By Mark David Blum, Esq.
(*Part of our continuing discussion of health care in America)
Living without medical insurance is playing a great game of chance. In doing so, you are betting against the odds and assuming you can afford medical care when the need arises. It goes without saying that the need will arise. The only questions are “when” and “how bad”. If you manage to accumulate enough savings and assets, you can liquidate them to cover your medical costs. If you cannot afford care, either you go without or end up having your bills subsidized by taxpayers.
The alternatives are just as mind blowing. Unless you are among the few lucky ones to have medical coverage given to you through family or job connections, you are going to find that avoiding the risk means buying insurance. Rates for insurance are around $800 to $1,100 per month for a family. That means you spend approximately ten thousand dollars a year for piece of mind. You obviously do not get the benefit of the money as it is the property of insurance companies. If you do not use medical services, there is no refund or payout to you. Ten thousand dollars for piece of mind and covering your bets. Yet as with most gambling, the odds are in favor of the house and you will lose. Only one of many actually comes out ahead in this game.
One alternative we should consider is the right to have a health savings account. Rather than give seven hundred to eleven hundred dollars a month to a health insurance company, why not let us put our money in a separate savings account and allow to draw down from that as we go. This fund could be used to cover everything from over the counter medications to major catastrophic events. Even if I put only three hundred dollars into the account on a monthly basis, within five years, I should be strong enough to withstand even the greediest of medical providers. Obviously, I lose if I draw from it sooner rather than later. I win big time if the fund is not depleted over the course of my life. Best of all, the money remains the property of the person who holds the account and not some behemoth insurance company and its six figure management team.
Only two things are needed to make the program work. The accounts would have to be judgment free. If the account holder is sued or owes a debt for non medical issues, the account must be considered off limits. Nobody could be sued for their medical savings accounts and nobody but the account holder can access the money. The second part would be that the accounts are tax deductible. We already grant that status for medical bills and insurance and other related programs. It would be no loss to the government to allow a self funded health savings plan to be deducted from pre tax dollars. It would encourage savings and thrift.
The upside to paying your own medical bills is your ability to negotiate for services and products. It puts the patient back in charge of their own health care. It requires more accountability from medical providers and could work wonders in keeping costs down and avoiding wasteful spending.
We already have a hybrid program on the books. Government has permitted the creation of health savings accounts that are tax deductible and serve to be used for all medical needs. The accounts however are not judgment proof so there is no real value in having one because it can be taken away on a whim.
More importantly, the current system only allows individuals to open a tax deductible health savings account IF a simultaneous medical insurance policy is purchased at the same time. Accounts can only be opened at certain banks and the banks charge up to $100 just to open the account and many have other continuing service charges. According to data recently reviewed, even with a ten thousand dollar annual deductable, a family would still be paying an additional seven hundred dollars a month for medical insurance.
Clearly the government that set up the rules is dominated by the efforts of the insurance industry. Where would the industry be if people were allowed to self insure? For this reason, you cannot have a duly recognized health savings plan and collect the benefits thereof unless you have an insurance policy to go along with it. The medical insurance industry would not survive if there was a mass exodus of policyholders to the self insurance model. For this reason and so as to stimulate buyers of insurance, government has made the insurance policy model a requirement.
Imagine instead a world where over the course of your life, you can manage your own account. Every month you put into the account what you can and deduct therefrom only what you need. Over the course of years, the overwhelming majority of us would have accrued enough savings to offset most medical costs; should they befall us. This is how insurance companies make their money. It is also a vehicle to keep medical costs down because it puts the individual in charge of their own medical care and the services and products required.
Clearly such a plan would run contrary to the wishes of the medical establishment as under the current models, providers can charge what they please and run up their bills as much as possible. Everybody has a right to make money. But the user of medical services should have a stake in the outcome and be able to negotiate rates and services. In every other aspect of business and transactions in life, we have the option to shop around and negotiate prices and services. Only the medical industry has set itself above and beyond that daily haggling and demands payment in full regardless of necessity and without discussion.
