A More Equitable and Efficient Approach to Insuring the Uninsurable

Document Type

Book Chapter

Publication Date



This chapter argues that although concern for individuals with relatively high expected health care costs may justify significant cross-subsidization on normative grounds, it makes sense as a matter of fairness and in terms of minimizing attendant efficiency losses to sever the employment link, enacting a program through which cross-subsidization occurs within society more generally. The chapter is organized as follows. Section 2 briefly reviews the literature on labor market distortions related to health insurance benefits. Section 3 discusses how many individuals are likely to be “uninsurable” in an insurance market in which coverage is not tied to a person's employer. Section 4 lays out the proposal to move individuals requiring subsidies to a broad-based pool financed through the federal tax system, and discusses the determinants of health insurance affordability and pricing mechanism. Section 5 discusses the necessary federalization of Medicaid and the abolition of state-level insurance mandates that accompany our proposal. Section 6 examines the experience of other countries in order to shed light on the efficacy of our proposal, and Section 7 concludes.


Health care policy, health care costs, health insurance, cross-subsidization

Publication Title

The Fragmentation of U.S. Health Care System: Causes and Solutions