HEALTHCARE TODAY: WHY IT’S A MESS
The disadvantages of third party payment plans (employer HMOs, employer PPOs, Medicare, Medicaid) to finance healthcare are becoming more obvious every day.
The causes of these problems are very fundamental. When someone else controls the money used to pay for products or services you need, then someone else’s priorities trump yours. When federal and state regulations control the structure and function of products or services you need, then politicians’ priorities trump yours.
Since World War II, Americans have taken it for granted that someone else will pay for their healthcare. If you are poor or over 65, government will provide it. If you are employed, a company will provide it. Some view this as a basic right of citizenship.
In no other area of our lives do we expect someone else to pay for everything exclusively. Certainly food and shelter are important and we do not expect government or employers to provide these. We would not want them to. Even in education we have both public and private alternatives. Our mail can be delivered by the Post Office or by FedEx. We have choices.
Unfortunately for healthcare, we have almost no choices. If poor or over 65, the only legal option is a government monopoly: Medicare and Medicaid. If employed, the only choice is usually a managed care HMO or PPO.
Choices are limited because we no longer have real health “insurance” in this country which any of us can purchase. Real insurance is a payment made for possible reimbursement should an unlikely event occur. Auto, fire and earthquake insurance are examples of real insurance products. You hope you never have to use them and they have a significant deductible if you do. Fifty years ago health insurance was this way and it was cheap.
Today health “insurance” is not that at all. It is third party financing of health services. There is no significant deductible for each use and we expect to use it frequently. Therefore it is no longer cheap.
The cost of healthcare has gone from expensive to very expensive because government regulations add to the cost of the few products available to us. There are over 60 state mandates in California which control the content of every HMO and PPO. The cost to doctors and hospitals of complying with state and federal regulations is in the billions every year.
There is no completely independent private healthcare left anywhere in the country. Just follow the money. The federal government has had price controls for Medicare and Medicaid for over 20 years. Your doctor has no control over what he can collect. De facto price controls exist for HMO and PPO fees since they follow Medicare rates. Hospitals and doctors must contract with them. If they are “out of network”, the insurance company punishes them by paying only 50% of their contract rate. Someone else controls the money paid on your behalf. |
This evolution to a government controlled healthcare system administered by the private sector results in several basic problems for you and your family:
- HELD HOSTAGE. If you are employed and under 65, you
are held hostage to your employer’s health plan. Leave and
go bare or pay one third more under COBRA. Worse still, if
you have any diagnosed illness, you may never qualify for
insurance coverage again.
- HELD UP. Healthcare coverage costs have skyrocketed
and you may feel you are being robbed by the rates you
have to pay or the cuts in coverage. When government
uses price controls, costs always go up as they have for
healthcare.
- HELD BACK. Your coverage is nothing like it used to be.
What it covers and which providers are on your list has
changed. You can no longer access any doctor or hospital
of your choosing.
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| HEALTHCARE TOMORROW: CONSUMER DIRECTED |
A little noticed provision in the 2004 Medicare Act has changed everything for working healthcare consumers. This legislation authorized the creation of Health Savings Accounts(HSAs).
HSAs give control of healthcare dollars and decisions back to you and your family. They add to other lesser known products offered by employers which also use pre-tax dollars to offset some healthcare costs: health reimbursement arrangement accounts(HRAs) and flex accounts. All of these put consumers in control and constitute consumer directed healthcare.
In brief, here’s how they work. Use the excellent web resources below to learn more about the details.
THE HEALTH SAVINGS ACCOUNT. You divide up the money you and/or your employer were paying the “insurance” company and put part of it in an IRA like account called the HSA.
You can use this pre-tax money to pay for traditional healthcare expenses and many others, usually with a debit card. If you have expenses, each year you meet your deductible using the HSA.
THE HIGH DEDUCTIBLE INSURANCE PLAN. The rest of the money pays for a real insurance product. It is much cheaper because it functions just like your auto, fire and earthquake coverage. There is a deductible and you hope you never use it.
Everyone wins here except the insurance companies. The billions of dollars they controlled is now going back to healthcare consumers to manage. Employers get out of the healthcare business and control their costs. The financial services industry is ecstatic since money is moving into IRA like investment products which they collect fees to help manage.
Many experts think employer sponsored managed care will be extinct in a decade.
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The advantages to you and your family should be obvious:
- YOU CONTROL YOUR HEALTHCARE. You choose what to pay for with your HSA debit card. It pays for many things
your old insurance plan did not, and all with pretax dollars.
- YOU CAN TAKE IT WITH YOU. No longer hostage to your
employer’s healthcare plan, you could quit and have the
same coverage. It is yours, not theirs.
- YOU CAN CHOOSE YOUR COVERAGE. The nature of the
insurance plan is up to you. There are many choices. The
amount of the deductible is up to you within certain legal
limits.
- YOU CAN SAVE FOR WHEN YOU REALLY NEED IT. If you
don’t use the plan, the money stays in the HSA and grows.
You keep the money, not your employer or the insurance
company. If you saved from the beginning of your career,
you could have hundreds of thousands of dollars in your
HSA at retirement.
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| HSAs enrollment has skyrocketed beyond all expectations.
But there is still more legislation needed to make them more useful and cost effective. Costs are still high compared to the costs borne by very large companies and the large pool of federal employees who do not have to comply with unnecessary state mandates. Federal legalization of association health plans would correct this injustice for working American families. In addition, there is no justification for terminating HSA insurance plans at age 65. The Medicare monopoly needs competition from seniors using their HSA plans. |
| We recommend the following resources for excellent additional details about Health Savings Accounts and consumer directed healthcare: |
- HSAINSIDER.COM. A complete source fo information for
anyone wanting to start an HSA. Great newsletter.
- HSAFINDER.COM. Another great source of information
- HEALTHIA.COM. Comparison shopping for HSA insurance
and acounts, hospital pricing and doctors. Very
interesting approach.
- HRSOLUTIONSTODAY.COM. Small employer site
discussing consumer directed plans
- CHCCHOICES.ORG. A consumer organization advocating
the consumer’s needs in the consumer directed
marketplace. Great e-newsletter.
- CAHI.ORG. Council for Affordable Health Insurance. Great
resource covering broader topics.
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