Congress has been given a golden opportunity to do something that nearly every American today knows must happen. Health insurance and the entire system by which we finance health care delivery must be reformed immediately. Costs are rising dramatically, from $27,000 per insurance patient before services are even used to far higher than that over the next year.
The affordability crisis is getting much worse, and health insurance is a headline problem. Incredibly, the costs are rising the most even before the services are used. This problem is structural and completely unsustainable.
“I am recommending to Senate Republicans that the Hundreds of Billions of Dollars currently being sent to money sucking Insurance Companies in order to save the bad Healthcare provided by ObamaCare, BE SENT DIRECTLY TO THE PEOPLE SO THAT THEY CAN PURCHASE THEIR OWN, MUCH BETTER, HEALTHCARE, and have money left over. In other words, take from the BIG, BAD Insurance Companies, give it to the people, and terminate, per Dollar spent, the worst Healthcare anywhere in the World, ObamaCare.”
Several other posts followed, all along the same lines. Trump is targeting the most powerful player in the gigantic American health care sector: the insurance companies. His suggested reform is a fantastic start. The federal government should distribute the billions of dollars it spends on Medicare and the exchanges directly to the people, who can then shop for their own insurance and medical providers.
It’s a start, but just that. The problem immediately presents itself. People with the cash still have to shop for insurance. They will thereby confront the current terrible system that is wildly overpriced, with premiums unrelated to health risk, with huge deductibles, with the absence of posted prices, and without real choice in the kinds of benefits one receives. In addition, most people will still be stuck with employee-provided packages that are so expensive as to throttle job creation and salary flexibility.
Anyone who wants to lower premiums now must confront this problem. Consider the defined benefits packages: Bronze, Silver, Gold, and Platinum. All of them are vastly expensive, with no choices to reject such things you might not want, such as mental-health coverage. In other words, your package is paying for services others use that you might not. They are also incentivizing people to use services for which they pay simply because they are covered.
It doesn’t take a doctorate in economics to know that such a system would explode expenses even before services are used. Everyone should have known that this day was coming as soon as they saw the name of the legislation that enabled it: the Affordable Care Act. It’s the government. Of course the opposite would be true.
I can recall those days after it went into effect, and my own premiums instantly went up by 10 times to the point of absurdity. The latter was generated by a machine. I wish now I had kept it. Of course, I had to drop the insurance and shop for a different plan with a vastly higher deductible.
In any case, 15 years later, we all know the institutions that mainly benefited from this change. It was the insurers, who were pretty well put in charge of all American health care. Most doctors work for them and not the patients. They will tell you this. This is why, when you go see the doctor, they stare more at screens than at you.
In any case, all this can change instantly. There needs to be a dramatic deregulation of these defined benefits. Any company should be permitted to offer any kind of package it chooses, from extremely minimal to extremely maximal, and adjust premiums based on what people believe they need. We need insurers to make a menu of options available with a clear sticker price.
Sounds pretty simple, right? Tell that to a member of Congress.
Let’s take on the third rail: the reality that your premiums have nothing to do with your health risk. This makes no sense, and as long as this is true, we need to stop calling this insurance. Imagine if your car or home insurance worked this way: just one price regardless of whether you had a dozen speeding tickets or lived on a floodplain.
That would not be insurance. And why not? Because the actuaries are not sizing up the risk for the policyholder. Here is the remarkable news: The actuaries do not actually size up your health risk when assessing your premiums. They are forbidden by law from doing so.
Let’s say you drink too much, weigh 150 pounds more than you should, and never exercise. You change your life and quit drinking, lose the weight, and start walking five miles per day. You feel like you have a new life. You post pics of yourself all over social media. You are so proud of what you have done.
Guess what. Even though your chances of hospitalization for ill-health have plummeted, you will experience zero change in what you pay for health insurance. This is outrageous. It makes no sense. It is effectively punishing people for getting healthy.
You wonder why Americans have gotten so unhealthy over the past 15 years? This is a major reason. There is simply no fiduciary incentive to maintain one’s health. Your premiums will be the same regardless. So why not just live it up and put on another 50 pounds and drink yourself silly?
If this were to change, such that a person could see an actual benefit from living better and getting healthy, everyone would be incentivized to match lifestyle choices with their budgets. If we really seek to make America healthy again, the economic structures governing insurance premiums must reflect that. Of course, there can be carve-outs for pre-existing conditions. But we must finally reject the notion that risks can and should be pooled across all cohorts to the point that the differences in risk profiles have no bearing on premiums paid.
In addition, employers and employees both need liberation from insurance mandates. Employers need to be able to offer higher pay and other benefits in exchange for offloading the burden of supporting insurance. This never should have been tied to employment. This is entirely an artifact inherited from wartime price controls and should never have been normalized.
Similarly, employees must be free to leave employer-provided health insurance and carry over their health savings accounts to other providers. Health savings accounts (HSAs) must be made available for everyone, regardless of insurance status. Why can’t healthy people in their 30s simply open an HSA with the bank or brokerage and enjoy the tax benefits even if they have no health insurance? If this were available, millions would choose this option.
Finally, HSA funds should be available to be spent on a range of alternative paths for health, including gym memberships, homeopathy, naturopathy, or some other path. The allopathic/insured model needs to be entirely dismantled.
- Government funds go directly to citizens instead of insurers.
- Insurers need freedom from pre-defined benefits and to let customers choose.
- Premiums need to reflect individual risk profiles.
- Employees and employers need complete freedom to opt out of insurance mandates.
- HSAs need to be available to everyone, with funds spent on all available medical options.
Thank you for your attention to this matter.
