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Mar

03

2010

Healthcare Reform: A Giant Awakens

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Written by Alex Parrish   

THE healthcare reform debacle that is being forced down the throats of "We the People" has set their tempers flaring. In town hall meetings all over the country last summer, dissatisfied American citizens, who were fed up with being ignored, minimalized, and discredited, bombarded surprised members of Congress.

These citizens were responsible, concerned, ordinary people who were seeing the current administration drag the country down a road they considered unacceptable and foolhardy. Moreover, like a sleeping giant, they had awakened to the fact that all was not right in their world and they need to stand up and do something about it. The only option they saw was to speak out.

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Enumerated Powers - Article I, Section 8[1]

Defensive Medicine - providing medical services that are not expected to benefit the patient but that are undertaken to minimize the risk of a subsequent lawsuit.[2]

Average Annual Premium - $13,375
Average Worker Contribution - $3,515
Average Employer Contribution - $9,860[3]

But aren't there other options available? Isn't Congress supposed to create legislation that will make all our lives better? Isn't the President supposed to look out for "the little guys" and make sure that they have all their needs met? Shouldn't we be supporting this government in their quest to "fundamentally transform the United States of America"?

The answer to these questions is, in a word, "No"; or, more emphatically, "Hell, NO!" Now, I agree that the healthcare industry does need to be overhauled, but not in the manner the current administration is doing it. Instead, let's ponder some other ideas together...

First and foremost, let us agree foundationally that the Constitution of the United States does not give any specific, enumerated powers to the Federal Government to provide or mandate healthcare, or to guarantee insurance for the People; it is a privilege, not a right. Having said that, let us also agree that, when necessary, the Federal Government can erect and oversee policy frameworks, based upon the foundation of the Constitution, that private individuals and industry can provision.

This being the case, I believe that a policy framework for healthcare can be constructed that would meet the needs of the People, as well as implement and promote quality, inexpensive, privately-provided coverage for the vast majority of the population. Best of all, it will not increase taxes for the Taxpayer and should end up saving them some hard-earned money. How would I construct such a thing? Well let me show you how...

The first framework action I propose would be to dismantle the barriers to purchasing insurance products across state lines. This action alone would bring immediate results in the form of greatly increased competition, thus causing insurance premiums to decrease in the neighborhood of 40% or more[4]. And the best part? It costs the Taxpayer absolutely nothing to implement, since simply repealing the legislation[5] that instituted the barriers in the first place is all that is required!

The second framework action I propose would be to launch "fairness" improvements in medical liability litigation, otherwise known as "tort reform". At least 40% of the costs related to medical litigation come from frivolous claims[6]. In most instances, the defendant (i.e. the doctor or insurance company) settles the case out of court due to the prohibitive costs involved to actually try the case. Because these costs lie solely on the defendant, the plaintiff does not hold any financial responsibility even if they lose.

This has prompted 90% of practicing doctors to modify their principled approach to patient care and adopt a wider, more general position of defensive medicine, where they prescribe extra and more expensive tests and procedures in order to cover themselves from any possible malpractice suits[7]. If there is ever going to be any real reduction in insurance and healthcare costs, this must be addressed head on.

To facilitate positive change in this regard, it would be only "fair" if the plaintiff was responsible for all court costs involved if they lose. The obvious, immediate result would be that most of those frivolous cases would dry up since the plaintiff would be required to have a solid, provable case or pay up if they didn't. As a result, healthcare and insurance costs would, in turn, be reduced as the need for additional, unnecessary medical tests and increased malpractice coverage decreased. This, according to the CBO, would easily bring about a savings of at least $54 billion over a ten year period[8], if not more. And, again, this action presents no additional costs to the taxpayer.

So far, so good. Now, to address the personal insurance side of the equation, I propose a framework allowing every employed person (standard, contract, or self-employed; full- or part-time) the ability to purchase their own insurance coverage from any private company of their choice anywhere in the country. To make it effective and affordable across the board, the policy would be a high-deductible, catastrophic policy with a health savings account attached. This would allow the insured to have more involvement and choice in the actual costs of their healthcare, prompting them to become interested in looking for better pricing, naturally bringing more competition into the marketplace and lowering healthcare prices.

The premium costs for these policies are relatively low since the insurance company is not liable for any healthcare expenses until after reaching the deductible amount. Each employed person would pay a premium rate of no more than 5% of their income, in most cases automatically deducted from their paychecks. For the average household income of approximately $50,000[9] this would amount to no more than $2,500 in annual premium, about a 30% savings on the employee's contribution for an average health insurance policy. This is a realistic premium amount for family coverage on a high-deductible plan. And, with the other program modifications previously discussed, this premium amount could be reduced even more; perhaps down to 2.5% or 3%.

Obviously, with every employed person paying the same percentage this would mean that those with higher than average income would be paying more and those with lower than average income would be paying less. This will work because those who are paying more will cover the shortfall of those paying less. And, while it might appear that two-income families are paying more than one-income families, everyone will be paying a fair and equal percentage of their household income; no more than 5%.

