US health care system as broken as everyone seems to
say it is? Yes, it
is broken, but not
for the reasons we see most of the time in the mass media. Do you sometimes think that too many
health care dollars are going to support the bureaucracies within
companies or government agencies?
you sometimes annoyed, concerned or even angry about the degree to
insurance company or government administrators insert themselves
care decisions that should be between you and your doctor? If you answered “yes” to
any of these
questions, please read on.
Just about every proposal discussed in the mass media invites even more involvement from either insurance companies or the government and will very likely lead to more of both of the above objections. Western North Carolina Objectivists (WNCO) is advocating a proposal that minimizes involvement from both of those institutions and maximizes patient - doctor involvement.
In the position paper, below, WNCO presents its alternative health care proposal called the
Reformed Health Savings Account (RHSA).
What is Objectivism?
What is WNCO?
In brief, this proposal can be thought of as a
vastly expanded Health Savings
Account (HSA). In
order to distinguish
this new concept from the HSAs available today, we designate it here as
Reformed Health Savings Account (RHSA). In effect,
it would work like an IRA.
Everyone could put funds into their RHSA and
withdraw them as needed to
cover health insurance premiums and medical expenses.
Instead of the current limitations imposed on HSA’s, RHSAs would allow for increased contributions and expand the ways in which the funds could be used.
Limitations of Current HSA’s: Today’s HSAs only allow you put in enough money to cover premiums for high deductible health insurance policies plus enough to cover the out-of-pocket deductibles. You pay for routine medical care up to the limit of your deductible (usually about $2,500). Then your insurance policy kicks in. Not only does the insurance policy kick in, but so does the rat race of dealing with the insurance company on filing claims, bickering over what is covered and what is not and all the other aggravations many of us have found when filing claims with insurance companies. In effect, today’s HSA rules don’t allow you to contribute enough so that you could accumulate a fund big enough to buy even higher deductible insurance options or even to eventually eliminate insurance altogether.
Limitations of Current Insurance Schemes. Today most working families get their health insurance through plans sponsored by their employers. It is so common that it is hard to imagine different ways of doing things. Most retired people get their health insurance through Medicare. Many people who are less financially fortunate get their health insurance through Medicaid. Each of these health care delivery systems has two major drawbacks in common:
1) Insurance plan administrators of one sort or another get between you and your doctor(s) on health care decisions. Why should they be involved at all? Health care decisions are important, to be sure, but making the right decision for YOU is not usually the administrator’s job. The administrator usually inserts himself on decisions regarding what they will reimburse for. I do not think a credible case can be made for these administrators to be involved so they can help us with your personal health care decisions. Our doctors are the ones we rely on for this and important medical decisions should be ours and ours alone to make. Can the case be made that we, along with our doctor(s), are not competent to make important medical decisions? We would also reject that contention. We do, after all, make other important life decisions such as whether or not to have children rearing our children, buying houses and cars, etc. Are we any less able, with the consultation of the doctors that know us the best, to make our own health care decisions? We at WNCO think we are.
2) The same administrators get involved with the financial decisions. Why? The answer is simple: it’s their money. What’s that you say - why is it their money? We pay them the premiums; those premiums become the insurance companies’ money. Many major health care spending options then become a matter of negotiation not only between the insurance company and your doctor, but between you and the insurance company. Not only that, but the insurance companies are holding all the cards (dollars)? Why can’t we all make our own health care medical decisions? WNCO’s Health Care Reform Proposal outlines a way you can do just that.
Another problem worth mentioning is that insurance programs offered through your employer go away when you change employers. Portability leaves a lot to be desired. Portability is also hindered by state regulations that throw up road blocks for insurance companies to offer plans that cover you anywhere you choose to live. The average person today will change jobs many times during his working career. Every time you do, you start all over with a new health insurance plan and have to select from a whole new set of options and learn all over again what’s covered and what is not. We don’t do this with homeowner’s or automobile insurance. Why do it with health insurance? Do we do it because our employers are better at picking insurance plans? No, we do it because the employers get better rates and can take the business tax deduction. Why shouldn’t we manage our own plan with equal or better tax treatment? This proposal does that.
How it Would Work. The first step is to set up a RHSA. It would be set up much as Individual Retirement Accounts (IRA) are done today. You could set it up at a bank or at a brokerage house. Let’s look at ways funds can flow into the account and how they would be withdrawn.
Funding your RHSA. Several ways funds could be deposited into your RHSA are outlined below. Creative policy makers can undoubtedly come up with other ways also.
1) You deposit funds into your RHSA just like you would into your IRA. Funds that you put in get special treatment under the tax code. The first portion of funds that you put in, let’s say $10,000 per year is a tax credit. Using a tax credit benefits both high and not-so-high income earners. Funds you put into your RHSA over and above the tax credit level, let’s say up to about $50,000 per year, would be tax deductible. These amounts may seem high, but who would argue that health care isn’t important enough to justify such treatment.
2) Your employer would have the option of depositing funds into your RHSA as an employee benefit. Companies might find this a good way to attract the talent they need to make their company more successful. Once the funds are in your account, you have control over them. Your employer would have no further input into your health care decisions. No more dealing with your HR department and no more dealing with the insurance company your employer selected. In this regard, it would operate much like a 401k.
