The Healthcare Debate
This issue cannot and will not be solved in a 30-second sound bite because it is a complex issue. Please take the time to read this statement in its entirety to fully understand my position.
During last summer’s Congressional recess, I attended the town halls hosted by neighboring Congressional representatives while my own Congressman, and now my 20-year incumbent opponent, Ron Paul chose not to hold one. He chose not to hear from the people on this important issue. Maybe since it was likely he was going to vote no (as he does on most bills) he felt there was no need for him to hear from the people he represents. That attitude is arrogant!
I attended two town halls hosted by Sheila Jackson-Lee, and one each by Al Green and Michael McCaul. I wanted to attend one of John Culberson’s but I had other conflicts on the days he held his. The debates in these forums were vibrant and exciting because people were passionate about the issues.
Much has been written about healthcare, but to me, one key item has been largely absent from all of this debate – cost containment. Nothing, absolutely nothing, in any of the bills proposed so far would work to curtail the rising costs of medical services, regardless of the insurance coverage issue. John Mackey, the CEO of Whole Foods, had a great editorial in the Wall Street Journal that proposed some excellent ideas and he was criticized by many on the left for his plan. Click here to read that editorial.
There are issues with our healthcare system that need to be addressed, but before any reform is enacted, two other major pieces of legislation need to be taken care of first; 1) Tort reform and 2) Immigration reform. Please see the immigration reform issue on this site for my ideas on how best to solve that problem. Tort reform needs to be addressed across all entities, not just healthcare.
Insurance Defined – What is it and what is it used for.
Before we discuss the issues with health insurance, we first need to take a step back and define just what insurance is and how it should be used. Insurance is about protection from financial risk or loss. Believe it or not, in the state of Texas you actually are not required to have auto insurance. What you are required to have is what the state calls proof of “financial responsibility”. Most people obtain this by buying auto insurance, but the state also allows you to post a $55,000 bond with the state as a form of “financial responsibility”. We are forced to provide this proof of financial responsibility to ensure others are paid for their losses in the event of an accident, which in turn protects us from financial loss. You are not required to carry comprehensive/collision coverage on your vehicle unless you have a loan because your lender requires it to protect their financial interest in the vehicle. Without a loan, you may choose to carry collision/comprehensive to protect your financial loss, but you are not required to do so.
The same goes for our homeowners insurance. If you own your home free and clear, you are not required to carry insurance (though one would be wise to do so). If you have a mortgage, your lender requires you to have insurance, which is done to protect their financial interests, not yours.
Neither auto nor home insurance pays for maintenance and repairs. When you get your oil changed, a new set of tires or the AC goes out in your car, you pay for these maintenance items and repairs - not your insurance company. If you choose, you can buy maintenance agreements and extended warranties, but they are optional. Our homes are no different. We pay for general upkeep and repairs around the house. It is only in the event of a calamity that we turn to our insurance company to recover financial losses.
We need to begin to look at health insurance in the same way. We need to take care of our general “maintenance and repairs” when it comes to our bodies and only turn to insurance when major issues occur. This is a case of practicing what I preach as I carry a high deductible HSA (Health Savings Account) policy that forces me to pay for, and thus consider the cost of, routine health-related expenses. I am covered in the event of a major calamity as my expenses for the year would be capped at $10,000. That is a lot of money to have to come up with in a given year for most families, but it is an amount that could be paid off over time and is substantially less than would be owed in the absence of any insurance.
Cost Containment – We need to be more in touch with our medical bills
For the vast majority of Americans who have insurance through their employers, moving to a high deductible HSA type plan would not be as financially scary as it may seem and it would also force them to consider the cost of all their care more closely. The average cost of a family health policy today is about $1,200 a month, where the employee may pay about $400 and the employer kicks in the other $800. Today all $1,200 of that is going to the insurance company. If we adopted high deductible HSA’s, the outlay from the employee and the employer would still be about the same, but where it went would be different. The $400 the employee pays would still be going to the insurance company, but the $800 would now be going into the HSA to fund medical bills throughout the year. The $800 per month ends up being $9,600 a year, or about the same as the high deductible associated with these types of plans.
Today, most corporate policies have a $250, $500 or maybe even as high as $1,000 deductible. If a doctor decides some tests are needed for you, most individuals do not discuss the cost as once they meet their low deductible, there is no cost difference to them whether the test if $1,500 or $7,500. However, when a person has a high-deductible HSA plan, where the first $10,000 being spent is “their” money, they will begin to ask questions such as – How much is this test? Do I really need that test? Is there a cheaper alternative that would be as effective? Without patients asking these questions, we will never begin to remove some costs from the system. Having the patients have a greater financial interest in their care is what will force them to begin asking these questions.
HSA’s – A Medicare and Free Market Employment Solution
Each year that a person or family remains relatively healthy, the money accumulates in their HSA account. In the early years of our life, the balance builds, in the later years, we begin to drawn down this balance. Also, this will enable us to pass the unused balance on to other family members or donate to charity of there is no family to leave it to. Having these monies set aside early in life begins to address a possible solution to the insolvency of Medicare.
