I’ve worked in the health care industry for a dozen years and have felt simultaneously fortunate and a little guilty, I must confess.
I’m fortunate to work in an industry that does so much good for people and I’m blessed to have found my place in a field that weathers economic storms better than most. The guilty part comes in my knowledge that health care is out of reach for a significant portion of uninsured Americans – 47 million, according to a 2005 report by late ABC news anchor Peter Jennings.
I know that government leaders have been trying unsuccessfully for decades now to solve the problem of rising health care costs. I’ve found no reason to doubt assertions that powerful lobbyists have repeatedly stopped these efforts in their tracks.
So I was captivated by a 136-page book with such a brash title. The entire health care crisis solved in just 14 short chapers. Amazing.
Authors J. Patrick Rooney & Dan Perrin are self-described proponents of the health care savings account, Rooney as CEO of Golden Rule Insurance Company, and Perrin as President of the Health Savings Account Coalition. Their formula for solving the health care crisis lies largely in giving the individual health care consumer a greater level of control over health care spending decisions and, thus, it is no surprise that the book was praised by the likes of Steve Forbes, the American Conservative Union and The Heritage Foundation.
With such a lopsided list of endorsements, I’m a little suspect that the answers are as cut-and-dried as the authors propose, but this is what they suggest.
- The enactment of a Fair Plan, whereby the government gives each person and family from $2,000 to $5,000 a year toward the purchase of health insurance, with the employee paying the balance. This would save money, the author contends, by eliminating company tax breaks for providing this benefit and would give individuals more choice.
- The widespread use of Medical Savings Accounts or Health Savings Accounts. These types of insurance policies would provide a few thousand dollars in a savings account owned and managed by the employee. This savings account money would be used to pay for common types of medical expenses, such as doctor visits, medical tests and prescription drugs. Large expenses, such as hospital bills, would be covered under the major medical portion of these policies. The authors surmise that people will be more prudent about their use of medical services if they control their own spending and they will not be delayed from seeing specialists as they frequently are under today’s HMO plans. Money not used in a given year would carry over to the next year, earning interest.
- Greater transparency on the part of hospitals and doctors on their charges, enabling the consumer to comparison shop. The authors assert that collusion between nonprofit hospitals and insurance companies have allowed for spiralling costs that the individual is too impotent or ill-informed to overcome.
- Legislation to allow the purchase of insurance policies across state lines and over the Internet.
- Convenient and cost-effective nurse-run health clinics in such places as WalMart and CVS, which would contribute to lower costs and hassles for the health care consumer.
It is timely that I am reading this book just as the Obama regime begins to tackle the health care crisis six weeks into his presidency. I have not had the time to fully digest his plan, but it seems as if there are some areas in common - at least on the face of it – with the plan proposed by Rooney and Perrin.
Here are some bullet points I copied directly from Obama’s web site that seem to match up.
- Establish a National Health Insurance Exchange with a range of private insurance options as well as a new public plan based on benefits available to members of Congress that will allow individuals and small businesses to buy affordable health coverage.
- Require hospitals to collect and report health care cost and quality data
- Reform the insurance market to increase competition by taking on anticompetitive activity that drives up prices without improving quality of care.
- Ensure everyone who needs it will receive a tax credit for their premiums.
This health reform debate is sure to go on for a long time. I will continue to follow the issue and I expect many good books will be written on the subject before it is all over.
Individual health insurance products are one of the great financial rip-offs of all time, taking around 35-40% of every premium dollar and in one case I know of 70%!
No system that rewards these companies with subsidies will ever work.
On the other hand large group health insurers have an important role to play when we finally get a universal national health system, but not as insurers, through Administrative Services Only (ASO) contracts.
These have been around for six decades, but are a closely guarded secret by insurers since they pay far less in commissions (sometimes zero) and are far less expensive.
In this case they would be competitively bid, with price and service being the only competition since the plan design would be identical, but with the nation divided into maybe 11 medical cost regions.
Medicare would also be a competitor and of course there would be no underwriting.
There would be room also for a reward system for uncovering fraud, such a % of the amount saved but with a cap.
That system needs to be a single payer universal national health care system that is actuarially advance funded using an Actuarial Cost Method called the Entry Age Normal Cost Method, just as Social Security needs to be. In this case ‘Single Payer’ does not mean just Medicare but rather that all funds go through Medicare before being disbursed so we can do some statistical analysis to determine if fraud is taking place.
The cost savings for having such a system would be about 75% of the $2.4 trillion, or $1.8 trillion a year, we are spending now, enough to pay down much of debt we now have and are creating to stop the global economic disaster that has been created—and lets keep this in mind at all times—by the Republican phony ‘free market’, trickle down, Voodoo economics.
However, it will take about ten years to do it all and there will be upfront costs before the major cost savings begin to kick in.
In the meantime we must actuarially advance fund both Social Security and Medicare and invest part of the money in stocks, which will help get us out of this major financial disaster, since it will boost investor confidence and the stock market, which will help people spend more and more importantly improve credit ratings of corporations and also permit them, to raise capital by issuing more stock.
Also, we can move towards much lower payroll taxes, the Entry age Normal Cost for Social Security for example would be less than 3.5% of pay but pay the balance currently going into the system, along with around $50 billion a year for 40 years, from the federal government’s General Account which would pay off the entire Initial Unfunded Past Service Liability at the end of that time period. That much lower payroll tax would benefit both individuals and help corporations to compete.
The same thing would be done for Medicare first and then medical care. However, the initial savings would be far less, but as the improvements take place in our bloated health care system, the payroll tax should come down to the same order of magnitude, around 3.5% of pay.
