Wednesday, June 24, 2009

The Jefferson Health Care Plan

All this talk about converting Medicare and Medicaid into a private funding source to purchase health care for everyone in America is surely giving some people headaches or making other people mad. It is just such a foreign concept to the entire evolution of federal government involvement in medicine since 1965.

Anytime someone or some group comes up with a 'crazy' new idea, the established orthodoxy comes at it with usual progression of attacks, as enumerated by Mahatma Gandhi: “First they ignore you, then they laugh at you, then they fight you, then you win.”

But before that ever happens, someone has to have the "new" crazy idea, don't they?

In 1994, 15 years ago, former Congressman Alex McMillan introduced the 'Jefferson Health Plan' that showed exactly how this 'crazy idea' of converting all of the federal health care programs into a pool of funds that could be allocated on an income-related basis to cover every man, woman and child in the United States with a comprehensive health insurance plan.

H. Res. 508, was a detailed, actuarial-sound plan that had been developed over a two-year timeframe with the assistance of one of the nation's foremost health care actuaries, Mr. Mark Litow of Milliman and Robertson in Milwaukee, Wisconsin.

Instead of trying to fix an unfixable system with bandaids on the margins, the Jefferson Plan sought to fix all of the inherent problems in health care such as covering the uninsured, lowering costs in the system and not raising any taxes in one fell swoop. It could have been called the "Gordian Knot" Health Care Plan because it had the same effect. [1]

It actually came about as an answer to a challenge in 1993 from the Ranking Member of the Budget Committee, John Kasich, who apparently got tired of Mr. McMillan constantly pointing out to the Committee that "There are already enough existing funds in the health care system to pay for everyone's insurance...the problem is just that they are not allocated properly!" Mr. Kasich then said:" Well, Alex, if you are so smart, why don't you show us how to do it and come back to us with a plan?"

Which led to the two-year effort that culminated in the Jefferson Plan.

You can take a look for yourself at the legislative language (which also required a herculean effort by the legislative counsel's office in the House who thought we were nuts at the beginning as well) and see the detail that went into the package. H. Res. 508

But the essence of the plan was predicated on three things:

  1. Health "insurance' coverage for everyone
  2. Conversion of every currently available federal health care dollar either currently spent or offered as a tax deduction or credit (in the form of a tax expenditure)
(Remember, this was in the aftermath of the so-called 'broken promise' by President George H.W. Bush from his 1988 campaign that led to the passage of the most successful budget-reduction/restraint law ever, the 1990 Budget Act, but that is the subject for another posting)

And the Jefferson Health Plan delivers on each point. It has the added advantage of being flexible and scalable according to revenue that actually comes in each year so that the payments can be adjusted and avoid any debt from being incurred. Once the base health insurance plan is paid for, each person has the option of being able to buy more insurance depending on their own risk profile and income-generating level. The utilization rates of health care services should fall to "normal" levels since people will now be responsible for making their own health insurance decisions, just like they do with car or home insurance, and more importantly, paying for it themselves.

They will also start to make better decisions regarding their own health, eating, exercise and wellness situations since every Twinkie they eat, beer they drink, cigarette they smoke or mile they don't walk every day goes right to their own bottom line in the form of higher health insurance premiums. The program can be set up one of either two ways: Make them high so that every pound they lose, their premiums go down or set them low and add on a risk-based premium according to their health profile.

The difference between a $200/month premium and a $400/month premium for a family making $50,000 of income per year is enough to incent anyone to more responsible behavior.

And the cigarette companies would not mind it either. We asked them for their opinion in 1993 and they agreed with the whole risk-based premium model. Congressman McMillan took the idea to then-First Lady Hillary Clinton and her point person on their ill-fated health care reform bill, Ira Magaziner, both of whom didn't believe it and dropped the whole idea.

The question now is not whether it can work; we have proven that the resources are there and it can be implemented. The question now is whether people 15 years later will decide they have seen enough of the foot-dragging going on in Congress to put pressure on their elected representatives and tell them they want health care 'insurance' paid for everyone without any new taxes or any expansion of existing, failing, non-sustainable programs.

The lost opportunities on comprehensive health care reform over the past 3 decades truly boggles the mind. But we have reached the end of the road, the point of no return, and the point where not doing something radically different like the Jefferson Health Plan imperils the future fiscal stability of the nation.

We will never be able to raise the $1 trillion in taxes the Obama people say is needed to go their approach. For anyone in the Administration or Congress to say that there are $2 trillion in savings "just waiting to be discovered" to pay for the 'public option' approach they are promoting is up there with belief in the Tooth Fairy.

The only way to do this right is to use the cold hard cash that is sent to Washington every single payday in the form of the payroll taxes used for Medicare across-the-board and the income taxes that flow into Medicaid across the country and buy bonafide, underwritten health care 'insurance' plans for every single person in the country.

Everything else is just more of the 'same old, same old' political shell games of the past and, sadly enough, from the present from a President who won the campaign with such promises of "Change is Coming!"

We can't afford the "wrong" kind of change and certainly not one that doesn't even cover all of the uninsured as the Obama approach has already been confirmed as not doing.

[1] Alexander the Great cut through an intricate knot of cornel bark at Gordium in Phrygia with his sword and set the standard for "cutting through all the bull" for generations to come


  1. Great idea. Thanks for reminding us that there are still plenty of good, old ideas in Washington that haven't been tried yet.

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