Health Care Overhaul II
In a previous post, I set up the background as to why the involvement of third parties in day-to-day health care is costing the American people tons of cash. Just how much? According to the RAND study, those who have a Copay only policy (like mine) consume twice the amount of health services as those with a 50% coinsurance plan. So the obvious solution is to get more people into HSA styled policies, where the insurer is INSURING against catastrophic health events and the individual is involved with the day-to-day costs.
The question comes, how can people pay for their day-to-day costs and go back to being health care CONSUMERS? After all, many struggle to pay at the current rate? While I haven’t worked out the logistics exactly on moving people to true health insurance and away from “health plans”, the increased costs to be paid through the increased coinsurance will be more than offset by the potential savings by moving back to a true market system.
Just how much could be saved? Well, figures I’ve seen say that Americans pay around $750 billion a year in health care premiums. On average, insurers pay out around 85-90% of premiums, so that’s around $650 billion or so in health services. According to the RAND study, a 50% coinsurance would reduce this spending by half; so the number would drop by $325 billion dollars! That’s over $1,000 per person! (I know this is an oversimplification, but it makes my point).
I’ve also taken Scott and White as an example for health care premiums as their plans are easy to compare and the rates are readily available on their website. For the “over insured” plan, such as the one I have, the average monthly premium across all age groups is $415 (mine is $120 including Rx). For their catastrophic coverage, which includes NO charge for preventative services, the average premium is $274. The difference is around $1,700 per year.
So these two effects, taking my simplifying assumptions, reduce the overall health care burden on the consumer by almost $3,000 per year…pretty close to the $3,000 deductible! So at most (on average) the consumer will be out the same amount as they are currently. If they consume less, it is more money in the consumer’s pocket!
But again, if the average American is already struggling to pay costs how can they come up with $3,000 if needed for a catastrophic event? Knowing the behavior of most Americans, the above mentioned savings will be quickly spent on houses, cars, boats, shoes, etc. This is where the already existing HSAs come into play (the bane of many Democrats!). If we’re going to require some minimum level of catastrophic health care coverage, why not require some minimum level of cash in an HSA to cover out of pocket expenses? A system could be set up so that X number of dollars must be contributed in the first few years until a certain level is built up in the HSA (let’s say twice your deductible). When funds are removed to purchase health services, they must be replaced in a certain amount of time. It’s OK to have too much money in the HSA, but not OK to have too little.
And what if there is too little? After a certain grace period, if the funds are not there, a “tax” is assessed. Now, I put “tax” in quotes because it is not a true tax. The tax is taken and the funds are put in an HSA (where there is already a penalty in place to remove the funds for non-health related spending).
The idea is to get everyone moved to a true form of health insurance with an account ready to tap for their spending. Since the account is their money, consumers will be spending the cash wisely, yet will have sufficient funds available to cover a catastrophe.
If the minimum deductible is set to $3,000, the first two years’ savings should fund the HSA. After that, it’s $3,000 for the consumer to use however they see fit!
The question comes, how can people pay for their day-to-day costs and go back to being health care CONSUMERS? After all, many struggle to pay at the current rate? While I haven’t worked out the logistics exactly on moving people to true health insurance and away from “health plans”, the increased costs to be paid through the increased coinsurance will be more than offset by the potential savings by moving back to a true market system.
Just how much could be saved? Well, figures I’ve seen say that Americans pay around $750 billion a year in health care premiums. On average, insurers pay out around 85-90% of premiums, so that’s around $650 billion or so in health services. According to the RAND study, a 50% coinsurance would reduce this spending by half; so the number would drop by $325 billion dollars! That’s over $1,000 per person! (I know this is an oversimplification, but it makes my point).
I’ve also taken Scott and White as an example for health care premiums as their plans are easy to compare and the rates are readily available on their website. For the “over insured” plan, such as the one I have, the average monthly premium across all age groups is $415 (mine is $120 including Rx). For their catastrophic coverage, which includes NO charge for preventative services, the average premium is $274. The difference is around $1,700 per year.
So these two effects, taking my simplifying assumptions, reduce the overall health care burden on the consumer by almost $3,000 per year…pretty close to the $3,000 deductible! So at most (on average) the consumer will be out the same amount as they are currently. If they consume less, it is more money in the consumer’s pocket!
But again, if the average American is already struggling to pay costs how can they come up with $3,000 if needed for a catastrophic event? Knowing the behavior of most Americans, the above mentioned savings will be quickly spent on houses, cars, boats, shoes, etc. This is where the already existing HSAs come into play (the bane of many Democrats!). If we’re going to require some minimum level of catastrophic health care coverage, why not require some minimum level of cash in an HSA to cover out of pocket expenses? A system could be set up so that X number of dollars must be contributed in the first few years until a certain level is built up in the HSA (let’s say twice your deductible). When funds are removed to purchase health services, they must be replaced in a certain amount of time. It’s OK to have too much money in the HSA, but not OK to have too little.
And what if there is too little? After a certain grace period, if the funds are not there, a “tax” is assessed. Now, I put “tax” in quotes because it is not a true tax. The tax is taken and the funds are put in an HSA (where there is already a penalty in place to remove the funds for non-health related spending).
The idea is to get everyone moved to a true form of health insurance with an account ready to tap for their spending. Since the account is their money, consumers will be spending the cash wisely, yet will have sufficient funds available to cover a catastrophe.
If the minimum deductible is set to $3,000, the first two years’ savings should fund the HSA. After that, it’s $3,000 for the consumer to use however they see fit!
posted by Cogito at 8:26 AM
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