Your friendly retired health care and pension-consulting actuary,
Andy Lang, FSA, MAAA andyclang@comcast.net
Thanks, Andy. Reviewing this book has had the unintended benefit of hearing another point of view that also piques my interest. There are so many points of view around this topic that I am not surprised at the inertia around finding a fix. I hope the new health czar is adept at surrounding herself with the most knowledgable people in this field and discerning in her ability to churn all the information and come up with the best recommendation.
The comments by both actuary and the two insurance authors have good points.
What has to be considered to improve a health care system currently thought to be broken?
All Americans are responsible for their finances and their health.
It is a part of life that can never be governed.
The person who buys his personal insurance currently and utilizes a medical or consumer directed health care plan doesn’t pay that 70% overcharge in premiums.
In making my point I refer to the great book I read, The New Health Insurance Solution How to Get Cheaper, Better Coverage without a Traditional Employer Plan, Health Savings Accounts and Other Ways You Can Save 5000+ a Year by Paul Zane Pilzer the New York Times best-selling author.
This book written in 2005 updated in 2007 explains consumer directed health care solutions for employers, employees, HR and the average person on how to get access, keep access and reduce the cost of health insurance. http://www.paulzanepilzer.com
To touch again on the health issue, a book I recently read by Dr. Mark Sorenson Vitamin D3 and Solar Power for Optimal Health, on the third page he starts a list of 105 diseases and disorders or conditions that can be diminished by just having proper levels of vitamin D which is actually a pro-hormone that produces all hormones in the body. http://www.vitaminDdoc.com
The biggest factor that I see in not accomplishing a true helpful health care system in America, is that we can never govern whether a person chooses to get healthy or stay healthy and to find those ways to be healthier and stay healthier.
It may seem common sense for a person to fix his home, his car or anything that needs repair, but that person may just pass by something that seems like a panacea that could repair a person’s health or keep that person healthier long-term.
Dr. Pilsner gives a chilling fact about Americans, which is 50% of all bankruptcies are not because of financial mismanagement, but is actually from just one medical expense.
This fact being true, it would make sense that a person would want to stay clear of medical expenses that weren’t accidents such as staying healthy, getting healthy and being active in taking responsibility for oneself.
If what the actuary actually says will take 7 to 10 years, a person exercising…getting healthy could buy his own insurance after seven years and get better results.
A person if healthy can actually do it now!
There are some exceptions.
New York and New Jersey do not allow competitive self/private insurance.
I do agree with all three of these people when they say that we need competition across state lines for affordable health insurance.
Karl author: Health Savings Accounts Guidelines Made Easy
Thank you Karl. I think it would be nice if we could all just take care of ourselves better and we wouldn’t have to worry about getting sick, but I can’t help but think of some of those super health gurus who dropped over from a heart attack in mid-life. Not to be ironic, but if you just drop dead midlife I guess your insurance concerns are over. I just believe there needs to be some oversight so people who are trying to take care of themselves and do things right are not ripped off.
Good point Donna. I know we see a lot of information from supposed gurus on health as well as finances. I find myself going back and doing research on who I listen to and what their background of success is. In Dr. Pilsner’s case, he has testified to Congress on medical and health care issues and Dr. Sorenson owned the number one ranked spa in America (National Institute of Fitness). He is 65 years old or should I say young. Maybe both of these books should be on your list to read and comment further on. Have a great day.
Karl
Donna, I agree in principal that having giving consumers more control over thier own health care and an incentive to comparison shop is the key to solving the health care crisis. That would stimulate price competition in the market, the lack of which I blame for the entire health care crisis. I just don’t believe health savings accounts are the way to do it.
With health savings accounts, a prolonged illness would wipe that account out in a flash, leaving a high annual deductable that the patient would be unable to afford.
I think the insurance companies need to give patients a cash back reward on an insurance debit card for thrifty choices, and assess a moderate co-pay to the card for not-so-thrifty choices. That, and a way for consumers to compare costs and quality, and a little something to the doctor for giving the consumer safe options to choose.
Hi Dvernier:
I went to your blog to see if I could reply to you with your first name – maybe it’s Dvernier? Anyhow, I see your blog is kind of new. I hope you have as much fun blogging as I do. The health care topic fascinates me….Perhaps Congress won’t get it totally right the first time, but at least there is now some momentum. Thank God!
I’m thinking about what you say with regard to comparison shopping. Here’s a concern I have about that, based on my own experience with buying cars. I get as much fun out of buying cars as I do going to the doctor’s office. Not a lot. So I usually don’t buy a car until mine is sitting on the side of the road dead, or it needs a bazillion dollars in repairs or I’ve totalled it in an accident.
Then I go shopping with a vengeance and am usually working from a position of desperation. The salesmen can see it in my eyes. I want to walk into a dealership, find something that is at least close to what I’m looking for and buy it.
So imagine if you suddenly find yourself in a serious, unanticipated health crisis. You need chemo, bypass surgery, a lump removed. Are you going to go shopping at that point or just say: “Fix me! Now!” Where I live there are a few choices of where to go for care, but some people who live in rural areas don’t have that kind of choice.
In matters of life or death, I’m not sure the consumer has that much power.
Donna, you have a good point, but not every consumer would be willing and/or able to shop. But if just those that were willing and able were given a reward from their insurance company for thrifty health care decisions, it would do a lot to generate price competition in the market, which is what we need to control prices. Those that could not shop would just have the standard co-pays instead of a cash back reward. Plus, if doctors benefited by helping patients shop, and understood that they could help their patients financially by helping them make thrifty choices, that would change their behavior in many cases to one that would foster price competition in the market. Thanks for the warm welcome, I appreciate it.