Michael Cannon’s Large HSA Proposal

My flippant answer to the problems in health care has always been “give us back our money and get the hell out of the way.” The point is that the supposed expert managers (employers, insurers, government agencies) we have hired to run things for us have completely botched the job and should all be fired. After all, every penny that is spent on health care comes from us and it is all supposed to be spent for our benefit.

But, other than expanding HSAs I haven’t had any real idea on how to make that happen. Somehow I missed a long-standing proposal by Cato’s Michael Cannon for “Large HSAs.” I just recently came across a paper Cannon had published in 2008 that pretty thoroughly explains the idea.

The policy proposal is really pretty simple –

  • Increase HSA contribution limits to $8,000 per individual or $16,000 per family.
  • These contributions would replace the current exclusion for employer-sponsored health insurance, and (like the exclusion) would be free of both payroll and income taxes
  • Remove the requirement that HSAs be tied to a high deductible health plan – or any kind of insurance.
  • Allow HSA funds to be used to buy any kind of health insurance from any source, as well as pay directly for services.

The rest of the paper walks through the consequences of these policy changes – how employers and employees (and the unemployed) would likely react to the new conditions and the effects these behavioral changes would have on health care spending and availability. It also considers the political reactions.

Cannon supposes that most employers would use the money currently spent on benefits to raise workers’ wages, but the employee could then direct that money to be deposited into her HSA up to the limit. The employee could then buy coverage either from her employer or on the open market, or she could save the money to pay directly for care, or use some combination of coverage and cash according to her own preference.

Cannon makes the point that not all workers want high deductible health plans, some still prefer HMOS or first dollar coverage. So employers who institute HSA programs under current rules are disadvantaging those employees. The Large HSA would enable even these workers to buy the coverage that works best for them.

I would add a point I have made here repeatedly – that some not-small portion of the population is unable to cope with insurance of any kind. They can’t read or understand the contracts, they may have poor impulse control so find it difficult to make and keep appointments weeks in the future, and so on. For this reason I have favored John Goodman’s universal tax credit idea that would be paid to safety-net providers for those people who do not buy insurance. Cannon’s Large HSA proposal addresses this problem even better – it would enable this population to show up at a clinic when they have a medical need and pay for the service when they consume it.

Cannon also makes the important point that sharing risks between people is not the only form of “pooling” available. It is also possible to “pool” over time – so that the young healthy Greg Scandlen saves money to pay the expenses of the old decrepit Greg Scandlen many years later. HSAs facilitate this kind of pooling.

I’m not going to go into all of the discussions the paper explores here. Cannon considers the varying effects on lower versus higher wage workers, considers the issue of indexing the contribution amount, looks at the possible effects on medical costs, and so on.

He is not proposing this as a panacea for everything in health care. He doesn’t address Medicaid or Medicare, for example. The focus is more on creating a more equitable market for working people.

But this is a serious, innovative idea that deserves more attention than it got when it was first published.

 

Resonse from Dr. Alieta Eck

Now you got me going. The answer is right under our noses– if we go back about 46 years–before the onset of Medicare and Medicaid.  It is not too late.  Here is the dream you are looking for, Greg.

The answer is for physicians to take on the care for the poor– for absolutely no pay. No billing, no CPT codes, no ICD-9 codes. Nothing.  No physician should earn his living caring for the poor. He should earn his living in his private practice where he can expect payment for services rendered.

And like the way it was before government decided that it could provide health care in an efficient, compassionate, low-cost manner, this free care needs to be done in non-government free clinics (NGFCs)– staffed 95% by volunteer physicians, nurses and support staff and funded by genuine charitable contributions– no government grants, no money extracted from overburdened taxpayers.

Patients self identify themselves as poor, sick and in need of a physician. Then they access the free clinic that is in their neighborhood, staffed by pleasant people who have chosen to be there and are genuinely interested in their well-being and future prosperity.  There will be no government bureaucrats filling out forms to see if they qualify for “benefits.” Each clinic will develop its own criteria to decide who is needy and needs the free care.

