Rethinking the Notion of Insurance

Ross Douthat has some good points in his NYT column today on health care reform. I tend to agree with him that the current congressional bills do not address the issue of cost nearly enough.

But any lawmakers voting “yes” should have no illusions about what they’re
voting for. This version of reform probably won’t make health care more
affordable for most Americans, or place the system on firmer footing for the
long run. Despite all the talk about a once-in-a-generation opportunity, our
political class will have barely finished congratulating itself before rising
costs will force everyone back to the negotiating table to consider more radical
approaches.

We know what one such approach would look like. It’s the eventual endgame
that liberals pushing a “public option” are aiming for: a federal takeover of
the health-insurance sector, paid for by rising tax rates, in which the
government guarantees universal access while using its monopoly power to hold
down costs.

But there’s another path, equally radical, that’s more in keeping with the
traditional American approach to government, taxation and free enterprise. This
approach would give up on the costly goal of insuring everyone for everything,
forever. Instead, it would seek to insure Americans only against costs that
exceed a certain percentage of their income, while expecting them to pay for
everyday medical expenditures out of their own pockets.

Such a system would provide universal catastrophic health insurance, in
other words, while creating a free market for non-catastrophic care. In the
process, it would marry a central conservative insight — that we’ll never
control spending so long as Americans are insulated from the true price of their
medical care — to the admirable liberal premise that nobody should go bankrupt
paying for life-saving treatment.