Catastrophic v. first dollar

Megan McArdle with a thoughtful post saying her comments on limits of insurance were aimed at first-dollar cover for middle class folks. Meaning, she says she didn't mean moving from no insurance to being covered had no health impact....just that first dollar cover for upper middle class folks probably has limited health benefits because most middle class folks would spend on basic stuff anyway. I think I basically agree.

I would take in one second a system that provided everyone guaranteed catastrophic coverage and that had people buying extra cover with after tax dollars, with premium support for low income, realizing that you create perverse incentives around the 'line' defining low income.

We could do it in one year using Medicare as a vehicle. You could also get it quick using McArdle's approach of making all health expenditures above 15-20% of AGI refundable via the tax code, at least for middle income folks who pay income taxes. Here is Martin Feldstein's answer to catastrophic insurance coverage....abolish tax exclusion, tax credits to purchase catastrphic plans, buy more if you want, and federal government issuing a credit card to charge expenses directly to feds above the spending limit.