WHY NOT JUST CALL IT A REFORM AND NAME IT OBAMACARE?:

Replace ObamaCare With Health Savings Accounts (Dean Zarras, Mar. 26 2011, Forbes)

Only Health Savings Accounts distinguish the “care” from the “insurance”. They are different issues, and they require different solutions.

To demonstrate the difference, say you currently have a traditional “family plan” through your employer that costs the employer $12,000 a year. Your employer is very generous, and pays for all of it. You see whatever doctors you want, and make “co-payments” of $25 per doctor visit. Beyond that, it’s basically all you can eat — the buffet line starts to your left.

With a Health Savings Account, your employer still spends $12,000 a year (in actuality, probably less). But they take $5,000 of the $12,000 and put it into an account with your name on it. The money is now legally yours. It’s a form of compensation. With the remaining $7,000, they buy a “High Deductible Health Plan“, whose deductible just happens to be $5,000. The HDHP covers you in full for any unlikely tragedy that should it occur, would be financially devastating.

When you go for your physical, since it’s a non-risk, near-certain probability event, you pay for the physical with a plastic card linked to your HSA. Here’s the kicker: since that $5,000 is your money, whatever balance you have at the end of the year is yours to keep. Note that this is distinctly different from “Flexible Spending Accounts” that many people have, which have a “use it or lose it” aspect to them (thus making them the local eyeglass store’s best friend in December).

Next year, your employer deposits another $5,000 into the account and the process repeats. Over time, the balance in the HSA account can grow, and it’s yours to keep if you change employers. And hopefully, the health tragedy that your high-deductible plan would cover in full, never happens.

Now you’re in a whole new world.

Suddenly you’ll pocket the difference in price between one provider of lab work, and a cheaper but totally acceptable alternative. Under a system of widespread HSA’s, labs would start advertising their services and prices to the retail customer. MRI service providers would do the same, as would doctors’ offices.

Can’t evaluate one lab versus another? A lot of people might be in that category, so a new company would pop up that would do that for you — the “Consumer Reports” of lab comparisons, if you will. You might even pay more for a lab that had a certain level of certification that you trusted. Think the certifying company might be corruptible? Any more so than your local government agency that might otherwise be mandated to do the same thing, paid for by additional tax dollars from you?

Of course, many different types of High Deductible Plans would be offered to cover the catastrophic events, some of which might have their own additional limitations or costs, in return for an even lower annual rate. Just as the labs and MRI providers would undoubtedly compete for business, the insurance companies, returning largely to the business of pricing risk, not certainty, would have every incentive to compete as well. We want to allow the insurance companies to beat each other up in the marketplace, rather than beat us up.

“But wait a minute.” you say. “In your example, I might have to spend $300 on the physical, where right now I only make a $25 co-payment”. True, but where did the $300, or the $25, come from in the first place? In both cases, your employer is the originator of the money, as they are funding the full $12,000. But with the HSA, you have an incentive to retain as much of the $5,000 each year as you can. With the traditional plan and the $25 co-payments, you don’t. The concept is the same even if you have to pay a portion of your health insurance costs from each paycheck, as is the more typical case.

Give the Democrats the universality they seek, the GOP the market mechanism that work and the UR an eponymous program that will last past his presidency as his one legacy and you have the outlines of a deal.

Posted by oj at March 27, 2011 9:54 AM
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