How The Asterisk would replace Obamacare and fix our health care nightmare

There are two major schools of thought when it comes to providing and paying for medical care in the United States. The first is single payer where one entity, most likely the Federal Government, pays for all medical care; basically acting as the universal health insurance provider for all citizens. Many countries use this model. We will not discuss the efficacy and economics of these single payer plans in this posting. The second school of thought is to keep medical insurance in private hands and allow individuals or employers to purchase care as they deem most effective and most affordable, and oftentimes these two schools are in total conflict.

Over the years I have promoted a bifurcated health provider scheme where all citizens have access to basic day-to-day health care through a network of government and government-sponsored facilities. Those who want more customized, personal, comfortable and immediate health care can pay out of pocket or through supplemental insurance for “boutique” medical care or specific hospital access. This type of arrangement could work with my proposal, but I will also set that discussion aside for another day.

The elephant in the room when discussing US medical care is the existing medical insurance infrastructure. The Affordable Care Act, also known as Obamacare, basically tried to take over the health insurance business in the US by mandating expanded minimum acceptable coverages and also demanding that insurance companies cover anyone with pre-existing conditions with few enforceable requirements for everyone to purchase a policy. Additionally, they initially made it easy for most people to sign up for free with a highly subsidized premium. We all know how this has worked out. Many who got the cheap policies are no longer eligible. Most of the low risk pool of potential policy holders never signed up, that is, unless they had an expensive situation ahead at which time they could enroll under one of many exceptions to the open season enrollment window.

Bottom line, the system is collapsing under its own weight and those who actually bought policies off of the Exchange usually ended up with a high deductible health plan (HDHP) where the deductible for each covered person is several thousand dollars. This high deductible amount virtually guarantees that the person will pay most of their medical expenses out of pocket, effectively rendering the policy a very expensive Major Medical Plan except for a few covered preventative procedures.

An important feature of the current health care landscape is the Health Savings Account or HSA. This device was signed into law by George W. Bush and became effective January 1, 2004. Effectively, an HSA acts like an IRA with the funds accumulated for the exclusive purpose of paying for health care needs not provided for by insurance. There are many regulations and restrictions surrounding the HSA but basically it can be used for any medical purpose except for over the counter drugs and for paying insurance premiums. Money is usually contributed to the account by the employer and as such, is deposited pre-tax (no income tax withheld as well as no “payroll” taxes like FICA, FUTA and Medicare). The account is owned by the individual, does not expire and can even be passed on to others as part of an estate.

I think that with a little tweaking, the HSA can become a powerful and essential piece of the puzzle to help fix our health care problems in the United States.

First, let me stipulate that this discussion is predicated upon the fact that our political environment is such that the only changes we seem to be capable of making is to redesign our medical insurance scheme. There is no appetite for government-run health care (even though we have many, many occurrences of it already) and there is little trust that, if given full control over the medical business, our government wouldn’t totally screw it up by controlling the administration of this most important function with political hacks from either side of the aisle. I also do not have the resources to cost out the plan I am about to propose, but I would find it difficult to believe that it could cost more than the monstrosity we currently have.

Here is how I would redesign the system.

I would recreate the HSA ecosystem to allow both employers and employees to contribute to the account before any taxes are removed. I would require that all HSA accounts have a payment card attached to the account. If the individual is credit-worthy, the card could also be used as a credit card for medical services, but at a minimum it would act as a debit card. The use of the card in a non-health care purchasing situation would be eliminated by the fact that each item to be purchased would be coded as health-related and all non-health-related purchases would be systemically disallowed through the payment card approval process. (Any fraud committed against this section of the law by a merchant or vendor would have extreme penalties including prison time.) I would also require every citizen to have an HSA account, even people who are on the dole or who have other arrangements for health care (Medicare, Medicaid, TriCare, etc.)

I would rename the HSA to be called the Health Services Account.

Many employees currently receive some sort of health insurance. The typical requirement is that the employer will pay at least half of the premium for the employee. The national average annual payment toward an individual’s insurance costs seems to be around 85% ($5,200 per year). Family policies add an entirely different wrinkle into the plan. Some businesses contribute to family policies with averages ranging from 65% to 85% at around $12,500 per year. This is a LOT of money and the amount the employee has to pay for his/her* part is a big hit to take home pay. Employer-provided insurance usually ends up being two or three policies offered after being chosen by the HR department. The employee gets to pick which one of the three plans he wants. PPO policies have gotten very expensive and while the HDHP policies are less expensive, the out-of-pocket (OOP) expense is a real burden if anyone gets sick. One thing which is rarely discussed is the extent to which the employee is aware of just how much money the employer is paying for their health care and how much higher their paycheck would be if this was not the case. A $50,000 per year employee with a family of five might actually see a paycheck totaling $70,000 if his and his employer’s contribution to health insurance were to be backed out of the equation.

