Health Care Reform

This is the political cause of the day. Some people ask me if I support the current plan for reform, or not. Of course the answer is complicated. In a simple single-statement answer, you allow people to be misled.

First of all, it's not health care that is at issue. NOBODY in America is being denied health care. NONE. Those who claim that some do not have "access" to "health care" what they mean is that they don't have access to my money to pay for their health care. In other words, if people have to pay for it themselves, then they say they are being denied access to it. What's next? Are there millions of people being "denied access" to luxury cars? Homes? HDTVs? A pool in their backyard? What other things do we say the government has to pay for in order for it to be "accessible"?

So then once we've redefined these terms correctly, then the question is not "do you support health care reform", but instead it is "do you support using tax money to provide universal health insurance".

And the answer to that question is "absolutely not".

But, I think that there is one or two simple things that could be changed about the "health care system" (the means by which we buy, pay for, and utilize health insurance and health services) that would dramatically and permanently reduce costs, improve quality of service, and require absolutely no taxpayer spending.

Are you ready?

Step 1. End employer-paid health insurance once and for all. No more employer-paid health insurance. The employer can select group coverage, identify the provider, negotiate the policy, and do whatever they want to make health insurance available to their employees, but the actual purchase of health insurance has to be made by the insured, and not the employer.

On the same note, it should be illegal for an employer to pay employees any extra if and only if they choose to spend that money on health insurance. So if you elect to not buy the health insurance that your employer has elected for you, then your compensation is not changed. You are paid money for your service to the employer, and the employer can make a health insurance policy available to you that you can pay for out of your regular salary or not.

Of course employers who would like to provide health insurance as a benefit to their employees will simply have to pay them enough to cover their selected insurance benefit. But it should not be dependent on whether the employee elects to buy the insurance.

So let's say that you work for MegaCorp and they currently provide you with a comprehensive health benefits package for you and your family that costs this employer $1,000 per month for you and your family. And just for round numbers, let's say that you earn a $60,000 annual salary. So in all, they are giving you $72,000 in total compensation. $60,000 in cash, and $12,000 in health insurance benefits. Under my new plan, they just pay you the $72,000 and you can decide whether the insurance is worth $1,000 per month for you. I bet many people will decide it's not worth it.

Step 2: Individuals can elect to join insured groups that are not affiliated with their employer. So an insurance provider can, for example, create a "group" that will be much like a group insurance policy from a company, which you are free to join without being a part of the company. They can market this group insurance directly to the individuals. Think of it like buying a mutual fund. I beleive that completing step 1 and 2 will basically eliminate employer-provided health insurance on the whole.

Step 3: Allow people to buy health insurance across state lines. This should be covered as interstate commerce, and the state boards of insurance should be abolished. So for example, let's say that currently the state I live in requires all health insurance policies to provide coverage for maternity, fertility treatment, and birth control. But in another state, they have no such requirement. Well since my wife has had a hysterectomy already we have absolutely no need for any of these coverages, so there is no reason we should have to buy them. So I should be able to buy the policy from another state's provider, allowing me to select the insurance that best fits my needs.

These three steps would basically eliminate this huge, burdensome cost of health insurance as we know it. Insurance companies would be compelled to offer product offerings that meet the needs of individuals and respond to the true demand, which is for a lower-cost option, more in line with the actual cost and risk absorption. I predict that there would be far more available offerings for major medical insurance policies that cost under $100/month and people will by and large decide that prescription drugs and routine preventative care, office visits, etc. are not worth insuring.

Just to make this a bit more personal let's look at my situation. I have two teenage kids and my wife and I are both in our late 30s, healthy, and we are done having kids. So on average, one of us may go to the doctor about once every 3-6 months. We may have a major medical event once every 5 years (one of us needs surgery, emergency treatment, etc.) that would cost, say, $25,000 to treat. And one of us takes prescription allergy meds that probably run about a dollar a day retail. So over the course of 5 years, we have about $30,000 in expected expenses. Why should I pay $1,400/month (my current employer-sponsored insurance premium) to cover what would only cost us $500/month to pay out of pocket? And the odds are that we won't have to spend that $25K on a surgery once every 5 years. But there is some small chance we might have to pay $1M over the life of the policy for some major thing. Comparing this to car insurance, there is some risk that I am going to cause a wreck with my car that is going to wind up costing $1M in expenditures (lawsuit, medical bills, property damage) so I pay $100/month for insurance against this eventuality. But I pay for the routine maintenance of my car myself, I don't expect my insurance to cover gas, tires, oil changes, etc. So why is health insurance any different?

There is no reason that a $100/month policy would not adequately cover the $1M eventuality, while allowing me to just pay for routine Dr. visits and prescription drugs out of my pocket would be perfectly acceptable. It would cost everyone far less and would not change my health benefits one bit. Taking the middle man out of the equation (the insurance company) for most routine transaction can only result in lower costs.

Why doesn't someone propose this kind of reform?