These patients need to know that the free clinic is not their medical home, but rather a bump in the road on their way to financial independence. Once they are on their feet, they can go to the same doctors who cared for them in the free clinic, but now in their practices.  Pay cash– but a fair cash price, not one that is trying to make up for the low fees paid by Medicare, Medicaid and HMO’s. A free market price, just like Jiffy-Lube for their cars.

The physicians and taxpayers need protection. If doctors are going to be providing free care in an NGFC, their medical malpractice for work done there will be covered by the federal government via the Federal Tort Claims Act (FTCA). But that is not enough. They need protection from the lawsuit hungry culture that has all but destoyed the medical profession. They need the state to step in and just cover them for malpractice– for their entire private practices. This will cost the taxpayers nothing unless there is a lawsuit– and these will be greatly reduced to episodes where real damage has occurred due to real negligence on the part of the physician. These cases are extraordinarily rare.

If the patients coming from the free clinics need specialty care or hospitalization, they need to access the system of “charity care” that the hospitals already have in place for poor people who have not gotten onto Medicaid.

The free clinics will be inter-connected via a sophisticated computer system. Thus surgeons who are willing to donate two operations per month will be able to sign on and find a patient who needs him, entered by the primary care doc who identified his problem via studies that were done by labs and radiologists who have donated their services. Obstetricians will identify two pregnant ladies per month, do their prenatal care in the NGFC, deliver them in the hospital and take care of them post-op. The absence of medical malpractice payments will free them up to do this good work.

The details will come easily once the structure is in place. All the pieces are actually there– but just need some realignment. Physicians are already covered by the state when they work in the medical school facilities.

Where will these free clinics come from? Where will they be? Who will start them and staff them? The answer again goes back 46 years– when all the hospitals were named after saints and popes and patriarchs. For the natural place where charity begins is in the faith communities. And there will be no shortage of volunteers, as the baby-boomers are retiring at a rate of 10,000 per day.

On Saturday, June 11th, at 10:30 AM, there will be a meeting of pastors held at the new facility of the Zarephath Health Center, 495 Weston Canal Rd, Somerset, NJ 08890. The ZHC will move from a 900 square foot to a 5,000 square foot facility, ready for the many volunteering physicians who will be looking for a place to see the poor.  The purpose of the meeting is to teach pastors how they can start a free clinic associated with their church.

The speakers will include:

  • The pastor of the church who has watched his congregation grow from 150-2,000 in the past 7 years– as people, rich and poor, are attracted to a church that cares for the poor.
  • The social worker who is also the builder who used many volunteers and thankful former patients to put together a clinic with 5 exam rooms, a dental room and 3 intake rooms where kind volunteers will just sit and hear the stories of the patients that come.
  • The physicians who have manned the ZHC for the past 8 years– who have learned much about the poor and what they really need.
  • The former FTCA administrator who now works for Echoclinics.org, a philanthropic group whose stated goal is to facilitate the starting of 10,000 free clinics by 2030.
  • The community activists who have convinced 6-7 legislators in NJ to write the New Jersey Volunteer Physician Protection Act to make this concept a reality.

It will be a time of interaction and real problem solving. Let me know if you want to be there, and I’ll have an extra sandwich for you!

Alieta Eck, MD

co-founder- Zarephath Health Center

NJAAPS.org — watch my discussion of this idea with Judge Andrew Napolitano, and my testimony to a Senate health sub-committee.

Response from Dr. Marcy Zwelling

The Immorality of Irresponsibility

This nation was founded on the principles of “natural law” and many believe fashioned after the writings of Thomas Aquinas.  Thomas Aquinas, theologian and philosopher, realized and wrote about the capacity of human reason to grasp what is right: our morality.  He wrote that truth was understood through reason and human reason was the basis for all law.  He even recognized and wrote about the law of economics, the idea of a fair price.  If the suppliers’ costs are not covered, the business cannot succeed, reasonable and rationale.