In my plan, the employer would take the amount of what he is putting into health insurance for the employee and put it into their HSA account. The employee could also contribute (up to a statutory limit) from their pay, pre-tax. The perfect situation is that the employee would contribute a couple hundred dollars more per month than their insurance premium which would build up a rainy day fund for their OOP medical expenses.

So, let’s take a look at the real bugaboo… the insurance itself. Once an amount of money is deposited into a person’s HSA, what policy will he purchase? Could the employee, or any permanent legal resident, be required to purchase a policy? I do not see how it can be forced upon anyone to purchase a health insurance policy. If Obamacare with all of its laws, mandates and “taxes” couldn’t make it happen, I don’t think anything else could. If a person who is ineligible for alternate arrangements (Medicare, Medicaid, TriCare, PHS coverage, etc.) does not purchase some form of insurance, then they would be responsible for any and all expenses incurred during a medical incident and a lien against their HSA would be attached to them for as long as they live. If they want the freedom to not participate in an insurance plan, then they should not participate in the benefits of the system they are rebuking. Period. Freedom isn’t free.

What about the poor and folks who “cannot afford” health insurance? I have a rather interesting approach to this problem. The federal government would work with insurers to come up with a minimum acceptable plan (MAP). This plan would cover major medical and catastrophic health needs. It would also cover a minimum level of wellness care allowing for an annual physical, flu shots, childhood inoculations and certain annual female exams. This type of plan would ensure that no individual could go bankrupt because of medical problems and that normal and reasonable steps can be taken to remain healthy. This would be the extent of the MAP. Any further expenses such as doctor visits, sprains, broken bones, minor surgeries, etc. would be paid from the HSA, out of pocket or through supplemental insurance.

Remember how I stated that every American citizen and permanent legal alien would have an HSA account and card? The federal government, along with the states, would provide enough money each month to pay for the MAP. This money would be deposited into the HSA, then the monthly premium would be drafted out from each person’s HSA. Additional money could be added, based upon needs testing, to provide for OOP expenses. Charities could also contribute as needed to assist individuals (picture a person needing to pay off a $2500 hospital bill and a church is willing to help. The church could deposit funds into the person’s HSA and tag it to pay off a specific medical bill.) All persons would be automatically opted in to a MAP. The only way to not be enrolled into the default MAP would be to show proof of other insurance.

What this accomplishes is to show every American what they are getting and what it costs. They see the money go in and they see it go out. When it is time to purchase health care, they have to make a conscious decision on what they are buying. Sometimes it doesn’t matter. If the situation is a matter of life and death, it will likely be covered by insurance, so no worries there.

In parallel to my plan for a revamped HSA, there should be an effort to fix the broken medical provider system and how it interfaces with insurance companies. First, medical providers should clearly provide, at point of service, their fee structure. The fact that a cash-paying patient can pay as much as 4x what an insurance or a Medicare patient would pay for the exact same service should be criminal, not to mention the fact that it costs ZERO to process a cash payment and only 2 or 3 percent to process a credit card. Every medical provider has staff whose primary job is to work insurance and collections. This is an big expense for a provider and cannot be ignored.

Insurance should be broken down into two different types of policies. One would insure against casualty – things like major medical, accidents, long-term congenital problems, the other would assure one’s health as a supplemental plan. This latter form could pay for pregnancy, normal day-to-day issues, emergency medical, mental health, dental, etc. The first plan is to keep you alive and not allow you to bankrupt doing so. The second plan is to take care of any other medical issues. If you are generally in good health, you could opt to accumulate money in your HSA and then use it to fund any issues which arise. If, as you age, you want a more reliable financial position, you could opt-in to supplemental plans which will take care of your specific needs. AFLAC offers a lot of plans like this and just about ANY insurance policy for ANY sort of risk allows a vast array of tailored options. Health is no different.

Then there is the pre-existing condition conundrum. If the MAP is in place and virtually everyone is covered by the MAP, a problems concerning a pre-existing life-threatening condition becomes a moot point. Pre-existing conditions for things such as pregnancy, cosmetic problems, congenital issues, etc. would be treated much the same way that orthodontics are treated with dental insurance. Buying in to a supplemental plan could have a one year waiting period before coverage would kick in for pre-existing conditions. If a person collects on a claim against a covered condition, they would have to continue to pay for the supplemental for five years. This is only fair. If someone buys a child birth supplemental, announces the next month that they are three months pregnant and then after the baby is born, drop the coverage, that is cheating the system.

