Friday, April 9, 2010

Not Insurance, Pre-Paid Healthcare

As I said in my last blog, the Healthcare system prior to ObamaCare, was similar to auto maintenance and extended warranty plan. The maintenance portion of the plan has shown to be cost prohibitive to most buyers and of course there is a pre-existing condition exclusion. The more persons in a healthcare plan the better. Especially if a good portion of these persons are young with unremarkable health. Medicare, which deals with older and elderly patients, has shown 27% of the Medicare dollars go toward the last year of a person’s life. Obamacare figures all this in, mandating most citizens to purchase health insurance. This regulating of the healthcare system, combined with the private industry, the lack of competition and government mandates, is by definition an exercise in fascism. It has already been acknowledged, that if ObamaCare is to succeed, then doctors would necessary need to become government employees. In the Netherlands doctors are educated and employed by the state; docotrs are paid the US equivalent of about $50,000 a year to keep medical costs down. If we are to preserve our Constitution and the inherent right to be free of tyranny, we are going to need a free market solution.

The pillars of free market and capitalism are supply and demand and competition. While there is certainly a demand for health insurance, the supply can be limited due to pre-existing conditions, cost, and competition is non-existent. This is because the requirements of healthcare insurance are determined by the individual states and there is strong resistance from the states to allow the sale of health insurance across state lines. This is one place were Health Insurers would actually welcome this competition. Catastrophic health insurance is highly profitable, because unlike a maintenance plan, it is rarely used. This allows the Insurance companies to pay for those that utilize the insurance, with premiums by those that never do; this is how insurance is supposed to work, and why standard Health Maintenance rates continue to spiral out of control. For most persons a relatively inexpensive catastrophic plan, combined with a healthcare savings account, would provide the least expensive and most comprehensive plan. If structured properly, this care would operate seamlessly.

The primary criticisms of this plan are two commonly held misconceptions. 1) Preventive care cost less then reactionary care. With the exception of pre- and post-natal care, this has been shown to be a fallacy. Study after study has shown that the price of preventive tests, far outweigh the price of treating the occasional disease. 2) If one has to pay directly for doctor visits, patients will forgo a doctor visit to save money. While there may be some truth to this, it turns out that there seems to be little difference in the actual number of doctor visits, between those that have maintenance heath insurance, and those that have healthcare savings account. Of the 43.6 million persons living in America with no health insurance (2002 numbers; http://www.ncpa.org/pub/ba460) it is estimated that 14 million or so, are eligible for government coverage such as Medicaid and the State Children's Health Insurance Program (SCHIP), that simply have not bothered to enroll. Further, 11.5 million or more are illegal aliens. There is evidence that many illegal aliens would prefer to be uninsured by choice, rather that have wage deductions for Health Insurance. The United Farm Workers (UFW) has found this to be a difficult nut to crack. Driscolls is one of the largest berry growers in the World, yet the UFW has been unable to unionise the workers. Located in the coast region of central California, Driscolls is renown for fairness to it’s workers. Unlike the UFW, Driscolls gives it’s workers an option (not a mandate) to purchase low cost health insurance or keep the money.

So, in order for healthcare to be affordable and available, we have to first recognize that it needs to be divided into two basic needs; routine care, and catastrophic care. As I said before, health maintenance does not lend itself to an insurance model as insurance is design to cover occasional incidents, not maintenance. If one is going to use an insurance model, it is best used for catastrophic care. So the first step is to develop a workable plan to cover health maintenance, which healthcare savings account are best suited. An issue is always made of the need to provide healthcare safety net for those who traditionally can not afford or has limited access to healthcare, but it turns out State Medicaid is already in place for this need. Medicaid is a means-tested healthcare system that is paid for by both state and federal funds; each state has set up Medicaid program. Medicaid has shown to be a effective safety net, helping most who can not afford medical Insurance. This was evidenced by the year long ObamaCare campaign, where the Democrats scoured the country for anyone who has fallen through the cracks, and could not find anyone that was not picked up by some healthcare program. The Democrats also tried to show that lack of healthcare resulted in death; 45,000 @ year. Like many statistics this turned out to be a made up number, which was the result of computer modelling, similar to that used for sub-prime mortgage derivatives; garbage in, garbage out.