The current system needs to change. Health savings accounts should be allowed by the IRS and government to be without a related insurance policy. This is not about keeping insurance companies afloat with forced stimulus through mandated insurance. It is not about providing the banks with a new revenue stream through special accounts that are subject to monthly and annual service charges. The process should be about making medical coverage available to everybody.
It can be done as simple as enabling the public to self insure. That works through a tax exempt savings account that is protected against judgment creditors. While the corporations that are now feeding at the public teat because of losses would feel the loss of policy holders, the long term goals of making health care affordable and available to everybody would be better realized.
A health savings account holder is in a position to negotiate costs and fees. There is no prequalification and no preexisting condition limitations. The person needing medical services is the one deciding for himself or herself what they need based on consultation with a physician of their choosing. No more will the supply of doctors and other providers be subject to the whims of an insurance company but rather they will be subject to the wishes and real needs of the patient before them.
If there is seen a great need for a catastrophic plan to be in place because there are going to be people whose medical needs are greater than their savings, maybe instead of insurance companies, we turn management of the accounts over to hospitals. Let the hospitals be the provider and manage the money and at the same time, let the hospitals never bill for the services they provide. Let the hospitals open more clinics for routine care and let them keep the monies provided. As backup for losses, should there be any, we the taxpayers can do as we already do and pay the offset through Medicaid and Medicare programs. At least through this system of catastrophic coverage, the money is going directly to the provider of services and not to the bonuses and retirement plans of insurance company executives.
At its core however, there has to be room for those who wish to self insure. In doing so, we at least set aside pre tax dollars to provide for medical coverage. The myth is that the uninsured are a drain on the system. In reality, uninsured do not use medical services because they cannot afford them. If we enabled the uninsured to save money for their medical care then more people would have access. The poor already have coverage through State and Federal insurance plans. The question is what do we do with those who do not qualify for public assistance but who still need medical coverage.
Right now the system is set up for failure. Those who have jobs and income but who do not have access to medical insurance are the ones who suffer most. Consider this: To afford a major medical insurance plan, a family has to spend about a thousand dollars a month. Add onto that housing, food, car and travel, and taxes, and a family will have to earn at least sixty thousand dollars a year to afford a medical policy. At the same time, under the current system, this same family would still have to earn about that same amount even if they went for the high deductible medical savings account option. Between funding the account and paying the premium on the mandatory catastrophic plan, the family is looking at even higher monthly medical costs. Ten thousand dollars a year is approximately $834 a month PLUS an additional six or seven hundred dollars a month for the catastrophic plan. Under the current models, it is a loss for someone to buy into the health savings plans currently available on the market as doing so actually costs more in the long run.
What I propose is simple, costs no overhead, and puts the patient in a better bargaining position. Let the market dictate if there should be a major plan behind the savings account. Mandating doing so only benefits the insurance companies and gives little comfort to those whose finances do not support being able to fund both. After all, is it not better that people be able to pay some of their medical bills than none of them? In time, the savings accounts will grow in strength and be stronger than insurance company policies. Simultaneously, enabling a health savings account will encourage savings and drive people toward self insuring.
Clearly the current models are broken and do not solve the problem. Health care costs are skyrocketing and insurance companies are making out like bandits. The general public is who suffers from the pressures of paying for services they don’t need or use and there is no way for the public to get back any unused dollars.
I don’t dare to believe that my idea is a panacea and solution to all problems. There are always going to be poor. Many people will not be able to fund their own savings accounts and even those who do may never reach a balance sufficient to offset the costs of a catastrophic event. Right now, we the taxpayers step up anyway and pay the bills. Why not at least provide a vehicle for folks who have no insurance but who can save some money for their medical needs. Government should enable the creation of self insured medical savings accounts, without a related major medical plan, and that such accounts be both tax deductible and judgment proof.
It is not about either-or. It is about both and allowing yet another option to be available for health care coverage. Presently, only some of us benefit from the tax deduction of savings while others who pay as they go do not get that luxury. That is patently unfair and only benefits insurance companies and leaves medicine unchecked in its cost growth.