STANFORD, Calif.-- A newly published proposal to use vouchers to provide universal health coverage would cost little or no more than what the nation spends under the current health system, according to co-author Victor R. Fuchs, PhD, one of the nation's foremost health economists and a core faculty member at Stanford's Center for Health Policy/Center for Primary Care and Outcomes Research.

At a time when few policy makers are offering proposals to overhaul the way health care is delivered in the United States, Fuchs' plan -- published in the March 24 issue of the New England Journal of Medicine -- presents a viable blueprint for comprehensive, universal health-care coverage in a way that would satisfy concerns of legislators across the political spectrum. On the one hand, it guarantees health care for all. On the other, it preserves consumer choice and market competition.

At the inception of the proposed plan, every American under age 65 would receive a voucher that would pay for a standardized package of health services, including doctors' visits, hospital care, preventive services, mental health care and prescription-drug benefits. Patients would choose a participating health plan from several alternatives. Those who wanted additional benefits could purchase them with their own after-tax dollars.

The delivery of health care would not be run by the government but would continue to be provided through the existing system of private health plans, clinics and hospitals. To oversee the system, a federal health board would be created that would define the basic benefits package, set reimbursement rates for providers, and offer guidelines for regional boards, which would be responsible for administering specific geographic areas. Under the plan, Medicaid would disappear, and employer-based health insurance would likely fade away, as companies' health insurance premiums would no longer be considered tax-exempt income for the employees. As the population receiving the vouchers aged, Medicare would be phased out.

Fuchs, the Henry J. Kaiser Jr. Professor, Emeritus, at Stanford University, wrote the proposal with Ezekiel Emanuel MD, PhD, an oncologist, bioethicist and expert on medical decision-making at the end of life. An accompanying editorial in the New England Journal of Medicine -- which discusses the health vouchers proposal along with a related article on financing universal coverage -- calls their plan "a thought-provoking suggestion" for "a universal coverage system ... that would be less chaotic and more affordable."

Fuchs and Emanuel published an earlier version of their plan in a November 2003 op-ed in the New York Times. The latest version adds more detail and also includes a rough economic analysis of the plan's cost. This element is significant coming from Fuchs, one of the founders of health economics and one of the nation's foremost empirical economists. Fuchs is a past president of the American Economic Association and has received some of the most prestigious awards in economics.

In analyzing the financial impact of the voucher system for their latest article, Fuchs and Emanuel found that initially, the nation's total use of health-care services would rise by about 5 percent, as those who were uninsured receive care they weren't getting before. These associated costs, however, would be offset by huge administrative savings; most of the $100 billion now spent on the sales and administrative costs of private insurance, for example, would be saved. The exact cost of the plan can't be calculated until the benefits package parameters are set.

The authors acknowledge that neither their voucher proposal nor any other major health-care reforms are currently politically feasible, but they predict that "There will come a time when the inequities, inefficiencies and costs of the current methods of financing health care will be so intolerable that the public will not only accept but demand comprehensive reform. At that time, the political feasibility of the voucher system will be compelling."

The plan would be funded through an earmarked value-added tax -- a general consumption tax assessed on the value added to goods and services. Such a provision may not be politically palatable today, Fuchs said, but that doesn't mean it can't be on the table in the future when voters are demanding that their representatives take action. "This is a more efficient and equitable way to replace the expenditures currently made by employers, state government and the uninsured," Fuchs said.

Fuchs and Emanuel assert that over time their voucher plan would decrease spending on health care. Part of the reason for such a cost reduction is that their plan features the creation of an independent Institute for Technology and Outcomes Assessment, which would assess the effectiveness and value of medical interventions. The Institute would be funded by a dedicated portion of the earmarked tax and would help to determine which services would be covered in the benefits package, leading to higher-quality, more cost-effective care.

"Our plan is more feasible than previous reform efforts because it's more congruent with American values," said Fuchs. "Our society values equality, but it also puts tremendous value on individual freedom, choice and competition."

The health vouchers plan was featured in news articles in the Washington Times, in a United Press International (UPI) story, in the Palo Alto Weekly and the Stanford Daily. In addition, the San Jose Mercury News published an op-ed piece by Fuchs and Emanuel that described and promoted their plan.