There have been many proposals to address the rapid increase in health insurance premiums and the uninsured.
I have studied this issue since 1990, when I first ran for the Minnesota Senate. That year, Health Care was also the top issue. People claimed that we had to solve the “crisis” which existed because insurance premiums were increasing by 10% that year. I guess we’ve had a crisis for the past 16 years, since Health care costs are still increasing by ‘double digits’.
The Legislature responded in 1991, by creating the Health Care Commission. It developed the idea of “managed competition”, the beginning of today’s managed care system. The idea was to create 8-10 “Integrated Service Networks” (ISN’s) around the state, which would manage costs, while still competing with each other. Back then, we still had a “fee for service” system which allowed patients to choose their own doctor or hospital. Today, we have less provider choice, but still don’t really have control of costs . Managed care is not the answer. It costs a lot to provide that much administration.
I’m convinced that the primary cost driver is the “Third Party Payer System” itself. It doesn’t make sense to me that employers choose and control health insurance for most of us. Many employers can’t afford the rising cost of insurance, and are shifting the cost to employees in lieu of salary increases. Employer-based health care also makes it hard for many people to change jobs. The current system is mostly driven by our tax code. Employers have traditionally been given tax deductions for providing qualified benefits to their employees. But, individual can’t claim the same tax deductions.
In 1993, I read a book, written by Don Larson of Owatonna. It was called “Medical Cost Crisis..A common-sense Solution”.The book has always stuck with me. Larson proposed that primary health care be paid out of pocket by consumers at market prices, and that government provide the basic “safety net” and catastrophic insurance for everyone.
For many years we have known that Medicare has a funding problem. When the baby-boomers reach age 65, the problem will only get worse. I’ve heard that Medicare’s unfunded liability is as much as $18 trillion. (See this article) Can we really afford to provide free health care to seniors who are millionaires in the future? This issue makes for great “political demagoguery”. We really need to have a more rational debate about the entire health care system in this country, without scaring senior citizens in the process.
My proposal is outlined in SF 3820, which I introduced at the end of this year’s legislative session, with State Representative Laura Brod. The bill would study a redesign of Minnesota’s health care system. It would move tax deductions from employers to employees. Consumers would deposit the money now spent for health insurance into Health Savings Accounts (HSA’s). This money would be 100% tax free, and would be used to pay a family’s medical bills directly to the provider. No need for third party administrators at the primary care level. This would save administrative costs and allow the money to be spent for direct care. Some researcher estimate that moving the medical deduction from employers to employees would reduce health care spending by $40 billion (in 2004 dollars), or about 6% of total private health spending.(See this article) Presently, the “gatekeepers” are financed out of insurance premiums that are paid with before-tax dollars, but co-payments and deductibles and now paid with after-tax dollars. The tax incentives favor administration over direct care, and that should be changed.
Under my proposal, after a family spends about 12-15% of their annual income on medical expenses, the government would pay for all additional health care. Only 5% of families would ever require government help. The rest of us would save money, and have total choice of which health care provider we use, based on quality and cost. If we live a healthy life style, money in the HSA would accumulate and could be used for future nursing home expenses, dental care, mental health care and many other services which are not covered by most private insurance right now. Many group plans cost $1000 per month for family coverage. But most families wouldn’t spend anything close to that much if they just paid their own bills. We need insurance to protect us from medical bankruptcy- not to pay for primary care. It is the fear of a catastrophic health problem (cancer, neonatal care, heart surgery) which makes people nervous.
This system is better than a ” Single Payer System” advocated by some. Under a single payer system, the government would pay for all health care. This means that politicians would decide the level of medical care, not consumers. This would also lead to health care rationing and a two-tiered system (like in the U.K.), as the government tried to maintain a balanced budget.
When people don’t pay the doctor bill themselves, the result is wasteful medical practices, and over-utilization of the medical system. That’s why we cannot control rising Medical assistance costs at the State level right now. We must make the cost of health care more transparent.( Next time you go to the doctor, ask him what the bill will be for the visit. Chances are, they won’t know because it depends upon who is paying your bill, and the discount they have negotiated with the clinic.)
The solution is not easy, or we would have implemented reforms by now. Most proposals to reform the health care system “tinker” around the edges instead of taking on the real culprit, the third party payer system itself. Only when people start paying their bills personally, will we control the skyrocketing costs of health care.