As we move forward with HSA’s we also need to move forward with decoupling our health insurance from our employer. We do not get our auto or home insurance through our employer, why should health insurance be any different. To an employer, benefits, be they insurance, vacation pay, or whatever, are merely a cost associated with an employee. They do use the benefits to attract employees and even with decoupling insurance from the employer, the employer will still be able to sweeten the benefits package with allowable contributions to an HSA account. Decoupling does several things that help both the employer and the employee. First, it gets the employer out of the health insurance market and all of the internal management that goes with finding and managing these benefit plans. All employers would need to do is merely ask for the employee’s HSA bank account number that would just become another bucket to deposit money into from their payroll processing.
Decoupling insurance from employment also improves the free market for employment as it frees employees from being trapped at an employer because of health insurance. Since employees would now own their own health insurance policy, they could keep it as they went from job to job, or even as they become entrepreneurs. They may lose the extra funds going into the HSA, but they would still have their policy with a smaller, more manageable premium versus the COBRA payment people face now when they leave a company.
This is an all around win-win for the employer and the employee. The employer no longer has to manage healthcare policies and can still use their benefits package (higher HSA contributions) to attract and keep the best talent. For the employee, they now have portable insurance they can take from job to job without having to worry about waiting periods or having to see new doctors under a new plan. They can also strike out on their own with a medical policy already in place. The amount of productivity gain could be tremendous as free market forces take hold.
Healthcare today and the reform that is needed
So, what do we do about the reform that is needed in other areas of the healthcare industry today?
Preexisting Conditions versus Mandatory Insurance
(Proof of Financial Responsibility)
This is a case of “you can’t have your cake and eat it too.” If we are going to force insurance companies to cover preexisting conditions, then we must mandate coverage. You can’t buy car insurance after a wreck or home insurance after a fire to pay for the damages, why would we expect health insurance to be any different? There are affordability issues and I will get to those in a bit. We need to make a cold hard choice between mandating coverage and denying non-life threatening care to the uninsured. If someone is capable of buying insurance, but chooses not to and is discharged from a hospital with a $100,000 bill after a car wreck, who should pay – and how? Should this person be charged with theft of services and have their wages garnished or assets seized to pay the bill? If not, why? If you walk out of a store with a cart full of goods without paying, you are arrested for theft and possibly thrown in jail in the end. Some tough choices need to be made in this area
Buying insurance across state lines
This is a good idea, but not everyone understands it. The primary driving force behind this is to allow individuals to buy less insurance than their own state mandates, thus creating competition between the states and the insurance companies. You cannot expect to buy a policy at Missouri prices and receive healthcare in New York City where costs are substantially higher. A policy bought from Missouri to cover doctors in New York City will be higher than the same policy offering coverage in St. Louis. However, if the Missouri policy offers less coverage due to fewer state mandates than New York, the policy will be cheaper than what that person could buy in New York. While buying across state lines helps, an even better deal would be for states to have fewer government mandates on the insurance companies. Indirectly, this competition across states might just force states to reduce their mandates as people flock to lower cost (i.e. less mandated) states. In order for some states to still compete, they might have to remove some mandates. Coverage would still be available, but on an as needed and as requested basis.
Affordability
The decent human being in all of us is willing to help our fellow man in need. We have seen this time and time again when disasters strike our country. However, there is a big difference between a hand up and a handout. Am I willing to help the person working two minimum wage jobs to provide for his family? Yes. Am I willing to help the kid sitting on the couch while texting on his iPhone and watching cable TV on his new flat screen TV? No. We all need to make choices in life and take responsibility for our own actions. How then do we go about helping the truly poor and indigent who are trying to make a better life for themselves. It could be through charities set up for this explicit purpose. There are many generous individuals in this country who do this every day. Can we do this without government tax credits and subsidies? That would be ideal. Do we force/encourage insurance companies to offer affordability credits as part of their overall business model, which just means you and I would pay slightly higher premiums in order for these companies to do this? This at least keeps the government out of managing any financial part of it - which is a good thing. Do we give the poor a break on their payroll taxes – Social Security and Medicare in order to afford health insurance? This would underfund these two already underfunded government programs, so it is probably not a good choice. Do we create a new category of charities where donations to these health care provider charities allow individuals a tax credit which is more of an incentive than a tax deduction? These are just some of the options we can agree upon if we stop and think about them in more detail, nonetheless, the issue of affordability is one that we need to address.
HSA’s and Portability
As I wrote in more detail earlier, we need to move toward HSA’s and individually obtained and maintained coverage and away from employer-provided coverage - just like our auto and home insurance. This will free up more than just choice, because it will free employees to seek out the best opportunity for their skills and their career. That would be a boost to the job and employment market.
While this is a long discussion, it is substantially shorter than the current 1,990 page bill produced by the House. We can get to a workable, minimal government solution if we have the right leaders with “Common Sense” vision in Washington.
