Medical insurance in America is a nightmare beyond nightmare.  The system is broken broken and Obamacare has not helped.  It was broken before but there is evidence it is even MORE broken now.

The Bottom Line

I will explain a medical system for America that gives the best of all worlds.  It is a plan that is logical and provides a lot of improvements:

  1. Much lower cost of medical care (maybe half eventually)
  2. Millions of jobs created almost immediately
  3. Higher wages
  4. Nobody uninsured (except for the very poor – but with a rational way to pay for them)
  5. Flexibility of people to choose the providers and types of care they would prefer
  6. No pre-existing conditions
  7. Less paperwork for everyone
  8. More rational and transparent pricing of medical costs

The Problems

The costs of medical insure have gone up 50% a year some years and over 10 years has more than tripled.  Now an employer would pay maybe $25000 or more to pay insurance for a family of 4 and the employee would kick in a substantial amount too.  Amazingly deductibles have climbed so that most people now pay more out of pocket than ever.  No wonder nobody is hiring full time employees.  When the average income in America / capita is  < $50,000 very few employers would be willing to pay $20,000 additional medical care benefit.  Better to hire them part-time.

Okay I could relate to you story after story of insanity in the current system.   It is full of phony money.  I got a series of blood tests for 20 years now.  The tests have gone from $150 – $5000.  I KID YOU NOT.  The only reason they charge this much is because the hospitals are gaming the system to get back money they lose on other things the insurance companies or government won’t pay.   This is phony money.  They pretend it costs $5,000, discount it to $1400 and then the insurance company pays them.   How could I ever figure out what it really should cost for those tests?   I recently wanted to do the tests at Theranos because they would charge me under $100 for these tests but because my doctors EMR (electronic medical records system) wouldn’t get the data I decided to incur the $5000 expense since I didn’t pay anything anyway.  I had no incentive to shop.

BASICS

Pre-Existing Conditions

We can agree that pre-existing conditions are pure evil.  Obamacare theoretically got rid of these.  Fully 10% + of people still don’t sign up for any insurance.  The republicans recently in a debate were split on the issue of pre-existing conditions.   A strict libertarian would argue that pre-existing conditions are fine but practically speaking they are a huge flaw.   If for no reason of your own fault you end up without insurance for a month you could find yourself in the situation of going bankrupt with millions in health fees.   To me it is a clear problem that we simply can’t justify the grief it causes.

Socialized Medicine

A government takeover of medicine has some advocates like Bernie Sanders and his most compelling arguments is when employers don’t have to pay $20,000/employee for medical care benefits they will hire millions of people.   The $5-$10,000 additional tax he puts on to cover government medical care sounds like a good trade.  Maybe it would work.  There are certainly advocates in socialized countries in Europe and elsewhere who will argue it is viable.

I contend that all these other countries of the world are living off the larges of Americans who pay trillions for research and high cost medical care to companies so they will innovate.  I know some European governments and companies innovate but I believe that America clearly outproduces them.  If the US went to socialized medicine we’d either see a huge drop in innovation or the whole world would have to step up and pay for some of these costs for innovation.

I firmly believe that socialized medicine would be terrible for a lot of reasons and wouldn’t work in America but I may be wrong.  One thing I know is once we go down that path there is NO WAY back.  This is another fear.  It is nearly impossible to give something like this back to the private sector so it is worth trying again to make the private sector work.

Tax Deductibility

I have never understood how medical expenses aren’t tax deductible.  If anything should be deductible at its core is medical insurance and medical expenses.   These are unavoidable expenses and MORE IMPORTANT we want to encourage a responsibility of people to pay for themselves whether car insurance or medical insurance.   You should not be able to go through life taking risks with millions of dollars of other people’s money or lives and think you don’t need to buy insurance.  People need to be encouraged to be responsible.  Therefore medical insurance and medical expenses should be tax free.  I don’t believe you can argue against this or you would have to argue against any tax deduction at all and simply go to a flat tax.  Even under that situation I still think medical insurance and auto insurance should be tax deductible because we have to have people be responsible.  These are basic issues.

Employer paid medical programs – The employer mandate

Employers decided some time ago to lure employees with great medical plans.  Part of the problem I am convinced is the artificial environment created by the implicit requirement that employers provide medical insurance.    It has made the whole system more phony and introduced new layers of complexity as well as created a lot of extra paperwork and change.

Medical Savings Accounts

I loved my MSA when I had a high deductible plan.   I got to choose how to spend my money and I felt like I was making decisions.  I like supplements.  For a while those were considered okay to use MSA for.  MSAs and high deductible plans have been made unworkable by Obamacare.  For whatever reason these plans no longer are economic.   I believe Obama wanted to kill this idea and so made it difficult or uneconomic.  I don’t know the specifics to back up these allegations but it was clearly a superior option before Obamacare.

The MSA’s have so many wonderful features I could spend paragraphs going on and on but they are so easy to use compared to filing with insurance companies every little thing.  Yes there was still a need to file if you wanted to claim against the insurance but it seemed simpler.    Today with my current plan I never can figure out what is my responsibility or why with the complex plans.  I think MSAs solved a huge number of problems and create great incentives.  They also are a way for encouraging savings for most people.   I really think this was a brilliant idea that has been lost somehow.

State barriers to competition, State programs and Medicare

In my opinion there is no good reason to keep the complicating factor of state mandated insurance programs and divisions.  The market should be unified.    I don’t like the exorbitant pressure conglomerations of states could put on drug prices but I can’t see that these state by state restriction are any better.  I believe that the states should be asked to deregulate their insurance controls.

