John C. Goodman

Suppose I choose to be uninsured and I develop an expensive-to-treat chronic illness. I will be expected to pay my medical bills. If I can't, suppose the provider institutions go to court and seize my assets. If a bankruptcy judge determines that I was being irresponsible by not insuring, the judge may garnish future wages as part of the bankruptcy resolution. Once my assets and take-home pay are low enough, I may qualify for Medicaid or free care.

Is this the type of social outcome we are willing to tolerate? Not if you listen to the Physicians for a National Health Program. They become almost apoplectic at the thought of people declaring bankruptcy because of medical bills. Let's note parenthetically that the PNHP greatly exaggerates the problem, ignores a large body of scholarly research, ignores the fact that "medical bankruptcies" are usually the result of loss of work income, not the medical bills themselves, ignores the fact that medical bills bankrupt Canadians at similar rates as U.S. citizens, and ignores the fact that there has been no significant reduction in bankruptcies as a result of health reform in Massachusetts. Perhaps they are still right about the principle, however. Maybe our national psyche can't deal with these outcomes.

If so there is a straightforward solution. Let people insure for the sole purpose of protecting their assets. Suppose a family has assets worth $10,000 and they buy an insurance plan that pays the first $10,000 of medical expenses. Then we should let them exclude the $10,000 of assets in determining whether they are eligible for Medicaid, if they need to apply for help in paying additional medical expenses. We can apply the same principle to income. Suppose the family earns $30,000. Then by buying insurance covering an additional $30,000 of expenses they would be entitled to have their earnings disregarded, should they need to apply for Medicaid. (These numbers could be adjusted for reasonable deductibles, especially if backed by a Health Saving Account.)

The decision to insure in this way could be voluntary. Or if you think that medical bankruptcies are socially intolerable, the purchase could be mandatory. In the latter case, however, the mandate would cost a fraction of the ObamaCare mandate.

John C. Goodman

John C. Goodman is President of the Goodman Institute and Senior Fellow at The Independent Institute. His books include the widely acclaimed A Better Choice: Healthcare Solutions for America and the award-winning Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts.”