No sooner had I announced my candidacy for President in this column last week than I received a letter from George W. Bush asking me to support his reelection and contribute to his campaign. Bush must be worried. Kerry should be too.
You see my plan for your health coverage would actually work.
National healthcare costs are spiraling out of control. A new study now shows that Medicare will be bankrupt by 2019, seven years earlier than previous projections. None of this is surprising.
Previously I diagnosed the cause of healthcare’s malignant growth as a lack of “negative feedback.” All systems must have a regulator in order to dampen runaway reactions. Healthcare coverage is no exception.
One way to provide just the right amount of negative feedback is to make sure that the person who pays for a service is also the person who benefits from the service and the person empowered to decide if the service should be given in the first place.
That’s my innovative proposal for healthcare coverage: Pay your own medical expenses. Who is better to judge if an examination or procedure is worth the cost than the person who benefits and also has to pay? This simple idea clearly makes me the best choice for president since it is the only proposal that provides exactly the right measure of negative feedback. All the other proposals are like trying to douse a fire with gasoline by comparison!
Our current system of healthcare coverage is like a plan to cover everything you buy in the grocery store for a $10 co-pay. Soon everyone would be dinning on smoked salmon and steak but your grocery store insurance would cost two thousand dollars a week. This is not a good use of insurance!
Insurance is best used to limit catastrophic risk, not pool everyday expenses. Therefore affordable medical insurance will have a high deductible. Out of pocket expenses below the deductible will provide sufficient negative feedback to prevent skyrocketing insurance costs.
If high deductible insurance coverage plus pay as you go below the deductible is the best system for medical coverage, then the new Health Savings Accounts (HSAs) are the tailor made answer.
Our family has been using a Medical Savings Account (the precursor to HSAs) for the past five years. Unlike some politicians I actually eat my own cooking. Previously Congress limited these account to those who are self-employed. Starting this year they are available to everyone, and you will see your employers providing this option in the near future.
HSAs are a pre-tax, pay as you go medical account that works in conjunction with high deductible medical insurance. Our policy has a deductible of $5,150 for our family of four. All medical expenses in excess of this amount are covered at 100%. The deductible is a family deductible. We are ensured against the type of expenses that could ruin a family’s finances, but we have strong incentive to save as much of the $5,150 as possible.
For a family of four we pay $282.32 a month for this “disaster” insurance. We also put additional money into our health savings account each month. From this account we pay any medical bills under our deductible. These out of pocket expenses are paid with pre-tax dollars and unused funds continue to grow tax-free from year to year.
HSAs provide individuals with the financial freedom to pay their own medical expenses. The benefits are significant. In our family’s case we have received better healthcare for less money. Our HSA covers our vision, dental, and prescription drugs for a fraction of the cost of more comprehensive co-pay insurance. Utilizing an HSA would change the way you think about healthcare.
You would ask what a procedure costs before agreeing to have it done. You would shop around and look for bargains and specials.
Your doctor’s bill would decrease. Nearly half the cost of routine healthcare is the bureaucracy required to collect the bill. If you write your doctor a check at the end of your visit the amount could be half as much. Clinics would use discount sport’s physicals, flu shots and mammograms to market their services.
Also, HSAs can fund a broader range of services with tax-free withdrawals including: Doctors, dentists and hospitals, artificial limbs, drugs, eyeglasses and contacts, chiropractic services, laboratory expenses, nursing home costs, physical therapy, psychoanalysis, x-rays, and nursing home insurance premiums.
Now that HSAs are available to more people rates and competition should make the choice even better. I shopped my policy and found an HSA with a $5,100 deductible for only $209.78 (a $72.54 monthly savings). And while my current account earns a 4% interest, this new plan allows a wide range of mutual fund investments.
The amount in an HSA that is not used each year remains in the account and continues to grow. This means that younger people can over fund their HSAs and save enough to self-insure for long-term care later in life.
Other proposals for universal health coverage usually involve massive schemes similar to universal grocery store coverage: Give me ten times your food bill and join my all you can eat buffet. Inevitably they degenerate into an expensive fare that is difficult to swallow.
I prescribe universal use of Health Savings Accounts to pay your healthcare costs. This is the best way to take control of your own financial future. You would expect nothing less from the Financial Freedom Party!
Photo by Danka & Peter on Unsplash