Specifically, the government would give each individual or family a voucher that would permit taxpayers to buy a policy from a private insurer that would pay all allowable health costs in excess of 15 percent of the family's income. A typical American family with income of $50,000 would be eligible for a voucher worth about $3,500, the actuarial cost of a policy that would pay all of that family's health bills in excess of $7,500 a year.

Sounds pretty much like what Brad DeLong says:

Brad would like to see a health insurance plan or plans in which the deductible is very large: 20% of any individual's pre-tax income in the previous year. Insurance would... [be] against catastrophically large medical expenses, as opposed to the present situation, where consumers have no real skin in the game and therefore no incentive to try to drive down prices. Where consumers do pay their own money, Brad notes, as with laser eye surgery, prices have a tendency to come down quite impressively.

Except that Feldstein is more generous because he allows consumers to keep 5% more of their income and he also avoids the gratuitous and entirely irrelevant reference to laser eye surgery. Feldstein also offers a way for consumers to pay for the out of pocket, although he does not think that a 15% savings rate is unrealistic for people who make less than $100,000 annually:

Two related problems remain. First, how would families find the cash to pay for large medical and hospital bills that fall under the 15 percent limit? While it would be reasonable for a family that earns $50,000 a year to save to be prepared to pay a health bill of, say, $5,000, what if a family without savings is suddenly hit with such a large hospital bill? Second, how would doctors and hospitals be confident that patients with the new high deductibles will pay their bills?

The simplest solution would be for the government to issue a health-care credit card to every family along with the insurance voucher. The credit card would allow the family to charge any medical expenses below the deductible limit, or 15 percent of adjusted gross income. (With its information on card holders, the government is in a good position to be repaid or garnish wages if necessary.) No one would be required to use such a credit card. Individuals could pay cash at the time of care, could use a personal credit card or could arrange credit directly from the provider. But the government-issued credit card would be a back-up to reassure patients and providers that they would always be able to pay

Naturally we pay for this by taxing employer sponsored group health plans which tend to offer luxury benefits like comprehensive care and low consumer cost shares. Everybody should buy insurance on the individual market and be at risk for a substantial percentage of their income in the event that they are improvident enough to get sick.

This is the way that we can get rid of the depression era institution of comprehensive group health insurance and move on towards a new free market utopia.

Naturally this will involve computers. The government will need to monitor our incomes to determine the size of our vouchers and health insurers will need more pricing actuaries to estimate the cost of providing insurance to various income groups. We will also need to administer the health credit card - but banks and financial corporations might be able to step in here with proper incentives.

Imagine the after market for government guaranteed health care loans.

There would be certain incentive problems. Low income families whose children had chronic conditions - say asthma - could pretty much kiss 15% of their income goodbye every year.

They might try to improve their position by getting a job that offered comprehensive health insurance but they would then pay income and payroll taxes on that insurance.

They might also try to find a job that just payed more but for every additional dollar they earned they would have to pay 15 cents in additional out of pocket expenses. Plus some additional payments in income and payroll taxes.

Which just increases the size of the dead zone, the place where poor people lose as much or more in benefits as they gain in additional earned income. For more on this see here.

The last policy reform that got such bipartisan support was financial deregulation.