Sacrificing Freedom on the Alter of HSAs

By Greg Scandlen

Our compadre, Bill Boyles, publisher of the Consumer Driven Market Report, argues that ObamaCare is good for HSAs and so repeal would therefore be bad for HSAs.  In a recent e-mail he sent around he said the following:

Repeal Could Hit HSA Market-Wide Definition
Repeal of the health reform act would also eliminate one key provision which expands the definition of all health insurance in the U.S. to include HSA law. The little-noticed section requires that a “minimum essential benefits” package for all insurers include at least the HSA law cost-sharing levels. A national committee at the Institute of Medicine meets this quarter to begin to finalize the details, including several HSA-friendly committee members. The change “Creates an essential health benefits package that provides a comprehensive set of services, limiting annual cost-sharing to the Health Savings Account limits ($5,950/individual and $11,900/family in 2010),” a chart explains. The reform law “Creates four categories of plans to be offered through the Exchanges, and in the individual and small group markets, varying based on the proportion of plan benefits they cover.” Millions would select HSAs.

So, HSA out-of-pocket maximums are the ceiling for all health plans in the proposed Exchanges. That being the case, Bill supposes that most enrollees will choose an HSA level of coverage and the lower premiums that go along with it.

That may be true. But it does not follow that repealing this law would be detrimental to HSAs, for at least two reasons:

  1. The appeal of an HSA level of benefits will hold, with or without ObamaCare. I suppose it is a blessing that ObamaCare allows HSAs to continue, but repealing the reform act would also allow HSAs to continue. And without the reform law, we wouldn’t have to worry about whether there are “HSA-friendly committee members” at the Institute of Medicine. If having HSAs is dependent on the make-up of the IOM committee, what happens next year, or the year after, when those friendly committee members are no longer on the committee? Indeed, what kind of health system is it that depends on the friendship of IOM committee members, or of Kathleen Sebelius, for me to get the kind of health insurance I want to have?
  2. The current design of HSAs is not the pinnacle of consumer-friendly health insurance, to be enshrined for all time. The current OOP limits will be the absolute maximum allowed for any health plan. So, if I decide that I am better served with a $10,000 deductible, I will be forbidden from exercising that option. In fact, one of the foundations of the HSA movement has been that allowable deductibles will be raised over time as the health care system becomes more accustomed to pricing for direct payment by patients and patients build-up balances in their HSAs. That evolution will not be allowed.

I’m afraid that HSAs have become another special interest group, with advocates saying, “we don’t care what happens with health care as long as HSAs are protected.” That is not where I am. I’m an advocate for patients, not HSAs. I am not willing to sacrifice individual freedom on the alter of HSAs, or any other business model.

Collapse of Pennsylvania’s Adult Basic Health Plan

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

The pending collapse of the Adult Basic Health Plan (see Philadelphia Inquirer article) is a sad time for all Pennsylvanians.  However, I have no sympathy for our government officials who were warned by me and others before the legislation creating the program was enacted.

When I was the Legislative Chair for the Pennsylvania Association of Health Underwriters (Health Insurance Agents and Brokers) we held meetings and a press conference in Harrisburg warning that the program was poorly designed and would eventually become unsustainable.  As a sounder alternative we promoted “mainstreaming” lower income workers into employer provided plans.  Good businesses that helped insure their employees in their private insurance plans would have received tax credits for each worker enrolled and the funding would have been provided through a portion of the Tobacco Settlement.

We asked our elected representatives how they would cover the rising cost of health care for those who would be covered under Adult Basic.  Their answer was that the “rainy day” fund would adequately cover inflation.  We expressed our concerns about what would happen when the Tobacco Settlement funds ran out.  We did not get an answer.  We pleaded that an independent actuarial study be done before it was enacted.  Except for a handful of brave legislators who raised the same questions we were ignored.  To me this whole fiasco is a matter of legislative malpractice.  The new Federal law is only going to make the problems worse if it isn’t repealed.

The solutions now include getting those who will face the loss of Adult Basic into regular health insurance plans and giving them some kind of subsidy so they can buy their own insurance.  Federal approval to allow HIPAA (Health Insurance Portability and Accountability Act) coverage credit to waive pre-existing conditions should be available for those who have been continually covered for 18 months or longer under Adult Basic.