(A note about birth control benefits. Yes, this is a little political but hear me out. There should be a low cost rider for birth control coverage. “The pill” is quite inexpensive and could be easily handled OOP, but for the sake of argument, a person can buy a BC rider. The rider will likely not cover the full expense of the individual’s prescription. For the 50% or more of the population who feels that BC is a right, let them also purchase the supplemental even if they are not going to use it. It would be their way to walk the walk and to show support for women who need BC and it could keep costs down for those who actually utilize the prescriptions.)

Some would make the argument that getting health care shouldn’t be restricted by a person’s ability to pay. Well, food is also necessary for life, isn’t it? So is water, shelter and clothing. We trust folks to make wise choices when they go to the grocery store, don’t we? The government doesn’t give people unlimited food access does it? Most people live within their budget. We cannot design a system for 330 million people which worries about what to do with every single one of them. Let’s design a system which takes care of 95-98% of the populace. Then special programs for the edge cases can be configured. Basic insurance to cover folks for big expenses should be affordable and there is a reasonable expectation that everyone should have access to it.

Previously I stated that there are many different types of government provided health care (not health insurance) provided for a variety of constituents. Public Health Service, VA Medical Centers, research hospitals and more. Maybe it is time for all of these providers to be consolidated under a single management. If there are special needs such as care for specific illnesses for our veterans, then create Centers of Excellence and Specialization for these exceptional cases. Take the rest and combine forces (and budgets) to allow a level of basic care to be made convenient and available to all citizens. Expand the availability of urgent care facilities to help patients meet most of their day-to-day needs.

I feel that it is time to do away with Medicare and Medicaid as we currently know them. Instead of stratifying health care costs between what Medicare pays, what insurance companies will pay, in-network pricing, out-of-network pricing, cash pricing or even writing off unpaid bills, let’s come up with unified pricing. I do not know how that would ultimately look like, but you cannot force every doctor and hospital to take all pricing. Maybe the federal and state governments establish a payment floor for a variety of procedures, much the same way as automotive collision centers have standardized pricing and, like car insurance, there are processes established to modify the original estimate to account for additional needs. This is what the insurance will pay. There has to be a middle ground.

Medicare and Medicaid have run their course. They are both bankrupt already. Their trust fund is a mirage just like the Social Security trust fund. Management of the plans is contentious and hated by most medical providers. Fraud is rampant because those participating in the fraud have nothing to lose. Get rid of both of them. When the billed amount comes out of someone’s HSA instead of being paid for by “the government”, it suddenly becomes personal and fraud should come down dramatically. Let the federal government pay for or supplement the MAP for folks who cannot afford it. Bill the rest of the population according to actual costs to run the system. If the “health care investment” paycheck deduction goes up dramatically, folks will get angry and the reasons will become apparent in short order.

Contract out HSA fraud prevention to a company like Capital One. These folks can smell a fraudulent transaction from the other side of the world. Put the onus on the card holder to do the right thing. If fraud can be proven, make an example of folks and put them in jail. Crime is crime. Why should a ghetto kid who steals a carton of cigarettes from 7-Eleven go to jail when someone who defrauds his fellow citizens of thousands of dollars in health care money gets off scot-free? This sort of vigilance will make people willing to help others, knowing that their money is not being wasted.

What I have tried to lay out is a fair plan. It is a proven fact that the majority of Americans do NOT want state-controlled and state-run health care. That cannot be debated. Many Americans want free health care but few are willing to pay for it. Seems like a paradox, doesn’t it? The lower a person or a family goes on the economic spectrum, the greater the desire for free. The ones who are making good money don’t want to see their paychecks dramatically reduced to pay for health care for all of the “free riders”. The people who are not poor and who are clamoring for universal health care certainly do not want it to come out of their pay, nor are most willing to cough up the huge sums needed to pay for it. They want someone else to pay for it.