Natural law stands as the foundation of our constitution and is the basis of our founders’ passion for every American’s right to self-determination. Man should be able to formulate his /her own destiny within the confines of a reasonable legal system.  The law defines our inherent obligations to each other and the public at large but does not compel us to practice self-sacrifice.

I believe that most Americans believe themselves moral. Most of us want to do the right thing.  We vote that way and define our relationships that way regardless of our politics.

Reason or natural law would have it that “the right thing,” basic human nature does not allow for irresponsibility.  How is it reasonable that any human would not want to take care of his/her own personal needs as best he/she can?  Protect himself and his family? How is it possible that it is immoral for me to not want to accept my neighbor’s personal responsibility?  It is not.

If personal responsibility is the moral paradigm that is the underpinning of American freedom, it cannot be moral that any person be allowed to dispose of that obligation. Morality and reason demand that I work for myself first. My morality demands that I not allow my neighbor’s indifference to his/her own needs mandate my personal contribution.

American morality has no place for personal irresponsibility.  If we are going to turn our economy around and provide the framework for American world leadership we must come to terms with our personal morality. Anything less will bankrupt our pockets and our sense of reason. Personal responsibility is our American duty.

The AMA No Longer Matters

One of the discussion lists I participate in had a lively exchange about the AMA’s new Executive Vice President, Dr. James Madara. Some people thought he was a good choice, others thought he is too much a creature of academic medicine and too much of an Obama liberal. I really have no idea, I said, but over the past few years the AMA has betrayed America’s patients and I have no use for the organization. Then I added another post:

Folks,

I really have no business commenting on the AMA, so I won’t (any further.)  I love — quite literally — every poster on this list. You are all great physicians, dedicated citizens, and decent people in every way that counts. I do not want to discourage any of you in doing what you see as the right and moral thing.

I want to throw in a different thought that really has little bearing on what the AMA does. I hope you will indulge me, because I think it may provide context.

I no longer think this health care system — or this economy, or this government — is capable of being reformed. It is too late. I have asked every economist I know about how we get out of the mess we have created, including schools that don’t teach, growing numbers of people dependent on government handouts, a regulatory system that destroys entrepreneurship, and the impossible debt we have accumulated.

Not one has offered anything approaching an answer. Not just a practical answer, but even any theoretical, dreamland answer. There is no way out. That means the entire house of cards will collapse. Maybe not for another 20 years, maybe just 10. By collapse I mean something close to an early Mel Gibson movie in which survival is the primary motive.

A very large portion of our population has no practical skills. They may have advanced degrees in comparative literature or they may be great systems consultants and six sigma experts. But they don’t have a clue how to feed themselves, make clothes, build shelters, or fix a broken bone. After the collapse, the people who will prosper are those who can actually do something of value.

Feel free to dismiss all this as irrelevant to anything currently on the table. And perhaps I have become a kook in my old age. Certainly there have been nonsensical doomsday predictors forever, and maybe I have joined the crowd. But I have looked for any ray of sunshine and have not been able to find it. Sorry.

So my interest in health care now is to find a way that one patient and one doctor can find each other and work out a mutually beneficial relationship. Anything else is just noise.

Greg Scandlen

Very much to my surprise most of the people on the list agreed with me. I will publish a couple of the more extended comments in a moment. I would love to hear what you think.

 

 

Mediscare and Medicare’s Real Future

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Horsham, PA

Tel. 215-682-7075

Rfs270@aol.com

There has been much misinformation about what Congressman Paul Ryan’s plan does to try and save Medicare.  According to the Medicare Trustees Report the program is in deep financial trouble and is not sustainable for the long term.  Ryan has proposed that Americans under 55 today would receive premium support payments into private insurance plans approved by the government starting 10 years from now.  When the first 54 year old reaches Medicare age, those payments would actually be 50% higher than the current cost of Medicare for each beneficiary.  No current Medicare beneficiary and no one age 55 and older today would be affected.

