Lotto as Healthcare Fix? Don’t Gamble On It.

This week cannot slip by without the Health Plan Innovation Blog commenting on the plan that came out of California to privatize the lottery and use the proceeds to help fund universal health care for all Californians.

There is no doubt some political maneuvering going on behind the scenes here, but just on the surface this appears to be a new twist on the worked over idea of mandating health care coverage and increasing taxes on employers who do not play along.

According to a report published in the LA Times, Schwarzenegger’s $14-billion plan would require all Californians to obtain private insurance, either individually or through their employers. The state would subsidize coverage for individuals earning less than $25,525 for individuals or $51,625 for families of four.

Still quoting from the Times story:

The new plan would create a tax credit for low earners who make more than those amounts, to address complaints that many Californians could not afford the insurance Schwarzenegger wants to require.

It also would excuse physicians from being taxed on their office revenue, a move intended to appease the California Medical Assn.

And the governor changed a 4% tax on employers who don’t provide healthcare so that businesses with payrolls under $200,000 would not have to pay that much.

Apparently the plan is not getting much traction. Republican leaders are objecting to a requirement that employers spend a certain amount on healthcare, Democratic leaders signaled that they continue to prefer their own alternative, which would require employers to spend the equivalent of 8% of their payrolls on healthcare, and Union leaders and consumer advocates said Schwarzenegger’s plan would still place too much burden on workers.

The Health Plan Innovation Blog doesn’t care much for the plan either mainly because there is no innovation here. Where is the plan to increase competition or to create new paradigms in delivering health care? The only good that could possibly come out of such a plan is that by forcing everyone to buy coverage most will choose a higher deductible plan and, as a result, they may become better healthcare consumers who will encourage systemic innovations to occur.

Then there is that whole craziness about privatizing the lottery. Apparently, back in January, Schwarzenegger pitched privatization of the lottery as a source of money to help the state’s overall budget. That idea didn’t fly.

The LA Times article noted that the Schwarzenegger administration estimated that leasing the lottery to a private company for 40 years could provide the state $2 billion a year for healthcare if California could boost lottery sales to the national average. Those payments could grow to $4.5 billion a year to keep pace with medical inflation, but all the money would run out after as little as 15 years without any plans to replace the revenue source.

And there you have it. Throwing money at this problem will not solve it. Solving the health care problem in the U.S. will come from allowing innovation to take place in a free market environment that will naturally attract talent, ideas, and, yes — money.

By the way, if you are looking for a more in depth perspective, check out The Alan Katz Health Care Reform Blog.

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