How can insurance premiums be capped at 10 percent of income?

The big news today is that Hillary Clinton wants universal coverage that will cap health insurance premiums at 5 to 10 percent of a family’s income, regardless of income. Considering that health care represents 16 percent of the GDP (i.e., income) and rising that number doesn’t seem too realistic. From the transcript:

Q: You’ve also said you would cap premiums. But you haven’t said where you would cap them.

MRS. CLINTON: You know, I think we could do it somewhere between five and 10 percent of income.

The median household income in the US is about $50,000 per year. I can tell you that $2500 to $5000 won’t buy much in the way of health insurance for a family.

Of course I’m describing matters in an overly simplistic way. Medicare is where the big money is spent. But of course even low wage earners who lack health insurance already pay into that system through FICA deductions, not to mention the spending that comes out of general taxation revenues.

Health care in the US is expensive. Mandating caps on premium costs won’t solve that problem.

March 28, 2008

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