Policy Proposals

A Comprehensive Cure: Universal Health Care Vouchers

July 1, 2007
Health Care

The Problem

The fundamental structure of the U.S. health-care system is increasingly unsustainable, threatening household financial stability and the broader national economy. Health-care spending growth exceeds GDP growth, tens of millions of Americans are uninsured or underinsured, and there are startling inequities between those with employer-sponsored health care and those without. Moreover, health-care quality remains haphazard, in terms of both administrative controls and access to various forms of medical treatments.

The Proposal

With the aim of covering all Americans, reducing the administrative costs of financing health care, and providing physicians with tools to deliver cost-effective care, a universal health-care voucher system would allow Americans to choose a qualified health plan comparable to the Federal Employee Health Benefit Plan. The proposed system would provide allowances for covering additional services with after-tax dollars; end the tax exemption for employment-based health insurance; and phase out Medicaid, Medicare, and other federal health-care programs over time, among other key provisions.


The Universal Healthcare Voucher System (UHV) achieves universal health coverage by entitling all Americans to a standard package of benefits comparable to that received by federal employees. Enrollment and renewal are guaranteed regardless of health status, as is the individual's right to buy additional services beyond the standard benefits with aftertax dollars. Health plans would receive a risk-adjusted payment based on their enrollment. UHV is funded entirely by a dedicated value-added tax (VAT) with the rate set by Congress. A VAT of approximately 10 to 12 percent would insure all Americans under age 65 at a cost no greater than current public and private health care expenditures.

UHV offers true universality, individual choice, effective cost control, and competition based on quality of care and service. To foster accountability and efficient administration, the voucher system creates a National Health Board and twelve regional boards with a governance structure and reporting requirements similar to the Federal Reserve system. The National Board establishes the overall rules and procedures and sponsors an independent Institute for Technology and Outcomes Assessment, which will slow the rate of growth of expenditures by encouraging cost-effective innovations. In each region a Center for Patient Safety and Dispute Resolution replaces the dysfunctional malpractice system. UHV is relatively simple compared with other reforms that have similar objectives. Most importantly, it is congruent with basic American values: equality of opportunity and freedom to pursue personal goals.