The solution is a Health Savings Account — much like your IRA or 401(k) –and its enactment (in limited form) in 2003 is just the beginning of what could become a health care revolution.
President Bush was addressing health care again Tuesday morning. But the President many conservatives assail for his gargantuan prescription drug benefit wasn't talking about socialism.
In fact, he was promoting its exact opposite. And it may well be the cure or virtually all of America's health care disease.
The problem is not resources. America is the richest country in human history, with the best-trained doctors and nurses, the highest qualitymedical schools, and technology that is nothing short of miraculous.
The problem is also not the free market, as socialized medicine proponents always claim. The proof is as close as your television or Victoria's Secret catalog. High quality plastic surgery is a booming business in America, and is largely uncovered by insurance or Medicare. As a result, it faces none of the government price-fixing applied to most basic health care, and guess what? Prices drop each year, while plastic surgeons make more and moremoney.
No, the problem is distribution; or more precisely, the left's failed "solution" to that problem.
Born in an era of wage-and-price controls, our system was designed to allow employers — but not employees (i.e., patients) — to purchase completely tax-free health care. This benefited the unions who voted for Democrats and the fat-cat businessmen who contributed to their campaigns.
But it also largely destroyed the market in medicine: tiny groups of people in a handful of businesses and government agencies make the health carechoices — and fix the prices — for everyone else.
The result is greater and greater centralization. Millions of consumers are forced into HMOs — or government programs, or overtaxed emergency rooms — to get the care they need, reducing choice and increasing bureaucrats' power. And given her way, presumptive Democrat Presidential nominee Hillary Clinton would put us all in what amounts to a radical expansion of the VA system.
There's just one problem: none of this works. It's like a crack-user increasing his dose to cure his addiction. Costs keep spiraling — as government's "fixed" prices always do — while consumers have no means to comparison-shop, and no way to even take their insurance with them from job to job.
President Bush has a solution, one I've strongly advocated for many years. That solution is a Health Savings Account — much like your IRA or 401(k) –and its enactment (in limited form) in 2003 is just the beginning of what could become a health care revolution.
An HSA makes whatever you save or spend on health care tax-free (a benefit FDR gave to big corporations decades ago). It also allows every American toeasily own his own fully-portable insurance: changing jobs is no longer a problem. And it encourages vastly more employers to give better health benefits (or even just give benefits at all), by reducing the cost andincreasing the flexibility in providing employees a health plan.
And it gets even better. HSAs are a tremendous savings vehicle. Right now, if you have medical insurance, you or your employers likely pay severalhundred dollars each month to an insurance company. But when it's gone, it's gone. If you don't get sick and "use" that money, you'll never see it again. And if you fail to pay next month, you're cancelled. Adios.
Not so with an HSA. With an HSA, you — or your employer — contribute monthly to a tax-free savings account. If you don't use the money, it'sstill there. In fact, it's growing, either through compound interest or capital gains or both. If you get sick, you use some of your money to paythe doctor of your choice: no one can turn you away because they don't take your brand of insurance" when your insurance is cash. And if you getreally really sick, your HSA has a catastrophic insurance policy on top of it to cover costs you can't afford.
It won't happen overnight, but HSAs will change everything if we let them. Young people — who rarely get sick — will amass enormous sums oftax-exempt money in their HSAs: by the time they're old, they'll effectively be self-insured; if they stay healthy into old age, they'll passthat money — potentially hundreds of thousands of dollars — to their children.
HSAs can solve America's health care crisis. Over the next generation, they can also largely eliminate poverty in America. And they can create a freemarket in most health services that sends costs spiraling downward instead of forever up.
President Bush wants to expand his HSA law, which just since 2003 has dramatically expanded coverage of the previously uninsured among the poorand employees of small businesses. We won't fix health care overnight. But we need to start right away.
Copyright: Rod D. Martin, 4 April 2006.
Gotta disagree. We don’t need government “helping us” yet again by expanding HSAs. It’s always the same story with these kinds of government initiatives. Government created a complicated, unintelligble tax code, then manufactures a tax credit or an exception or a shelter to “help” us. Then people have to jump through a bunch of hoops and fill out a bunch of extra forms, they change the rules every year, and make us calculate ceilings and eligibility and deferral amounts. Result: Yet another mess.
The reason we have issues with health care in the country is because the government has intervened in the private transactions of people as they obtain and pay for health care. The insurance and health care industries are heavily regulated, scrutinized, and picked apart as it is. We want more of this? I don’t think so.
What we really need is government to step out of the mix. We need tort reform so lawyers like John Edwards can’t collect multi million dollar contingencies against doctors. We need the free market to determine what health care prices should be. We need the third party (health insurance carriers) taken out of the pricing transaction, so that that there is an incentive for consumers to shop for the best price.
We also need to change the expectations of people who think they are entitled to health care by birth right. Health care is not a right. By definition, a right cannot place a financial burden on another citizen. If I have to pay for you to exercise your right, then my right to my property (money) has been infringed. Therefore, you do not have such a right.
