Health Care Fix Summary

Book Review for
The Health Care Fix
Shichao Tang
Econ 522

Description of the health care crisis
The United States government is facing enormous fiscal burden as the baby boomers are heading to retirement. This is because the baby boomers represent a large fraction of the US population, and their retirement means continuously rising benefit payments. In 25 years, the benefit payments will rise to over $30,000 in current dollars. Among the benefit payments, Medicare and Medicaid are the major parts and represent a half of the total benefit payments and will reach 70 percent of the benefit payments by 2050. However, such increase in Medicare and Medicaid benefit payments is not sustainable, as the costs on these two programs

However, the annual real growth rate of per capital GDP is only 2.01%, leaving a biggest gap among the 10 OECD countries with 2.29%. Meanwhile, the share of population age 65 and over 65 increases over time. It is projected that the share of elderly will increase from 12.4% in 2002 to 21.6% in 2070. Though the United States has relatively low elderly share compared to the other OECD countries, the fastest benefits growth rate makes the United States spend more than any other OECD countries with 18.8% of GDP spent government health care program. The increasing benefits level in Medicaid and Medicare and the aging trend will lead the United States government to a long-term fiscal

The biggest market failure in the health insurance market is the adverse selection. Though many measure have been taken to combat the adverse selection such as: risk adjustment, the fragmented markets in the United States make it hard to be solved. A universal insurance plan can effectively solve this problem by including everyone in the insurance system.
My critique to this solution is that it is really difficult to evaluate the value of the voucher for each person. In order to evaluate the value of the voucher for an individual, the government has to know the detailed health information about this person including diagnosis information, risk factors, and other demographic factors, which requires the government to establish a very complex database system. The administrative costs will be very huge and may exceed the claimed cost saving by unify fragmented public insurance program into just one. The privacy will be a big concern even though the author thinks it is not a big problem, as it is not easy to maintain such a massive system without leaking private information. In addition, though it sounds a good idea to constrain the health expenditure by limit the expenditure on voucher based on the income growth, it is not practical to implement it since the economic growth is not stable and there must be ups and down, we cannot just