The Healthcare issues that remain are pre-existing conditions, portability, gaps in income and illegal aliens? Along these lines, there is the misinformation that healthcare maintenance plan decrease emergency room visits, but this has not been showed to be the case. In Massachusetts, RomneyCare (single payer state healthcare) did nothing to slow visits to Emergency rooms. The reason is obvious, it is easier to go to an Emergency room than make an appointment with a doctor, and since both are equally paid for, Emergency room visits actually increased once RomneyCare covered all residents. One of the key aspects of RomneyCare was a Healthcare mandate; a mandate that all residents have proof of health insurance; while this, as a state mandate, passes constitutional scrutiny, the jury is still out on the Obamacare federal mandate and it still doesn't address illegal aliens. However, without the mandate, it is difficult to address pre-existing conditions. There is also the issue of loss of employment or income gaps, where even if portability was not an issue, how would one be expected to continue paying healthcare premiums if they are not employed and earning an income?

What is needed is to re-focus on the affordability of healthcare, and encourage and subsidize coverage through the states. Depending on ones income, the subsidy would be in the form of discounts and/or tax deductions The key rational behind healthcare reform has always been a medical problem should not result in bankruptcy, yet the focus continues to be on maintenance. This plan is based on a privatized state Medicare model. First there would be a pool of state insurance companies, offering an basic catastrophic healthcare insurance, similar to Medicare Part A, that would be available across state lines. This insurance would be subsidized by the state on a sliding scale as previously mentioned. While not an entitlement, the subsidizing of this plan would make it available to almost anyone who is employed. Next there would be a Part B insurance that would be available through the same insurance pool, but would rely heavily on medical savings accounts. Those that could not afford a basic Part A or Part B plan, would be financed through Medicaid. Another component is pre-exsisting conditions. With this plan, pre-existing conditions would be handled two ways. First, there would be no restriction on pre-existing conditions, however, you could only initiate a plan during an open enrollment period that would be the month of your birth. This would not apply if you are reducing or increasing your coverage. If you have no insurance by choice, but need catastrophic care, you will be assigned an insurer in an assigned risk pool. You will then be required to purchase at a minimum a Part A insurance policy for the next 3 years at the assigned risk rate, after which you can decide to drop your insurance, or continue purchasing insurance through the standard pool at a standard or subsidized rate depending on your circumstances. Back in the 1980's the Heritage Foundation presented a similar plan, but with mandated catastrophic coverage; the reasoning being that the insured will get a taste of health insurance and will want more, however the Heritage Foundation has since walked back the idea, as any mandated insurance, not matter how well intended, runs counter to the free market and gives too much power to the government.  Finally there is the illegal alien situation. Illegal aliens will not be eligible for either Part A or B. If an illegal alien needs medical care they will seek it, as they have been, in an emergency room. Since immigration is the responsibility of the federal government, then any costs incurred by a hospital treating an illegal alien will be billed to the federal government.

This of course is not the totality of the plan. Tort reform would also be a necessary component. This would include a basic matrix of care, primarily for diagnoses (this would not be used to preclude a test if a doctor thinks it is necessary), that if followed, would relieve a doctor of liability. Further, like workman's compensation, attorney fees would be set at 10-20%. The stated purpose of malpractice insurance would be to compensate a patient for damages caused by incompetence and not following established protocols; compensation would not be intended to compensate patient for a rare condition that was difficult to diagnose.

Subsidizing good wanted behavior has shown to be very successful in areas such as mortgages, where buyers are motivated by tax deductions. The plan also uses free market capitalism, as it creates an insurance policy for catastrophic care and a secondary maintenance plan where healthcare providers could give discounts for healthy lifestyles. If someone loses their job or their income is reduced, their care would be dialed back, but it will not disappear. The federal governments part in this plan, will be to continue to subsidize state Medicaid and pay for the care of illegal aliens. This is a workable plan that is designed for affordable coverage and what I believe is a governmental obligation (but not an entitlement) for healthcare.

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