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Jason Furman Wants a Different Form of Health Insurance

His hope is that this will finesse many of the problems with HSAs. I don't know. I'm not a health economist. I just play one on radio sometimes:

Washington Wire - : A New Prescription to Curb Health-Care Spending: One Democrat is suggesting some tough medicine: force people to pay more of the bill, and spending will go down. Of course, this is not a Democrat who is running for office. It's a Democrat who is working for a think tank. Still, the idea may be intriguing to those looking to slow rapid escalation of health spending.

Jason Furman, a one-time economic adviser to President Clinton and Sen. John Kerry, is proposing a radical solution that might have trouble finding backers outside, say, a seminar at the Brookings Institution, where it's being unveiled this morning. Furman, now director of the Hamilton Project, a think tank organized to come up with ideas for centrist Democrats, suggests that the U.S. could reduce health-care spending big time if people shared a larger slice of the cost of care. After all, when consumers know how much something costs, and when they have to pick up a hefty chunk of the bill, they are more careful about what sort of tests and procedures get ordered up on their behalf.

This is the philosophy behind Health Savings Accounts, the health plan conservatives love and liberals love to hate. With Health Savings Accounts, participants have a high deductible, meaning they pay a large share of their health costs but are covered in case something really really expensive happens, like an extended hospital stay.

The problem with Health Savings Accounts, Furman argues, is that they are risky for low- and moderate-income families. As an alternative, he proposes income-related cost sharing; a typical family would pay half of their health costs until the family's out-of-pocket costs reached 7.5% of the family's annual income. The more money you earn, the more you have to spend on your own health care before full coverage kicks in. Citing an analysis done by the RAND Health Insurance Experiment, Furman estimates this could reduce total health spending by 13% to 30% without hurting health outcomes. "Every family would have an affordable limit on their out-of-pocket payments," he writes in a paper.

Implementing this idea would be a challenge....

In an interview, he added that while no one is rushing to propose this idea today, it could gain currency as part of a larger universal coverage debate as policy makers wrestle with how to control costs. "This type of idea can come in handy," he said. "It could be part of a political compromise. But I recognize it's not something we're going to do tomorrow."