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Details of Hybrid Solution

(1) Government provided preventive care (vaccinations, pap smears, blood pressure tests, colonoscopy, etc.) This would save lives and costs by detecting problems earlier, when they can be more effectively treated. It would address the problem of the poor and those paying for it themselves (those with HSAs) waiting until the problem is severe, and thus more costly to treat. It would take people out of the emergency room to where they can be more efficiently treated. By government payment for preventive care (vaccinations, physicals, screening tests for cancer, etc.), we avoid patients scrimping on this and incurring larger treatment costs later.

(2) The patient pays directly for everyday care, up to a high deductible adjusted by income. This is basically the HSA plans used today, except for varying the deductible. The poor, and those with chronic, non-lifestyle caused conditions, would get government assistance. We would address both costs and patient control by putting the patient in charge of health care decisions. The patient knows best what is important, and the patient is the one that needs incentives since many health care problems are caused by lifestyle.

A system that puts the patient in control would provide the best service for the best cost. People are used to trading off costs, such as the cost of an HMO vs. PPO, or how much to pay for LASIC eye surgery vs. surgeon quality. Patients can decide how much of a deductible they want to pay for. Patients can decide if they want to pay for insurance to cover expensive end-of-life measures. The combination of patient responsibility and competition has led to Lasik eye surgery costs (not covered by insurance) dropping dramatically. See Consumer Driven Health Care.

(3) Catastrophic health problems insurance with a high deductible can be purchased by individuals, employers and the government. Everyone would be required to have insurance (several states have started requiring this, such as Massachusetts and California - but it would make more sense and be cheaper if limited to catastrophic health problems). Health Insurance risk pools will subsidize health insurance for those with pre-existing conditions. Alternately, insurance companies are required to cover everyone using community rating, only varying based on sex and age and healthy habits (not smoking, exercising, etc.), and not varying based on pre-existing conditions and hereditary problems. Individuals could choose the amount of the deductible, and the things that are covered, in order to save costs.

Shift tax subsidy. Ideally, the tax subsidy, which causes over insurance, should be removed. This may not be practical. However, it could be phased out for all plans except HSA plans, to drive people into HSA plans. In fact, more generous tax benefits, with larger covered account values, could be created for such plans. For example, older people (with higher health expenses) should have a tax credit for a higher amount each year in the HSA account. This subsidy cost would be balanced by reducing overall medical costs by putting the patients in charge.