Most likely, there will be a surplus created. These surplus funds can be a fallback to provide insurance coverage for those who are unemployed, disabled, or otherwise incapable of providing for their own coverage. We, as Americans, still hold a certain responsibility to help provide aid for those less fortunate or who have fallen on hard times. This will eliminate the need for Medicaid coverage which will help reduce state and federal expenditures. In addition, coverage will be extended to seniors, as well, eliminating the need for Medicare and reducing the FICA deduction percentage for both employers and employees from 7.65% (15.3% for self-employed) to 6.2% (12.4% for self-employed)[10]; an additional savings to all involved.

Now, the Health Savings Account (HSA) can be grown in a variety of ways. It can be paid into by the insured, by the employer (with a tax break as an incentive), and it can even be filled by tax rebates from the Federal Government! Allowing the funds in the HSA to accumulate and rollover every year will see the account filled in short order. Another benefit of this also becomes clear; since the employer is not required to pay any of the premiums, they will have additional funds available to use for furthering the interests of their business (i.e. increasing employee pay, hiring new employees, investing into the company, etc.). Best of all, the employee owns their policy and can transfer it with them wherever they work.

Lastly, I would give the insurance companies the ability to modify the coverage (with certain restrictions) in order to provide a policy which would be more enticing to customers. In order to allow for competition between companies as they vie for more customer satisfaction and retention, I would also free the insurance companies to create "gap" policies which would cover the deductible amount. These policies would be relatively inexpensive since the insurance company's exposure would only be a few thousand dollars a year per policy. Ultimately, the employee would have the option to purchase the coverage, or not, based upon their needs and finances.

This policy framework gets the government out of the way and allows private industry and individuals to provide for themselves, which was the intent of our Founding Fathers. It still allows for Federal oversight of the insurance companies, which is necessary and constitutional, but does not allow the Federal Government to dictate who the insurance is purchased from or under what circumstances that coverage is applied. Nor does it allow the government to limit the coverage that the insurance companies want to offer.

Could there be anything more American than a plan that affords private enterprise the greatest freedom to individuals and industry, while providing across-the-board savings and, ultimately, better quality healthcare to all for less money?


 



References:

1. Constitution of the United States - Article I, Section 8. http://straightstuff.net/documents/constitution/cons-complete#ART1S8

2. Weinstein, MD, Stuart L. "The Cost of Defensive Medicine." American Academy of Orthopaedic Surgeons - AAOS. Nov. 2008. Web. 03 Mar. 2010. http://www.aaos.org/news/aaosnow/nov08/managing7.asp.

3. Kaiser Family Foundation, Health Research and Educational Trust, and National Opinion Research Center. 2009 Employer Health Benefits Annual Survey. Report No. 7936, pg. 2, Exhibit B. Health Research and Educational Trust, Sept. 2009. Web. 25 Feb. 2010. http://ehbs.kff.org/pdf/2009/7936.pdf.

4. Yoo, Hannah, et al. Individual Health Insurance 2009: A Comprehensive Survey of Premiums, Availability, and Benefits., pg. 6, Table 3. AHIP Center for Policy Research. America's Health Insurance Plans, 21 Oct. 2009. Web. 21 Feb. 2010. http://www.ahipresearch.org/pdfs/2009IndividualMarketSurveyFinalReport.pdf. Figures are based upon the difference between the most expensive average annual premium and the least expensive. Actual savings could be greater after full competition takes affect.

5. "McCarran-Ferguson Act of 1945." Encyclopedia.com. West's Encyclopedia of American Law., 2005. Web. 21 Feb. 2010. http://www.encyclopedia.com/doc/1G2-3437702869.html

6. Studdert, David M., et al. Claims, Errors, and Compensation Payments in Medical Malpractice Litigation. The New England Journal of Medicine. 354.19 (2006): 2024-2033. Web. 25 Feb. 2010. http://content.nejm.org/cgi/content/full/354/19/2024

7. Studdert, David M., et al. Defensive Medicine Among High-Risk Specialist Physicians in a Volatile Malpractice Environment. JAMA: The Journal Of the American Medical Association. 293.21 (2005): 2609-2617. Web. 2 Mar. 2010. http://jama.ama-assn.org/cgi/content/full/293/21/2609

8. Elmendorf, Douglas W. CBO's Analysis of the Effects of Proposals to Limit Costs Related to Medical Malpractice. Letter to Honorable Orrin G. Hatch. 9 Oct. 2009. Congressional Budget Office. 9 Oct. 2009. Web. 2 Mar. 2010. http://www.cbo.gov/ftpdocs/106xx/doc10641/10-09-Tort_Reform.pdf.

9. DeNavas-Walt, Carmen, et al. Income, Poverty, and Health Insurance Coverage in the United States: 2008. U.S. Census Bureau. Current Population Reports, P60-236, U.S. Government Printing Office, Washington, DC, 2009. Web. 25 Feb. 2010. http://www.census.gov/prod/2009pubs/p60-236.pdf.

10. "FICA and SECA Tax Rates." Social Security Online. Social Security Administration, 12 Nov. 2009. Web. 02 Mar. 2010. http://www.ssa.gov/OACT/ProgData/taxRates.html.


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