to the advantage of consumers and insurers alike.  The increased competition would cut into the monopolistic nature of insurers, and the fact that Uncle Sam was picking up the tab for “last resort” cases, insurers wouldn’t be overly burdened by whatever rules they had to stick to in order to compete on the exchanges.

The problem with only taking it as far as Megan suggests is that right now we have a real lack of competition and no real big insurance pools to draw from if you’re an individual or a small business.  In other words, the market place for insurance is broken and it needs to be fixed.

I’d also like to point out that states can still set up their own healthcare systems even if reform fails.  Massachusetts has a pretty progressive system, as does Hawaii.  Arizona has its very own public option.  California has medical marijuana.  The point is, federalism can still work – but it works better if markets are allowed to flourish alongside it, something that certainly cannot be said for the current insurance market.