I don’t know if his plan will work to save Medicare or not.  However, it is clear that if nothing is done the program will be in worse shape down the road.  I once heard a speaker use this simple formula for financial planning.  Problem multiplied by time equals a bigger problem.  Time is certainly against us.  It was in 1993 that President Bill Clinton held an “Entitlement Conference” designed to address the financial problems of Medicare, Medicaid and Social Security.  No action was taken after this conference. Now our Federal debt is over $14 trillion and the boomers are just starting to reach Medicare age this year.  The Tsunami is now coming ashore.

So what is the alternative proposal to Ryan’s idea?  I have heard nothing and read nothing from my Democratic leaders about what their proposal to save Medicare is.  If we continue to follow the same path we have been following and we all go over a cliff.  The result is higher Medicare premiums and higher deductibles and co pays with the imminent collapse of the program anyway.  It is disingenuous to criticize Ryan’s plan by saying seniors will have more out of pocket in the future under his proposal.  That is exactly what is occurring with the program now.

Look back 10 years and compare the out of pocket in the program to today.  In 2001, the Medicare Part B premium was $50 per month.  Today it is $115.40 per month or a 235% increase in government premiums and much greater than that for higher income beneficiaries starting at $80,000 of modified adjusted gross income.  The Part B annual deductible was flat at $100 until a few years ago.  Now it is $162.  The hospital deductible under Part A of Medicare was $792 in 2001.  Today it is $1,132 for each hospital stay/benefit period.  The Skilled Nursing co pay for days 21 through 100 was $99 in 2001.  Today it is $141.50.

Projecting the Medicare numbers out for 2021 using the last 10 years, seniors will face Part B premiums of $180 or much higher for many more people because there is no adjustment for the higher income surcharge.  In 2021 the Part B deductible would be $180 and each time a beneficiary stays in the hospital they would have to pay $1,472.  The skilled nursing co pay would be $184 for days 21 through 100.  Is this not taking money away from seniors?

Ten years ago, buying a Medicare Supplement was a choice that people made.  Today it is a necessity.  The irony is that you need to buy a private insurance plan to cover all of the out of pocket costs of the government plan which you already paid for your whole working life in income taxes and payroll taxes.  Still the government program is going broke.  Then any politician who tries to address the problem is crucified as demonstrated by the recent disgusting TV advertisement by the Agenda Project showing Paul Ryan pushing a grandmother off a cliff.

So what has the current administration done?  They got Obamacare passed which projects a $500 billion reduction in payments to health care providers within Medicare and diverts those funds to pay for expansion of Medicaid, government subsidies, regulations and enforcement under the so-called Affordable Care Act.  The weight of all of this will continue to stagnate the economy reducing revenue for payroll taxes that go to Medicare Part A which has constituently run deficits the last several years.  It is President Obama and his supporters in Congress that passed a law that drives a stake through the heart of Medicare at the very time the program is running out of gas.

We need to change course.  Paul Ryan and Clinton Advisor and former Congressional Budget Office Director Alice Rivlin came up with one idea to address the Medicare solvency problem.  The backlash against the proposal will diminish the chances of others coming forward with other solutions that may work to save Medicare.  Look out baby boomers; the politicians are interested in their own future, their re-elections, privileges and sanctimonious rantings.  They certainly don’t have our backs.

The Destruction of American Medicine

By Greg Scandlen

The New York Times has published a sobering article by Gardiner Harris  which describes how quickly we have allowed the best health care system in the world to slip through our fingers.

The story keys off Dr. Ronald Sroka, a family practice physician in Crofton, MD. It says,

Handsome, silver-haired and likable, Dr. Sroka is indeed a modern-day Marcus Welby, his idol. He holds ailing patients’ hands, pats their thickening bellies, and has a talent for diagnosing and explaining complex health problems. Many of his patients adore him.

But he is being pushed into extinction by academics like David J. Rothman, president of the Institute on Medicine as a Profession at Columbia University who is quoted:

Those of us who think about medical errors and cost have no nostalgia — in fact, we have outright disdain — for the single practitioner like Marcus Welby.