3) Gifting to other people’s RHSA would be permitted. Your RHSA wouldn’t have to be used just for you. As long as these funds are used for health care, they qualify for the full tax benefit. This includes taking funds out of your RHSA and transferring them to the RHSA of other family members and even of others outside the family. Why shouldn’t you be able to donate some of your RHSA funds to someone else as long it is a bona fide medical situation? Since a big part of the current health care discussion involves how to cover everyone, why not make charitable giving for medical issues become part of this.
This is just one way people at the lower end of the income scale could see their RHSA grow. Suppose, for example, you learn of a person in your town who has been stricken with a severe illness and his own resources are rapidly diminishing. You look at your RHSA and see that it has grown well beyond any anticipated near-term need. Why shouldn’t you be allowed to make a contribution out of your own RHSA to help him or her out? This would truly lie within the spirit of charitable giving. It is person-to-person, fueled by genuine compassion, and bypasses involvement from any bureaucracy whether it be insurance company or government.
4) Estate planning options would allow you to transfer any funds remaining in your RHSA to anyone you wish to will them to at the time of your death. That way you could help insure that your loved ones get some help from you on this important issue.
5) Other options may evolve over time. Initially, as the current system is dismantled, existing health care funding mechanisms such as Medicaid may remain in effect for some time. As a transitional measure, public funds now going through the Medicaid program could be diverted directly to individuals’ RHSA for those currently on Medicaid. Ideally, this type of funding would eventually prove unnecessary.
Provision for low income earners. What about those at the lowest end of the income scale? Individuals and families who, for whatever reason, might not be making enough to gain the benefit of the income tax credit benefit from the WNCO Health Care Reform proposal as well. Low income earners may set up a RHSA with a minimal contribution. At that point, they become eligible to receive funds from any of the sources discussed above.
Using your RHSA Funds. Once your fund is set up, you use it to pay premiums on any health insurance policy you elect and for any out-of-pocket medical expenses you elect. The insurance policy will kick in depending on the specifics of the policy you bought. Over time, the size of your RHSA will grow if you keep adding to it, are blessed with good health and withdraw the funds wisely. If the fund grows large enough, you could consider buying a policy with an even higher deductible - one that just covers catastrophic medical issues.
Advantages of the WNCO RHSA
· The ideal program would mandate that funds in your RHSA be used for health care purposes. This would include all health care uses: medical, dental and vision. The only reason you would be taxed is if you spent your RHAS funds on something other than qualifying medical care. Additional penalties might be levied if you spent funds on non-qualifying expenses.
· Over time, as more and more people build on their RHSAs, their dependence on Medicare and Medicaid will decrease. This has the benefit of lessening the future financial impact on two very stressed federal programs. Not only can an RHSA provide for the health care needs of future retirees, but also do so in a way that promotes their independence.
· People currently on Medicare, Medicaid, etc. or who are close to getting on them would be exempt from the provisions of this plan.
· Promoters of health care reform often cite the fact that the US spends more on health care per capita than any other developed country. Much of that cost results from the burden of administering the insurance plans and government programs we have. Imagine how much our health care costs could be brought down when most individuals are “administering” their own plan. Much of those administrative costs built into insurance companies and government programs will go away.
· Using your RHSA for long term care insurance premiums and for nursing home care would be permitted.
· Tort reform needs to be addressed either as part of a more comprehensive individual-centered approach such as this or as a separate piece of legislation.
That health care has been the subject of so much
discussion in recent
years is a real understatement. You
it in the media, it has been discussion in Congress at all levels,
political campaign has addressed it and no doubt lobbyists from all
industries associated with health care have seen fit to make their
to our elected representatives. There
has been precious little discussion devoted to options that put health
decisions and associated financial control into the hands of the
individual. If you
had to rely on the
media, you would think that the only options are government funded
insurance policies. The
proposal that we are aware of that comes close to the RHSA discussed
here is the
proposal put forth by John Mackey in a Wall Street Journal in an
11, 2009) entitled “The Whole Foods Alternative to ObamaCare”
(http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html). Perhaps it is time to re-awaken Mr. Mackey’s approach with the added features proposed here.
Given the lack of discussion on individually-focused programs such as the Whole Foods plan or the RHSA, what possible objections could there be?
· Can people make their own health care and related financial decisions? It is tempting to dismiss this objection out of hand, but there are undercurrents of arrogance in media discussions that focus only on government mandated programs. It is undeniable that there are people who cannot take care of themselves. The RHSA may not be the best option for them. The RHSA is being proposed for those who can. The gifting feature of this proposal allows those with well-funded RHSAs to contribute to the needs of the less fortunate.
· Wouldn’t the existence of RHSAs hurt the business of health insurance companies? Maybe. Insurance companies today are a giant industry. Much of the cost of running an insurance company is the cost of paying for all those employees who administer the complex policies and paperwork. Many people feel that their primary modus operandi is running interference on getting proper diagnostics and care and then reimbursing us only for what they determine we are entitled to get. The RHSA program removes insurance companies from routine health care decisions. If the RHSA program became an option, and a very large number of people became fully engaged in it, no doubt many health insurance companies would be looking at downsizing options.
· Isn’t it the government’s job to take care of us? There is a school of thought that takes this position. This is purely a question that lies within the sphere of political philosophy. This article cannot go into depth on this (very important) issue. But we would submit that health care is an entirely too important and personal an issue to leave to the political process.