A National Health Insurance Plan Needs to Separate Day to Day Medical Expense from Catastrophic Medical Expense

Almost everyone in the United States now thinks health insurance should cover everything from day to day office visits and prescriptions all the way to cosmetic surgery and heart transplants. HMO’s have programmed everyone to think that way because of their total Wellness type health care programs. These things are great but have become tremendously expensive for anyone to fund but the very largest corporations or as we know federal, state and local governments (Which we know is the main culprit for out of control spending and higher taxes at all levels of government). Insurance was never intended to cover the day to day maintenance of the individual.  Insurance was created for the catastrophic events.  Think of Car and Homeowners insurance, we all decide how much risk we want to take when we decide a deductible amount.  You buy insurance to protect you from the major expenses.

 

Hence:  If we decide in this country that health care is a right for all our citizens (Which I think most people do), we need to find a way to fund day to day wellness separately from the catastrophic healthcare in order to make it affordable enough to cover everyone.  Our country cannot possibly cover everyone from cradle to grave (Nor should we) under our current healthcare structure.  For those citizens that can, they must take some of the risk or have some skin in the game.  If you ask most people, they would agree that they should have some responsibility for their own day to day healthcare.  They just worry about the big stuff. That is what catastrophic health insurance was designed for.

 

So, what are some things that might be discussed in relationship to this premise that might be workable on a national scale?

 

For the day to day wellness or maintenance type medical expenses, the HSA (Health Savings Account) program would work fantastic.  Our geniuses in Washington would have to pick an arbitrary number for the deductible amount for individuals and families.  Let’s use a figure of $1500 deductible amount each year for an individual and maybe $3000 per family.  Each individual or family would pay out of pocket for day to day medical expense until that deductible amount was met which in any given year if they went over that amount the catastrophic policy would kick in to pay 100% of anything over that amount (No denial of coverage for pre-existing conditions would be allowed).  In the HSA model, the individual or family can use what ever amount they did not use each year as a tax-deferred investment account and take the total deductible amount as pre-tax dollars to reduce taxable income each year. For those with little or no income, vouchers would be issued by the federal government to cover day to day medical expense up to pre-determined deductible amount. Ideally, the voucher amount not used each year could remain in a fund that would grow tax-deferred over the life-time of that individual and grow into a nest egg at retirement to help supplement living expense in retirement age. Eventually a system like this would give millions and millions of people a nest egg most of them would have never been able to accumulate. This system would give millions the incentive to try to stay healthy and not fill the emergency rooms with minor ailments.

 

For the employers that are barely able to pay health insurance benefits now or have dropped the benefit all together, they could self insure for this deductible amount with ease and give their employees another way to grow retirement income by helping them with ways to invest the unused portion of their deductible amounts each year.

 

I think once understood this HSA model, if framed correctly, would gradually expose where the problems lie in our national debate and show some tremendous benefits. 

 

The biggest benefit would be that this plan would take the insurance industry completely out of the administrative end of day to day healthcare.  Individuals would pay health care providers directly up to their deductible amounts each year.  When this happens, competition would be created (Which is why the healthcare industry would fight a plan like this tooth and nail).  They want prices to be set by their partners in crime, the health insurance companies.  Imagine, if your primary care physician recommended a MRI and you needed to meet your deductible amount before it would get paid for, don’t you think you would start looking around for the best deal. This is what the healthcare industry needs to have happen but doesn’t want it to. They like their little cabal they have going.  In our present system, prices are set for what the traffic will bear.  Just try to get a straight answer from a hospital as to what the prices of procedures, medications and services are.  The first step to affordability would be to get some kind of pricing system people could access.

 

When we talk about the CATASTROPHIC part of healthcare, I think the first consideration is that we design a national plan that will allow the health insurance industry to stay in business and keep the federal government out of it.  Let them as an industry using tried and tested insurance principles and actuarial tables, come up with a dollar amount that would insure every single American regardless of age or pre-existing condition.  All these companies are excellent administrators that already have the man power in place.  We should not develop a new bureaucracy to administer healthcare but make the health insurance industry live under a federal plan based on regulations. In fact, get Medicare out of the federal government and place it into a new comprehensive plan administered by the health insurance industry saving billions if not trillions of dollars in the future. The present system is rank with fraud and abuse.

 

When coming up with a deductible amount where 100% of everything will get paid for with a catastrophic insurance plan, an important part of making a plan like this affordable for individuals, employers and those publically funded, would be how end of life issues are handled.  Is it right for tax payers that will be funding a large portion of any national plan the government came up with, pay for the large expense incurred in the late stages of life when that individual may be able to pay for some or all of their own medical expense?  I think most people would feel that money they accumulated over their life times should be spent on their own end of life medical expense rather than funded by the tax payers.  There would need to be some kind of means testing provision in place to make any comprehensive plan affordable for all.

 

Obviously, these are some broad ideas that I think have a lot of merit.  Working out the details is always difficult but if we can just start with the premise of separating day to day from catastrophic would be a step in the right direction.