Here are two practical concepts for improving the welfare of all the citizens of a nation, especially the poor and the ill and the disabled. At least twenty nations have already adopted variations of these proposals, and they seem to be benefiting enormously thereby. They have not yet been adopted in the United States, except in small pockets, even though some of the key ideas were very well put forth by Steve Forbes in his campaigns for the presidency in 1996 and 2000. The Democrats in Congress blocked them when they were put forth by President Bush in 2005. These proposals are a threat to those with vested interests in government-run social democratic programs, because they tend to achieve many more goods, with greater efficiency, at less cost, and as a far greater impulse toward personal autonomy. Personal Medical Funds.
Do not build a government health service at huge public expense. Instead, mandate that income-recipients set aside some low percentage of their earnings. These savings would be deposited into a health fund owned by themselves, and this fund would be transportable to any future job they may move to. In case of their own premature death, this fund would be inheritable by any persons they have previously designated as their heirs.
These personal funds could be spent for ordinary health expenses at the owner’s discretion. However, any money he does not spend will be kept in his account as long as he lives, invested safely for modest growth – and given to his heirs if not spent. This policy makes every earner the owner of a capital fund of his own.
Mandate next that a small percentage of that personal fund, set by market rates, go for the purchase of (so-called) “catastrophic” coverage, in case of cancer or other serious illness, a personal accident, freak injuries, or the like. In the case of those with no income and no spouse – a minority of citizens – the government would pay an annual subsidy to provide similar coverage.
Ownership by individual families or individuals is important, for such ownership supplies an incentive to the one spending the money that he take responsibility for his own choices. Medical decisions ought not to be taken by the Government, nor even by health professionals alone, but by the individuals involved.
A public policy along these lines would greatly reduce the size of any government health bureaucracy. It would discipline costs, and it would raise the quality of service by encouraging competition among providers. President George W. Bush took a first step in this direction by his 2003 bill to cover the pharmaceutical costs of the elderly. The government funds this program, many providers compete to provide the services, and the elderly themselves choose the provider best suited to their needs. This vigorous competition has brought costs down far more than first predicted, and quality has been enhanced.
The reasons for personal medical accounts are three: first, to give individuals ownership of their own capital fund for health; second, to give them access to many more choices; and third, to invest individuals with responsibility for how they use their medical capital.
Personally Owned Old-Age Accounts.
In a similar way, nations widely scattered around the world have mandated that income earners set aside a certain percentage of their income to pay into a pension account for old age, of which they (not government) are the owners. This program has three significant good effects. First, the government saves enormous funds by closing down most of its own Old-Age bureaucracy. Second, every citizen becomes owner of a capital fund, whose remainder after his death goes tax-free to the heirs he designates in advance. In this way, any accumulated capital fund remains in the family. Third, this new investment flow immensely strengthens the national private economy, in which most of the family funds must be invested. In poorer countries, this domestic capital investment is especially important.
The policy of personal Old-Age Accounts has by now been tried with great success by such nations as Chile, New Zealand, Lithuania, Slovakia, and more than twenty others (half the population of Latin America now has access to personal accounts).
Let me close this point with one clarifying and affecting example. In the United States today, a disproportionate number of black men die before, or not long after, they reach the age of sixty-five. But that is the age at which they become eligible for a monthly stipend (“social security”) from the government. As matters now stand, the State owns the pension plan, so when these black men die, the government keeps everything remaining in their accounts. In other words, these men lose everything that they paid into the social security fund during their entire lives. What a waste for them and their families!
Neither of these two new policy ideas promises paradise on earth. But they do seem designed to strengthen both the common good and the sense of responsibility (and well-being) of the individual person. The person and the common good are the two main normative inspirations of Catholic Social Teaching.
Published in The Catholic Thing June 17, 2008