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Taking a scalpel to the healthcare system

Former Tennessee Gov. Philip Bredesen proposes a Social Security-like trust fund to collect payroll taxes and issue medical vouchers to every American. That would do away with private health insurers — making it something worth considering.

March 03, 2011|David Lazarus
  • Former Tennessee Gov. Philip Bredesen is trying to deconstruct and rebuild a broken system rather than merely papering over its shortcomings.
Former Tennessee Gov. Philip Bredesen is trying to deconstruct and rebuild… (John Russell, Associated…)

Social Security now doles out more money in benefit checks than it takes in from taxes, and its trust fund is projected to run out of cash in about 26 years.

So this is a good model for healthcare reform?

Yes, indeed, says Philip Bredesen, a former health insurance executive who just completed two terms as Tennessee's governor.

In his book, "Fresh Medicine," he argues that a key element of meaningful healthcare reform is creation of a Social Security-like trust fund that would raise money from payroll taxes and issue vouchers to all Americans.

Those vouchers would be used as cash to buy services directly from healthcare providers. Private insurers as intermediaries would largely disappear.

Pretty radical stuff. Not to mention that any proposal to create a healthcare system even vaguely resembling government-run insurance probably would need an adrenalin shot to get through Congress.

But, as Bredesen points out in his book, this approach would cover everyone (which is no small feat) and help rein in costs by making doctors and patients more aware — and more in control — of treatment costs.

"These are big changes," he told me over coffee during a recent visit to Los Angeles. "But when you look at the numbers, we've got to make some big changes. We can't keep going the way we're going."

Bredesen is right, and I respect that he's attempting to deconstruct and rebuild a broken system rather than merely papering over its shortcomings. Some of the things he's proposing have genuine merit.

Others might look attractive at first glance but don't necessarily hold up to scrutiny, at least not until we learn more details of how things would work in the real world. More on that in a moment.

One thing everyone can agree on is the scope of the problem. About 50 million people in the United States now lack health coverage. And for those who are covered, premiums and deductibles have been rising steadily in tandem with soaring medical expenses.

The United States spends more than twice as much per person for healthcare — $7,538 in 2008 — as such countries as Germany, France, Denmark and Britain. Yet our infant mortality rate is higher and our life spans are shorter, indicating that we're not getting as much bang for our medical buck.

Bredesen gives points to President Obama for at least tackling healthcare reform. But he doesn't mask his disappointment with the president for essentially placing a Band-Aid on a failed system rather than seeking more fundamental change.

"We need to take a fresh look at things," he said. "That's why I decided to put some alternatives on the table."

Props for that. But although Bredesen has created an impressive and ambitious recipe for healthcare reform, it's got some potentially fatal flaws.

Take the trust fund. As Social Security's future shortfall demonstrates, a trust fund can be depleted when more cash is going out than coming in. It's possible, even likely, that a healthcare trust fund would be depleted more quickly than planned.

Bredesen is proposing a 20% payroll tax for every worker in the country — on top of other taxes. Yes, that sounds scary. Bredesen said that, as with Social Security, the tax could be shared with employers.

But he also estimates that by doing away with insurance premiums, deductibles and co-pays, this tax would lead to lower annual costs for many middle-class families.

If the trust fund starts running dry, of course, a bigger bite out of people's paychecks would be required. Or smaller vouchers. Either way, you would be looking at a benefit cut.

Another potential problem: Bredesen's vouchers would be adjusted to accommodate different health circumstances. Someone with diabetes, say, would receive a larger voucher than someone without any illness. An older person would receive a larger voucher than a younger person.

Bredesen believes this would counter cherry picking by insurers and healthcare providers who seek out people who are younger and healthier (read: more profitable) and leave sicker people to costlier alternatives that reduce profit margins.

Maybe he's right. But I suspect we would face a new era of McMedicine, with patients shuttling in and out of doctors' offices as fast as they can be moved.

One more potential flaw: What happens if — God forbid — you get cancer and have to exceed the value of your voucher? It's unclear how Bredesen's system would deal with that, though presumably there would be some sort of safety net to provide additional funds in such cases.

Yet Bredesen is also proposing some good ideas that could be incorporated into our current system. For example, he wants all healthcare providers to be audited for quality by an independent body and to have a rating that would allow apples-to-apples comparisons by consumers.

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