The states and federal government would keep many of their existing programs pretty much without change except that state and federal employees would be required to buy their own insurance the same as everyone else.

One thing would be that people would be able to use their MSAs to pay for medicare supplemental programs.

I am not familiar enough with all the state, federal programs and separate insurance programs for government employees.   To the extent possible all these should follow the same guidelines as for other people.  That means most government employees would have their cost of medical care put into their salary and required to buy insurance like everyone else.   That would represent potentially many more customers to the insurance companies which could offset their losses from reduced premiums due to competition and changing composition of plans.

High Deductible Insurance Plans, Preferred Provider or HMOs

Since the entire system would be designed around MSAs high deductible plans would become the normal type of insurance.   Insurance companies charge dramatically less for high deductible plans so it would result in significant drops in income to insurance companies.

Preferred provider plans could still be viable for the high deductible plans.  They could still charge more for out of network providers.

HMOs could provide a combined “program” where they would have a full service plan which they would have to designate how much of their plan will take from your MSA to pay for the HMOs normal expenses.   People would be able to see and compare the costs of an HMO including the MSA requirement and compare it against high deductible plans and paying for medical costs themselves with their MSA money.

One thing that seems like a big consequence would be far fewer plans.   For many reasons people would not need so many choices for each company, for each state, for people in this position or that position.

Government mandated insurance

The last of the great “principal ideas’ I want to discuss is the idea of government mandates.  I would put it differently.  Since the government would pay for medical care anyway for people I would be in favor of simply having a fixed insurance policy added to your insurance.  If you can show you pay insurance you can deduct that against the medical insurance.   Maybe some people will say that is a mandate but I believe that it is immoral to go around without insurance and then find you have cancer and expecting the rest of us to pick up your bills.

If you don’t make enough to pay for this tax then the government will pay anyway.  Frankly that is NO different than what happens today.

Let’s add it all up.  This is the only logical logical logical plan for medical care for America

  1. Employers will not be able to deduct medical insurance from employees paychecks.
  2. Employers will mainly add back the insurance benefits they don’t pay anymore to employees salary.
  3. The pre-existing conditions elimination will continue
  4. Insurance companies would mainly offer high deductible plans
  5. The government will add in a tax to all filers for the cost of high deductible insurance plan.  Employees will be able to deduct medical insurance premiums against the taxes they owe.
  6. People will be able to create a tax-deductible MSA with up to the deductible limit of high deductible plans and maybe a little more.   Your employer will be allowed to deduct money to put into your MSA.
  7. Insurance companies will be required to provide plans with a minimum coverage to qualify to be deductible from their taxes.  Such plans will have a minimum of $1M maximum lifetime benefit and with other sensible benefits that would be agreed to cover every American with a minimum of responsible care in case they get sick.

What would this plan do?

  1. HUGE BENEFIT FOR EMPLOYMENT
    1. For employers the cost of hiring an employee will fall DRAMATICALLY.   They will hire far more people and pay them better.    It would cause a massive increase in employment and incentive to business.
  2. INCREASE IN AMERICANS SALARIES
    1. In a similar way the reduction in expenses for corporations would have to result in significant increases in Americans salaries.  Although they would have somewhat offsetting tax increases and increased expenses the cost of high deductible plans is significantly less than the current plans most people have.
  3. INCREASE IN TAX REVENUES
    1. Increasing income from employers would drive up federal and state tax revenues
    2. Increasing taxes from mandated high deductible insurance in the tax code will increase federal tax revenue
  4. REDUCTION IN INSURANCE COMPANIES REVENUES AND INVOLVEMENT IN MEDICAL CARE
    1. High deductible plans cost 1/2 the cost of low deductible plans.  Insurance companies would have dramatic drops in income
    2. Insurance companies would not be involved in most decisions or payments for most people’s insurance dramatically lowering their costs.
  5. INCREASING COMPETITION ON INSURANCE COMPANIES
    1. The reduction in income and the fact that everyone would be on the same level playing field for insurance would increase competition on the insurance companies.
    2. People would keep their insurance companies and there would be far less need for so many specialty plans for employers or for different states or government or … The competition would increase dramatically and I predict massive consolidation eventually and also increasing efficiency.
  6. MORE PRESSURE ON ALL MEDICAL PROVIDERS TO REDUCE COSTS
    1. Since we would choose how to spend a significant fraction of our medical costs there would be real competition.
    2. We could choose alternative medicine or to spend on very traditional medicine.  Whatever you like.
    3. People could customize their spending to their needs.  People with certain problems could focus their spending on making their life easier and with less “rules” from insurance carriers or government.
  7. PEOPLE WOULD HAVE CHOICES HOW TO SPEND MONEY ON MEDICAL CARE
    1. People would choose new providers and they would have to compete
    2. This system would have to be backed up by good information to consumers so they can make good decisions.
  8. NUMBER OF AMERICANS PAYING FOR INSURANCE WOULD CLIMB DRAMATICALLY
    1. Because the government would collect insurance costs if you didn’t get insurance and the tax advantages, increased employment there would be a near universal coverage.   Those who didn’t get coverage cannot pay for insurance in any case would be the responsibility of government as they will always be no matter what program is designed.

 

Summary

If you look at this objectively such a program would be dramatically better than either socialization or continuation of Obamacare or a return to prior healthcare regimes.

I also believe this is better and more coherent and viable than any plan I’ve heard from any candidate.  It would have tremendous incentives on industry, people, insurance companies.

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