Mr. Rothman’s disdain and his allies in the insurance industry and government bureaucracies are winning the war. The article explains:

The share of solo practices among members of the American Academy of Family Physicians fell to 18 percent by 2008 from 44 percent in 1986. And census figures show that in 2007, just 28 percent of doctors described themselves as self-employed, compared with 58 percent in 1970.

It’s enough to make you weep, but there is perhaps a sliver of good news. A friend sent the following e-mail to one of my discussion lists:

Last week, Senator Whitehouse came to northern Rhode Island to speak to his home community. He had largely an elderly and retired audience of about 300. His comments were focused on them as he spoke of how he would fight to retain Social Security and Medicare. The audience clapped politely. Whitehouse continued to discuss healthcare. He eventually came to speak about physicians, lighting upon the topic as to how our actual charge per service differs depending upon what insurance each person has. “Go ahead,” he said, “call a doctor and ask what they charge for a certain visit or procedure. They’ll ask what insurance you have.”

I rose and said “$50.” I introduced myself to the audience and said that I charge $50 for an office visit, that I don’t take insurance, and that as a result of the massive cost savings by not having a coding specialist, collections specialist, or billing overhead, and by not having to rent an office big enough to house all those people, I can charge a reasonable fee while each patient retains the confidence of knowing that no third party will have any of their private medical information, of knowing that there are really only two people in the room when we talk, and of trusting that I’m going to provide the treatment that they really need rather than the treatment some third party tells me I should be providing.

I expected that this largely Medicare-covered audience would shake their heads and whisper “dinosaur” under their breath. Instead, I received applause and a few dozen new patients the next day. Each said roughly the same: “I’d rather pay for the care I want than have insurance cover me for care I don’t want.”

If indeed most new physicians choose to look toward the type of practices described in the Times article, that will allow all the physicians who want to run their own lives to do so without worrying about whether they’ll have enough patients. There will always be patients willing to pay a reasonable fee out of pocket for the kind of care that can be delivered by doctors like Dr. Sroka.

While the bulk of American medicine may accept becoming little bureaucrats, doing the bidding of their masters in Washington, a sliver will simply offer their services to patients on a cash or concierge basis. These few may grow until medicine becomes once again the noble profession it once was.

Krugman’s Blinders

By Greg Scandlen

There has been a lot written about Paul Krugman’s recent op-eds  and blog posts about how thinking of people as “consumers” rather than “patients” violates their “sacred” relationship with doctors.  My colleague Ben Domenech had one of the best rebuttals in Consumer Power Report #269.

It is more than a little disconcerting to hear people like Paul Krugman suddenly invoke the sacred doctor/patient relationship when they have been working so hard to have bureaucrats control both physicians and patients. But I want to make a different point, one that has been lacking in most of the commentary.

The whole point of Consumer Driven Health Care is to get people involved in their health care decisions long before they become patients.  For decades the “health policy community” has been fretting over this very thing – how to improve “health literacy,” how to get people to make healthy lifestyle choices, how to get people to ask questions about their treatment alternatives, how to teach people when it is appropriate to rush to the Emergency Department and when it is not, how to teach people the differences between the various medical specialties, etc., etc., etc.

We have health education classes in high school. We have newsletters with “Tips for Healthful Living.”  We have media reports about the latest breakthroughs in prevention and treatment.

None of it worked very well – until the advent of Consumer Driven Health Care. Suddenly people are responsible for making decisions about how to spend their own money for their own health, and they demand more information about their options. They sit together in the kitchen to decide how much money to set aside in a saving account and how big a deductible they can handle.  They have discussions about how often the kids go to the doctor and whether they will need glasses or dental work in the coming year. They look for lower cost generic drugs to replace the name brands they have been using. They use home remedies first, before making an appointment with the doctor. They participate in wellness programs.

They are not yet “patients.” They are active “consumers.”

If the Krugman’s of the world would take off their political blinders, they would see something wonderful is happening in the market.  But that would shatter their illusion of an all-powerful bureaucracy fixing everybody’s problems.

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