Editor's blog 6th November 2008: extend your way out of recession via US healthcare insurance coverage?

Good morning. So how big do you think mid-day's interest rate cut will be? The full 1%?

This morning’s Guardian brings us an interesting suggestion that President-elect Obama should give tax credits to employers who provide or extend health insurance coverage for their workers at around $3,000 per worker per year.

The author, Dean Baker, Dean Baker is co-director of the Washington think-tank the Centre for Economic and Policy Research (www.cepr.net), whose website’s details that they do not “receive any funding from corporations, unions, or foreign governments”.

The CEPR assess themselves as “progressive”, and self-diagnosed as the US’s most cost-effective think-tank in an in-house survey. Self-assessment of cost-effectiveness is an interesting idea, if difficult to trust.

Mr Baker proposes that “if 20 million workers get coverage through this tax credit, that would cost $60bn. If another 60 million get an average of $1,000 in additional healthcare benefits, this would cost another $60bn. If we also throw in funding to reduce the healthcare burden for Medicare beneficiaries, for example by $1,000 each, this will cost roughly $40bn.”

Baker’s recipe
This sounds like a recipe for cost-inflation, but Baker also suggests that an option to allow employers and individuals greaster access to the lower-cost Medicare scheme, at about $1,000 per year for a Medicare-type plan. This is particularly topical in the light of recent UK debates about a two-tier health system – but could also extend coverage.

Baker suggests the greater use of Medicare “is important, because a well-working public sector plan (‘plan’ is American for health insurance scheme) will be important to controlling costs over the long-term. After 2010, the tax credits would be cut back, with the goal being a system of subsidies that pay the full cost for low-income people, but phase out at higher income levels”.

He also emphsises the role of “the Medicare-type plan and other tools to squeeze waste out of the system, since controlling healthcare costs is essential to sustaining a healthy economy over the long-term”.

Policy tourism is a dangerous business, but this idea sounds as if there is some merit in both extending coverage and encouraging value-for-money. Baker observes that the US is uniquely challenged by the high level of its cost-inflation and by the relatively poor health outcomes as correlated to spend.