The need for health care reform is widely acknowledged, but current proposals are too costly and ignore common sense changes that can yield real benefits.
While our health care system needs to change so all Americans are insured, there are four points worth consideration to do this wisely:
Routine health care expenses should be paid by patients.
Insurance companies should band together to share the cost of covering individuals with pre-existing conditions.
Our current Medicare public plan is not as generous as commonly perceived.
More people will be able to afford health insurance if premiums are tax deductible.
Some of us remember when plans did not include $5, $10 or $20 co-pays. Although convenient, co-pays mask the true cost of health care and too often prompt excessive use of coverage. Well-intentioned federal legislation in the 1970s legalizing health maintenance organizations, or HMOs, has had the unintended consequence of entrusting insurance companies with too many insurance premium dollars. Although convenient, it is expensive to pay a small portion of the cost of care when needed and adds to frustration when the insurance company disagrees with a recommended treatment, challenging our doctors or refusing to pay.
Insurance companies charge employers 15 percent to 25 percent in overhead expenses for every prepaid health care dollar. The patient’s $20 co-pay for a $100 service requires $115 to $125 in premiums even though the doctor receives only $100. So why not pay the $100 directly using pretax dollars? Flexible spending accounts, health reimbursement arrangements and health savings accounts are growing in popularity since they allow pretax payment of personal medical bills.
While many are not adequately insured, too many Americans are over-insured. For all but 100 percent covered preventive care, Americans should expect to pay 3 percent to 5 percent of annual income, equal to $2,000 to $5,000, before unlimited insurance protection starts. This way patients become better informed about the cost and value of recommended services. Duplicate testing and excessive use goes away, saving up to 15 percent. Paying routine medical costs with tax deductible flexible spending account dollars has been a legal option since 1978.
It is often a surprise to learn that Medicare is not generous insurance. The 2012 Part A deductible is $1,156. Part B requires seniors to pay 20 percent of physician costs after a $140 deductible. A $25,000 hospitalization and surgery can mean $2,000 to $3,000 in out-of-pocket costs. Seniors generally buy supplemental coverage to pay these costs. These “Medigap” premiums are $2,500 to $3,000 per year. Another $350 to $1,000 is needed for prescription coverage, and $1,156 to $3,700 for Part B premiums, depending upon income. While some Medicare Advantage HMO plans require no premiums, that would change with health care reform because existing government subsidies are redirected to help pay for the new public plan. Health care reform is projected to cost $100 billion per year for each of the next 10 years, including higher taxes and the restriction or elimination of FSAs, HRAs and HSAs in 2011, even though the public plan is scheduled to start in 2013. Twenty million Americans still will remain uninsured even after the public plan is in place.
A critical reform need is guaranteed insurance access for people under age 65. Currently, individuals can be turned down for coverage if a medical condition exists. The insurers’ concern is that these individuals can drop coverage at the end of any month, increasing the likelihood the insurance company will payout more in claims than collected in premiums. Well-meaning government leaders have concluded that the best way to fix this problem is a public plan option. But public plan proposals are costly and may result in Medicare for all and possible rationing of care that is common in other countries.
If insurance companies band together to share the risk of guaranteeing coverage for all individual buyers — even those with pre-existing conditions — a public plan is unnecessary. Of course, these individuals must be required to maintain health insurance coverage. Health care providers must also do their part and add only a reasonable markup to the cost of services instead of the 35 percent to 85 percent that exists today.
For too many years, American workers have paid rising health insurance premiums by accepting reduced wages. Many of us also have thousands of dollars deducted from our paychecks for insurance, especially for family coverage. If we reduce current use by 15 percent, there should be enough money to pay for the 15 percent of our population who currently lack insurance. With proper regulation, adequate deductibles and tax incentives, we can avoid a government takeover of our health care system.