Medicare vs. Private Admin Costs: Let the facts stand

By Ralph Weber CFP®, ChFC®, CLU®, REBC®, and Dave Racer, M.Litt*

Many health care reformers cite Medicare’s administrative cost as a reason to drop private insurance and move to a government-managed health care system. Depending on who makes the claim, Medicare’s administrative cost estimates range from 1.5% to 12%. In much the same breath, these reformers claim that private insurance companies spend 10% to 50% on administration.

The real administrative cost of Medicare and private health insurance relies on how one defines administrative expense. The estimated cost of administering Medicare, for instance, often excludes overhead items that are not only common to private health insurers, but to all businesses. These different ways of accounting confuse an honest evaluation of the government’s Medicare administrative cost.

So what constitutes an administrative expense? Where can one find real, honest numbers with which to make an intelligent comparison?

Governments across the country have turned to HMOs and managed care to resolve health system problems. Yet, do the most common administrative cost measurements include the high cost of administering managed care, compounded by CPT codes and other billing codes, the cost of billing a host of different insurance companies, and all the other normal business accounting practice cost? These additional – and unnecessary – costs add tens of billions of dollars to the health care bill; a sorry waste of money when there is a less costly, workable solution available (and it is not Medicare).

The best way to measure administrative cost is also the simplest: Take the total dollars spent on health care and subtract how much actually gets to the providers (doctors, hospitals, etc.). The difference is administrative cost.

The health care spending “bible” is the endless set of statistics from the Centers for Medicare and Medicaid (CMS). CMS tables provide a detailed, line item description of how each dollar is spent.

One spending line item on the CMS tables is tiled “Government, Administration and Net Cost of Private Health Insurance.” This is the line item so often quoted out of context when proponents of government medicine are trying to understate the costs of government administration. For private insurers, this line item includes the cost of administration, marketing, research, premium taxes, facilities, equipment, insurance and reinsurance losses, as well as profit.

The CMS data for government spending include additional line items that fall below the “Administration” line: “Government Public Health Activities, Research, and Structures and Equipment” (see Table 1). If CMS separated these same costs for private insurers in the same manner as it does for government plans, it would be a fairer way to compare the two; but it does not, and that fact goes ignored.

Table 1

      Private Insurance Government


Non Patient Care costs        
  Government Administration and Net Cost of Private Health Insurance   x x
  Government Public Health Activities   x
  Research   x
  Structures and Equipment   x


To shed light on real administrative cost of public versus private health care requires computing the actual per capita cost in absolute dollars. Table 2 shows such a comparison.

Table 2

Costs as percentage of expenses   Private Insurance Medicare Medicaid   Government Grand Total
Number of enrollees   201,991 41,375 39,554   91,884 299,106
Total cost in millions   775 431 329   1,036 2,241
  Cost per Capita   3,837 10,422 8,328   11,272 7,493
Patient care costs   680 410 304   851 1,878
  Medical Loss Ratio   87.79% 94.99% 92.29%   88.32% 86.67%
Non Patient Care costs   12.21% 5.01% 7.71%   11.68% 13.33%
  Government Administration and Net              
  Cost of Private Health Insurance   12.21% 5.01% 7.71%   5.74% 6.95%
  Government Public Health Activities           6.19% 2.86%
  Research           3.68% 1.89%
  Structures and Equipment           2.26% 4.49%


If one assumed from Table 2 that Medicare administrative cost is just 5.01%, compared to 12.21% for private insurance, it might seem that Medicare is administered at a significantly lower rate. However, comparing the percentage of cost for activities not directly related to patient care paints a far different and truer picture: Private insurers’ non-patient care costs are 12.21% compared to 11.68% public healthcare. Yet, this still leaves out vital data.

Table 3 shows the cost of care in dollars per capita and leads to the truth. Considering “Government Administration and Net Cost of Private Health Insurance” in isolation, the net cost of administering Medicare is 11% greater than that of private insurers on a per capita basis. Including all non-patient care cost indicates that public healthcare administration is 281% greater than that of private insurance administration. This assessment still does not include the cost of collecting taxes, nor does it include the providers’ cost of complying with insurance billing and collection requirements.

