The appropriate role of coverage, payment, and incentives
• Employment-based coverage is economically inefficient, but deeply embedded in both the tax and compensation system.
• Insurance coverage is necessary for inpatient care (infrequent and very expensive) and chronic illness care (almost impossible to get once one has the problem)
• The rest of medical care (mostly minor acute problems) doesn’t really need insurance, but subsidies may be necessary for some people
• Universal coverage for inpatient and chronic illness care can be achieved either with a fully tax-supported system or by building on existing employer contributions with an individual mandate
• Income-based subsidies are needed to assure affordability of mandated coverage
• Specifying what particular services, devices, or drugs will be covered leads to lobbying by special interest groups; it is better to cover everything been shown to be safe and give clinicians incentive to make wise choices for each patient
• The incentive effects of how payments are made are more important than the size of each payment. Without rationing access, simply constraining fees is ineffective at controlling overall expenditures