Good points, Rich, though I do see a niche that HSA’s fill. I am mostly concerned about the downstream impacts. Mr. Martin makes some extravagant claims for HSA’s that I find specious. Particularly, I find his claim they will make us rich and send healthcare cost spiraling downward absurd.
A more conservative assessment would suggest they may slow the upward spiral rather than return things to where we might have been sans earlier government interventions. People tend to under-fund private insurance now; so, it is unlikely we will do much better using HSA’s. The structuring and tax incentives will mean we do a little better at it and more people will be attracted to them, but that’s about all. Most of us will compare the level of coverage to what we have now, estimate whether it is enough, and make slight changes. In a couple of years, if we see a lot of money accruing to our account, we’ll reduce our contributions so as to have more money available for other needs (e.g., replacing an old car, new house, kids college tuition, &c). Still later, (as health declines – say late 40’s), we’ll take a more serious interest in funding that HSA for old age. Then, of course, we’ll be playing catch up and may never have quite enough to cover all contingencies. When we wind up in a nursing home, we’ll still have to spend down our own assets (including HSA’s) before getting government coverage.
Remember, just because something has a tax advantage doesn’t mean we want to over-fund it any more than under-fund. That’s money that can be put to better use and with greater liquidity. HSA’s will be designed to be conservative investment vehicles, and won’t provide us with the high yields of slightly riskier investments. HSA’s are a useful tool, but they are only one more tool, one more option to be evaluated and decided on. They are no more likely to be Coronado’s lost gold mine than any other, and if too successful we can expect the market (or government) to react to correct them.
The real impact, and this is why Bush is backing them, is they provide an opportunity for uninsured workers to get health coverage without resorting to covering them at taxpayer expense. Liberals would prefer the national health paradigm a la Britain or Canada. The far-left has been demanding this kind of system for decades and has succeeded in whipping up enormous hysteria and a fake healthcare crisis; to which we should respond “What healthcare crisis?” HSA’s help moderates to stem this quite real public demand and derail the liberal rant.
Costs are certainly higher than ever and in greater proportion to earnings. Some of that is attributable to disincentives to economize. Much more of it is due to diagnostic tools and procedures that were simply not available, to better drugs and the costs of research, to better facilities catering to a wider range of specialties and interdisciplinary association. In other words, we are paying more because we are demanding and getting more. We have more disposable income, and we choose to spend it to prolong life or maintain life quality. Where, before, we would accept declining health in latter years, we now have the option of staying active and alert for longer, and are willing to spend money on that. Where there are people who must choose between eating and medication, how is that worse than before? In fact, aren’t we seeing less of it, rather than more? Instead of reacting to Chicken-Little’s disparagement of our healthcare system and its “dangerously chaotic fragmentation”, we need to appreciate how much better ours is than heavily socialized systems, how fragmentation equates to entrepreneurial freedom to experiment and improve, and affords consumers the best opportunity to choose, manage and optimize coverage.
Americans are healthier than ever and among the healthiest populations on the planet. Most of us have pretty good coverage, and the number of uninsured has been steadily shrinking. Most of those who are uninsured (not counting illegal aliens) are young and healthy, and have ‘chosen’ to defer health insurance until later. A few of these will rue having done so, but it is a gamble we all make. The poor and those who evade work can walk into any hospital in the country and demand emergency and basic medical care at taxpayer expense. The socialists can find plenty of exceptions and use them to distort the real picture. None of us like paying hefty bills for a hospital stay, but at least we have the option. Of all the things you pay hard earned money for, which is of greater value to you than your health? Without the health necessary to work, how would you make money to pay your mortgage, feed your family, or take a vacation? If you think of health in terms of an investment and analyze the ROI from it, you soon realize what we spend on healthcare is one of the best investments we make. For those of us with coverage, HSA’s may make the deal a little sweeter. We’ll have to wait and see. For others, it may get them in on the game.
Gotta disagree with one point. You say every employee will have his own “portable”helth insurance plan. This is not so. An employee on a group HSA can take his account with him when he leaves, but the HDHP needed to underpin the account remains with the ememployer.
Of course, he could always go buy his own individual HDHP, providing he is insurable.
Al V..Insurance broker
Like many other industries, this is simple economics. When the government attempts to “help”, all it really does is manipulate the market. This system sounds like another program that government officials eventually will just rape and pillage (like they have with Social Security). I am constantly reminded how republicans are no longer conservatives. Mr. Bush and Mr. Martin are nothing more than liberal light. To paraphrase Ronald Reagan, governments primary responsibility to its citizens is to get out of the way. RR also reminded us how government agencies, regardless of intention, will eventually be a burden to society, not an asset. Looking at the track record of agencies in government, does anyone doubt this truth? So regardless of how warm and fuzzy this plan looks on paper, as long as the government is taking money out of my paycheck to “protect me from myself, or make things better,” I want no part of it. Maybe we shodl all move to Maryland and work for Wal-Mart????