Table 3

Per capita in absolute dollars   Private Insurance Medicare Medicaid   Government Grand Total
Number of enrollees   201,991 41,375 39,554   91,884 299,106
Total cost in millions   775 431 329   1,036 2,241
  Cost per Capita   3,837 10,422 8,328   11,272 7,493
Patient care costs   3,368 9,900 7,683   9,257 6,280
Non Patient Care costs   468 522 642   1,317 999
  Government Administration and Net            
  Cost of Private Health Insurance   468 522 642   648 521
  Government Public Health Activities     698 214
  Research     415 142
  Structures and Equipment     255 337


Americans have always been mistrustful of the concept of “government efficiencies” (the ultimate oxymoron). The idea that government can manage health care more effectively and more efficiently is counter-intuitive, and for good reason: The facts show it is not true.

Let the facts stand, and in so doing, let us quit considering the nonsense of a government-run health system. Instead, let us move toward the kind of reforms that will unlock the power of American consumers, and watch effectiveness and efficiencies fall into place.

About the authors

Ralph Weber is a Canadian expatriate, now a Tennessee-based health insurance design consultant, and CEO of Route Three Benefits, Inc. Also the founder and CEO of MediBid Inc., A free market online medical shopping portal for transparency in pricing.

Dave Racer is a speaker, writer, publisher and co-author of Your Health Matters: What you need to know about US health care (Alethos Press LLC, 2006), FACTS: Not Fiction – What really ails US health care (Alethos Press LLC, 2007), and Why health care costs so much: The solution – Consumers (Alethos Press, 2009).  See Alethos Press.



CMS expenditure data taken from Table 4, and table 6, National Health Expenditures, by source of funds and type of expenditure: Calendar year 2007. Last accesses January 18, 2009

Enrollment data taken from CPS Annual Demographic Survey Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2007. Last Accessed January 18, 2009,


The Holes in our Safety Net

By Marcy Zwelling-Aamot, MD FACEP

I don’t know Congresswoman Giffords or Judge Roll.  Nor am I familiar with any of the other Arizonians who had their lives seized from them when a crazy person shot up the Safeway in Arizona.  That said, I am sickened by the shooting and like others I can’t help but wonder how this can happen.  How did this man get a gun when he was already known to the police in the area? If his gun was purchased legally, shouldn’t that information have been made available to the police when he was arrested?

The media has already started the spin.  Depending on the bias, this tragedy is the result of the argumentative nature of politics today or it is the result of liberal gun laws.

But, as a doctor, I want to know how someone with obvious mental illness escaped the system.  I want to know how it is that society can’t separate the mentally ill from a gun. Where were this man’s parents? His friends? Where were the counselors at the community college where he was dismissed? He was known to the police, albeit for “misdemeanors,” but the police knew he was a problem, and there should have been a means of getting that information into a data base so that 1) he could not get a gun and 2) he was able to get the help he needed.

The purpose of government is to provide a safety net to provide for the welfare and security of the public.  Where was the safety net?  Have we become so politically correct and so insulated from the world, that we let those in need escape the help they need?

The nation is arguing about Obamacare.  Admittedly, I have also been vocal about repealing the legislation because I don’t think it does a thing to help the health of this nation.  It surely doesn’t do a thing for the mentally ill. And I don’t think that Obamacare helps us become more responsible about helping our fellow man or more accountable about our own health.

The stimulus package was responsible for putting billions of dollars into the economy by mandating the electronic health record.  Doctors are mandated to spend tens of thousands of dollars in hardware and thousands in software in order to provide the government with our patient’s most private medical information.  But, the government can’t seem to share information about felons to keep the mentally ill from owning guns.  Shouldn’t this be a part of homeland security?  Perhaps we could divert some of those funds allotted to the additional agents needed for pat-downs at airports to a system where we could improve communication with our law enforcement facilities, our doctors, and our social service systems.

Does it make sense that the government would know this killer’s cholesterol but they can’t protect the public from the ravages of his mental illness? Does it make sense that a doctor is mandated to report the results of his colonoscopy but there is no means to communicate with law enforcement about the risks of gun ownership?

I, like most of America, am frustrated by the argumentative behavior of Congress and the president.  And I have yet to see a productive debate about how we really might utilize our “security net” to protect Americans and that includes an erudite discussion about the health care delivery system’s flaws and proven solutions that might really work.

I would suggest that the lesson we learn from this tragedy is the lesson that the government would do well to concentrate on the business of protecting the public rather than devising a means to invade the sanctum of the patient-doctor relationship.  When Congress gets down to repealing (or not) Obamacare and legislating workable solutions, they should remember that their job is to protect the public pure and simple and they should start with devising systems that secure our safety rather than systems that invade our privacy.