Guest Column: Economic case for ColoradoCare health plan
As in the rest of the United States, Coloradans spend much more on health-care per person than people living in other developed countries. However, this extra spending is not buying us longer, healthier lives. Why are we getting so little bang for our buck?
Our current health care system is built around private insurance companies and their mazes of deductibles, copayments, out-of-network providers and differentiated reimbursement schemes. This inefficient corporate bureaucracy — which makes it difficult for patients to access care and expensive for providers to file claims and collect payments — eats up over 20 cents of every health care dollar.
From an economic perspective, the case for ColoradoCare is straightforward. ColoradoCare provides a plan to streamline our state’s health care system. If voters approve Amendment 69 this November, the state will transition from our current web of private health insurers toward the sort of health care system enjoyed by the rest of the developed world. Then again, you don’t have to look to other countries to understand how ColoradoCare would work. Just as Medicare provides health care for all Colorado residents older than 65, ColoradoCare would cover the rest of us.
ColoradoCare would generate significant savings for most Coloradans. The plan eliminates health insurance premiums and deductibles and replaces them with a new 3.33 percent payroll deduction for employees, while employers pay 6.67 percent. A typical Coloradan working full time at the median wage of $18 an hour would pay $1,199 in health care premium taxes under ColoradoCare, compared to the current cost of purchasing a Gold Plan on Colorado’s health exchange — about $5,000 in premiums and up to $6,850 in annual out-of-pocket costs. ColoradoCare’s handy, online calculator at http://www.ColoradoCare.org/calculator shows that this worker would save anywhere from $3,794 to $10,644 a year in health care costs. The savings for families with kids would be even greater.
Most businesses would save money with ColoradoCare as well. Runaway health insurance premiums are squeezing employers today. By replacing health insurance premiums with a fixed payroll tax, ColoradoCare would make health care a reasonable and predictable business expense. Employers can estimate their precise costs using the online calculator. A growing number of business leaders have come out in support of ColoradoCare as a better way to maintain a healthy and productive workforce.
ColoradoCare would also make our labor market more dynamic. Today some workers are reluctant to change jobs because they fear losing their health insurance. Severing the connection between jobs and health insurance will make our labor market more fluid. ColoradoCare will empower workers to take advantage of opportunities as they arise, such as pursuing a new career path or starting a new business.
Finally, ColoradoCare would extend coverage to nearly 400,000 Coloradans who are still living without health insurance. Right now we all pay the price when patients are unable to get preventive care and end up in the emergency room. We all bear the risk when illness forces uninsured Coloradans into bankruptcy. And in our current system, the fact that you have health care coverage today in no way guarantees that you will be covered next year. There is a good economic case for adopting a universal health care system that protects us all from life’s uncertainties.
Putting ColoradoCare in place will not be easy. We should expect the health insurance industry to fight this proposal as it has fought similar proposals in the past. Our advantage this time is that the decision is in the hands of voters, not politicians beholden to special interests. Amendment 69 allows us to decide for ourselves whether to maintain our expensive health insurance bureaucracy, or whether to vote to pass ColoradoCare and provide affordable health care to all Coloradans. The choice is ours this November.
Anders Fremstad is an assistant professor in the Economics Department at Colorado State University.