To sum up my plan:

  •   Repurpose and reconfigure Health Savings Accounts to become Health Services Accounts (HSAs)
  •   Require all HSA users to have a payment card and use it to pay all covered expenses
  •   Allow all health care expenses to be paid from HSAs
  •   Allow the HSA card to be “plussed up” by government, charitable agencies or individuals
  •   Track down fraud and prosecute guilty parties with extreme prejudice
  •   Establish a Minimum Acceptable Plan (MAP) to provide a floor of coverage against catastrophic events
  •   Require everyone to be covered by at least a MAP plan. It would not be a crime to refuse. Non-participants will be penalized only if they need health care and cannot pay for it. Freedom is not free.
  •   Abolish Medicare and Medicaid. Replace it with federal subsidies deposited into an eligible person’s HSA to pay for MAP coverage.
  •   States can supplement prior Medicare/Medicaid recipients with HSA deposits to pay for standard and customized supplemental plans which bring coverage up to meet state requirements. This allows for a variety of coverage levels from state to state while the federal payments ensure life-sustaining coverage.
  •   Require all medical providers to establish and provide a rate sheet to all patients. Require that there be just one price billed for any given procedure. No more variable rate structures based upon insurance carrier. If a provider bills higher than the regionally assigned baseline pricing, insurance will pay for baseline and the patient can pay for the balance or go elsewhere.
  •   Utilize supplemental plans to give people the ability to customize their insurance plans which will be paid from HSA deposits by employers, their own paychecks and even other entities (including charities and benefactors)
  •  Ensure transparency in rates, billing and payments across the board while retaining privacy throughout the system

This plan leverages the Federal government to fund minimum coverage for those not able to cover themselves and set nationwide standards of health care. It leverages the resiliency and ingenuity of for-profit medical providers to find ways to bring down costs while increasing their profit margin. And, it leverages the cost-cutting DNA of established and upstart medical insurance providers. This plan can be a win-win-win.

In the spirit of fairness, giving people subsidies to pay for their own health care and then taking the money away to pay for it allows everyone to be accountable. If a poor family of five sees $700-$800 per month coming into and out of their HSA, suddenly they see the value of what “free” Medicaid was paying for. If they want more coverage, maybe they put $100 per month into their HSA to allow better management. EVERYONE has disposable income, even the dude on the corner with the cardboard sign. It is our freedom to choose how to dispose of it. Do you spend your money on cable internet? Cell phone with a data plan? Cigarettes? Alcohol? Nice pair of Nikes? Or do you put a little away for health care? Everyone makes that decision.

If people know that someone will bail them out on their health care if they choose to not buy into it (unlike their responsible neighbors), then they won’t spend the money. Why should they? There must be a penalty for stupidity and poor decisions. I believe that this last point is what really separates liberals from conservatives. It is not that conservatives are mean and uncaring. It is that conservatives believe that with freedom comes responsibility and part of that responsibility is living with one’s decisions. Liberals seem to think that everyone should be taken care of and that no one should be lacking. This sounds heartfelt and magnanimous, but throughout humanity this has been shown to be wrong. We will not decide this debate with a decision on health care provision and insurance, but it is instructive to be aware of the cause of the rift.

* I use the generic terms “his” and “he” in place of his/her and he/she throughout this document


The Asterisk said…
Let me expand on the MAP. The MAP would be a Federally-specified plan which would meet criteria I laid out above. It would NOT be a Federal insurance plan. The plans would be worked out with the assistance of HHS and the insurance companies to be affordable while not leaving policy holders holding the bag if they become very ill. While the Constitution does not specifically state that Congress has a right to do this, the Federal government has already taken this role and it isn't going away. Nor is Social Security. Nor is Food Stamps.

So, with that out of the way, any policies written in the US after the MAP is released can simply state that their policy "meets MAP minimum coverage" or "does not meet MAP minimum coverage." If an individual wishes to buy less coverage than MAP, it is their decision because they must legally opt out of the MAP through their HSA. Once they opt out, they are on their own and they must suffer the consequences if they make a wrong or bad decision.

This scheme allows the government to set up a workable health insurance scheme, fund or assist in funding for those who need help, and structure it to be cheaper for those of us who pay for our own out of pocket or through work. This removes the mandatory application, yet retains a viable penalty for those who choose to "act stupidly." And choice is what it is all about, right?
The Asterisk said…
And one more thing. Expensing the employer contribution of medical insurance for highly compensated employees (HCEs). These folks are usually owners or shareholders of a small business. Many would be surprised to know that owning as little as 2% of the stock of a business precludes the HCE from having their insurance paid for in the same proportion as any other employee. This forces business owners to come up with thousands of dollars each year to fund their own health insurance while they are paying (out of their company profit) for employees' policies. One other anomaly is that if a business contributes, say $100 per month, to its employees' HSA, an HCE cannot get the same $100 deposited into his or her HSA. How crazy is that?

Let's fix this reverse loophole (I like to call it a noose) while the rest of health insurance is getting a well-deserved makeover.

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