Universal Catastrophic Coverage: Will it work?

Dr. James Veltmeyer

Special to the Village News

The recent decision by Texas federal judge Reed O’Connor striking down former President Barack Obama’s health care law, the Affordable Care Act offers Washington policymakers of both parties a unique opportunity to revisit the entire health care debate and craft a new plan that will actually improve people’s lives while controlling costs. A possible solution could lie several decades in the past.

In 1971, Harvard professor Martin Feldstein who later became President Ronald Reagan’s chief economic adviser proposed a possible way out of America’s seemingly intractable health care dilemma. It was called Universal Catastrophic Coverage, and its objective was to provide all people with health care coverage when they really need it, in life-threatening emergencies or major bankruptcy-inducing medical events, like cancer, heart disease and newborns with genetic defects.

Universal Catastrophic Coverage was not intended to cover the costs of routine or preventive care, like annual checkups, basic blood tests, sore throats or runny noses.

No less than the great University of Chicago and Nobel Prize-winning free market economist Milton Friedman endorsed the plan in 2004 in an article he wrote for the Hoover Institution.

Under one version of Universal Catastrophic Coverage, all individuals not eligible for Medicare or Medicaid would receive a uniform, high-deductible catastrophic health insurance policy from a private company. The level of the deductible would be based on family income. The higher one’s income, the higher the deductible.

Universal Catastrophic Coverage would protect people from financial ruin in case of a devastating health care event, while allowing individuals to purchase “supplemental” insurance, such as Medicare recipients do, to pay for routine medical expenses. They could also rely on their Health Savings Accounts or on a monthly membership in a direct primary care provider practice.

The estimated cost of such a universal catastrophic policy: about $2,000 a year or $160 per month. The vast majority of individuals would pay for this themselves, potentially using savings from the elimination of employer-paid coverage and higher wages. Those who cannot afford this amount would receive a voucher from the government to pay for it.

Membership in a directs primary care practice would permit individuals to contract with a direct primary care physician of their choice for a low monthly fee to access basic medical care, including 24/7 access to the doctor through unlimited office visits, email and text, lab tests, X-rays and even some medications. There would be no co-pays or deductibles.

The monthly fees might vary, but are normally in the range of $50 to $100 per month per patient. Obviously, older patients who need to see their doctor more often would be charged at the higher end of that scale and younger people at the lower end. Children are even less, sometimes as low as $10 or $20 per month.

Patients seeing their direct primary care provider on a regular basis as there is no per office visit charge but only the monthly fee are less likely to be hospitalized, have surgeries or be admitted to the emergency room. Doctors are free to spend additional time with their patients as they are not burdened with answering to insurance companies or filling out reams of paperwork.

While anyone can see that the direct primary care model is highly affordable, does the same hold true of Universal Catastrophic Coverage? The answer is yes, according to a study by Kip Hagopian and Dana Goldman published in National Affairs. Their analysis indicated that their version of Universal Catastrophic Coverage would cost about half as much as “Obamacare” is expected to cost over 10 years, which is $950 billion for Universal Catastrophic Coverage versus $1.8 trillion under “Obamacare”.

“Obamacare” exploded the cost of health insurance by imposing massive regulations and requirements on insurers to offer coverage most people did not want or need, such as single unmarried men who are required to buy maternity or gynecological coverage. Universal Catastrophic Coverage and direct primary care end that dissonance by creating a system where catastrophic health insurance works hand-in-hand with a direct-payer model for routine and preventive medical expenses without breaking the bank. In some ways, it is similar to the much-praised health care system in Switzerland.

Unfortunately, the Affordable Care Act virtually eliminated the option of catastrophic insurance for anyone over 30 years of age, which is akin to eliminating fire insurance for a home.

The price tag of Universal Catastrophic Coverage would be paid for by eliminating the massive $250 billion tax subsidy for mostly large employers who supply employer-paid insurance. Universal Catastrophic Coverage and direct-payer working in tandem could largely supplant work-based insurance and allow wages and salaries to increase instead, while freeing employees from the chains of staying in jobs they dislike just to receive the health benefits.

Employers would also see the costly burden of providing and administering health insurance lifted from their shoulders. The entire system of employer-paid health insurance, which traces back to Bismarck’s Germany in the 19th century, has served as a powerful disincentive for individuals to be personally responsible for their own medical needs – leading to over consumption of high-priced services, such as the ER and hospitals for care that could be performed less expensively in a direct primary care physician’s office, for example.

The beauty of Universal Catastrophic Coverage is that it returns insurance to its original purpose: protecting people in the case something cataclysmic happens. The beauty of the direct primary care model is that it provides for all other basic medical needs at a low, monthly fee which can be accessed by both Medicare and Medicaid patients as well. The massive costs that physicians now bear for administrative, billing, coding and the rest will be drastically diminished as the role of health insurance companies will be carefully confined and corralled, no longer reaching out to interfere with medical decisions or line their own pockets.

Imagine the cost of an entire health care plan for $200 to $300 a month. It’s time for health care by the people and for the people now.

Dr. James Veltmeyer is a prominent La Jolla physician voted “Top Doctor” in San Diego County in 2012, 2014, 2016 and 2017. Veltmeyer can be reached at [email protected].