The country could always follow the lead of Gov. Mitt Romney(Rino-MA), compelling all of it’s citizens to purchase health insurance. This would be invaluable legislation to all employers who would be obliged to pay a $295 per employee penalty for not offering them health insurance. It would also be great for the person not interested in health insurance, therefore facing a $1000 per year penalty for not purchasing it. The government could collect these penalties and fees and pay for the insurance of the impoverished, thus creating even more of an entitlement state. But oh, who will pay to implement this plan? I suppose we’ll just have to raise taxes again. They’ll understand, it is for their good.
Oh happy are we in our communist society!
I’m concerned about why we or the government have to develope plans that do nothing but cater to an indusrty that is driven by nothing but good old fashion greed. Why should we be required to pay $8 zillion dollars for health care? Here’s my solution, walk into your doctor’s office or emergency room and say “My insurance company and I are only paying you $2o bucks for all services all medications, we are doing our part to keep high costs down!” Kind of funny but it does present a solution. Price controls. Do not raise the cost of health care beyond the inflation rate. HSA’s may look good on paper but from what I can see it raises my health care costs significantly. First of all, it passes more cost to me, the patient. I have to pay the first $5ooo before my insurance company gets invloved and that’s only on procedures that the insurance company approves of. Any that’s ANNUALLY. That means every year I have to cough up $5000. For people who live from paycheck to paycheck, it’s impossible. And for what? So my paycheck deduction s will go down a mere $20 bucks! That’s an insult!! Gee! I can now buy that tank of gas I’ve been saving up for, wait, that costs more now too! Price controls are the only real world solution.
Mike,
I’ll restate my point: Government intervention has caused the problem. You are advocating more government intervention. Price controls have failed every time they have been tried.
Prices are a manifestion of a universe of relationships. We have a dynamic economy with a million different interplays. Price controls treat the symptom, but the disease rages on.
What puzzles me about you is that almost every point you addressed in your post was dealt with earlier in the thread. Why don’t you read them, and then make your point based on the discussion at hand?
One other thing. As I mentioned, insurance is one of the most heavily regulated industries. Government has its tentacles into every aspect of health care. I can’t see for the life of me how you can say it’s the fault of greedy insurance companies, or Big Drug companies, or Halliburton, or Carl Rove’s fault. If you’re going to make a sweeping generalization, you better have at least one fact to back it up.
Just for your information, for every dollar taken in by the insurance industry last year, $.99 was paid out in claims, administration, overhead, and expenses. You do the math and tell me how greed comes into play here.
Mike, I don’t know if you are being sarcastic or you simply have no concept of reality. Give me one time in history where price controls produce the desired results? Communism failed, get over it.
You are forgetting the whole idea of shared risk. The average income American could never save
enough to cover a major surgery or severe illness. Unless they were fortunate enough not to get
sick until they 60 or 70 years old. That is why we pool risk. Insurance is not socialism. Goverment
should provide tax incentives for both individual and company provide health insurance. Because
the health care system lets no one die or suffer to an extreme extent it always provides care and
someone is always going to pay. Encouraging health insurance promote responsible behavior just
as mandatroy auto insurance does. I think the plastic surgery example is flawed. Plastic surgery
is elective and market forces can shape the market. I can decide if I want to go on vacation or have
a face lift. But the same is not true if I need heart surgery. In reality, who really could shop for
health care. We leave most of the decisions to MD’s and people qualified to make them. There
has to be standards of care because the health care without standards could be criminal. Standards
imply relative conformity as to best practices so individual choices have relative impact on providers.
Insurers are in the best postion to negotiate. Oversimplifing the complexityof our health care
system and the ethical issues involved will not lend credible solutions.
Rich & Honker,
I don’t mean to be sarcastic. What I look at is my day to day realities that I have to deal with. Last year I paid out about $3000 in healthcare costs not including my payroll deductions. Now with HSA’s I have to have to contribute to a pre-tax account, which means less spendable cash for my bills, I have to pay the first $5000 before the insurance company gets invloved. So here’s the math:
$5000 – HSA
$3000 – last year medical expenses (not including payroll deductions)
Balance – $2000 more that I willl have to pay.
Tell me how this a blessing?
Mike
I sure didn’t suggest there was a blessing in HSAs. If you read post #1 above, I began with, “gotta disagree.” I sympathize with your health insurance plight, but the solution is not more government involvement. That’s what got us into this mess.
There is no easy answer, but we have to learn to stop looking to the government to solve our problems. Look at their track record. Has the government solved any problem in society yet?
Besides, if you would like healthcare ran like the IRS, nationalize healthcare.
Rich,
I agree with you. By the way, I am on the same team as you. Less government is good but I don’t see HSA’s as a real solution and I don’t really know what the answers to this complex problems are. Healthcare in the USA sucks and it’s getting to the point, and may now already be at, that only people like Bill Gates, Donald Trumph can afford healthcare.