THE TRANSITION TO A NEW, HSA-BASED HEALTHCARE SYSTEM
Julio Gonzalez, M.D., J.D.
In my last incarnation, I told you how the United States only haphazardly came to adopt an insurance-based system of healthcare funding. Although doing so allowed employers to better attract new employees in the highly competitive, government-restricted, World War II labor market, the move was not based on healthcare policy or on a push to develop an optimal system for healthcare delivery in the United States. Now, the American people are stuck with the burdens of such a dysfunctional system and dealing with the ramifications of an historical accident gone wild. In the face of the system's weaknesses, the Progressives are aiming to make the situation even worse by pushing for the further centralization of healthcare as the solution to our nation's challenges, and the Right is refusing to tout an alternative solution that makes sense. The Center for Healthcare Policy Solutions aims to change that.
There are indeed a number of interventions that need be undertaken to improve our healthcare delivery system, but it all begins with the abandonment of the dysfunctional, insurance-based system for one where healthcare funding is primarily based on health savings accounts (HSAs).
An HSA is a tax-deductible savings account managed by the patient and implemented to pay for the costs of healthcare. With an HSA, the patient is in complete control of his or her care, from the treatment he or she accepts to the amount paid for it. No other system of healthcare payment offers a greater degree of autonomy and independence to the patient than the HSA.
Why aren't HSAs more frequently employed in paying for healthcare? The answer to that question, once again, is government interference. Presently, the tax code recognizes HSA eligibility only for those who are not enrolled in Medicare and possess a high deductible health plan (HDHP).[i] An HDHP is a healthcare insurance policy covering preventive services before the deductible and carrying a minimum deductible of $1,400 for an individual or $2,800 for a family.[ii] Under such circumstances, the taxpayer is allowed to contribute up to $3,550 to his individual HSA, or up to $7,100 for family coverage.[iii] When not used, the funds are allowed to roll over and earn interest, which is also not taxable.
The present model for HSA regulation is nowhere near ideal. Linking HSAs to specific insurance products only allows for the insurance company to benefit by favoring the sale of HDHPs and allowing them to become involved in a patient's decision-making process. Additionally, because HDHPs cover preventive medicine services before applying a deductible, the power of HSAs to curtail expenses is repressed. The advocate for this restrictive arrangement argues that HSAs discourage the taxpayer/beneficiary from spending money and therefore from seeking preventive medicine services, but it is not the government's role to either encourage or coerce the people into seeking preventive healthcare services. Additionally, the requirement of purchasing an HDHP before being eligible to fund an HSA robs valuable capital from the individual making decisions about her budget.
Another nonsensical and unproductive provision in the present HSA legislation is the exclusion of Medicare recipients from participating in HSAs. This restriction is particularly nonsensical as it targets the nation's principal healthcare consumers. Medicare enrollees have the greatest power to bend the spending curve and have the greatest resources available to spend on healthcare. They should be employed in the national effort to curb prices and make providers accountable to their patients.
And why would a person who is 65 years of age or older contribute to an HSA? Divisibility! The ability of the HSA's owner to will his funds to subsequent generations is the key factor in the long-term development of intergenerational financial independence in healthcare.
Indeed, the beneficial effects of HSAs to healthcare cost containment and efficiency is so great that shifting America's dependence away from health insurance and to HSAs should be a national priority. In fact, one estimate holds that shifting half of America's employer insurance policies to HSAs would result in cost savings of $57 billion per year![iv] And another concluded that a complete transition to HSA based healthcare funding could save up to $400 billion per year.[v] After all we have seen and experienced with third-party directed healthcare, isn't it time we demanded this change from our policymakers?
Think about it. When you're young and pay your approximately $800.00 premium to an insurance company for coverage while not claiming benefits, the money disappears. It is exactly as if you had thrown your money into the ocean without ever seeing it again. Of course, when you're young and healthy, you will rarely need to use health insurance, so practically every check you cut to your insurer is wasted. But when you apply those same moneys to your HSA, it stays with you forever, waiting for you to use it. What's more, when you do deploy your funds, you will be the sole determiner of how it will be used. No insurance. No government. No pre-existing conditions. Just your doctor and you having a conversation about the care you need. That's the situation the Center for Healthcare Policy Solutions is striving to implement for every American. This is not to say that you could not continue with health insurance as your principal choice of healthcare funding. You could still do that, but let the HSA option compete with the insurance option on even footing. If this were to take place, particularly amongst the young, the increasing use of HSAs would eventually transform the system from an insurance-based one to another where the patient is in charge.
The challenge in making this immensely logical and common sense change lies only in the fight. There is a lot of money invested in propagating the inefficiency and dysfunctionality of an insurance-based system, and this is what the Center for Healthcare Policy Solutions aims to combat. And of course, it needs funding to combat such an outdated but deeply entrenched system.
Could you please help by contributing $20, $50, $100, or more to help us fight this battle? Any amount is greatly appreciated. And all assistance is welcomed.
Please visit healthcarepolicysolutions.com to learn more and contribute.
Dr. Julio Gonzalez is an orthopaedic surgeon and lawyer living in Venice, Florida. He served in the Florida House of Representatives. He is the author of numerous books including The Federalist Pages, The Case for Free Market Healthcare, and Coronalessons. He is available for appearances and book signings, and can be reached through www.thefederalistpages.com.
[i]Rhine, Russell, "Potential for Health Care Savings: Can Health Savings Accounts (HSAs) bend the Cost Curve?" United States Senate Joint Economic Committee, Dec. 13, 2018, https://www.jec.senate.gov/public/_cache/files/baceddcc-39ef-4dae-a216-3da872a738ae/hsa-3.0.pdf.
[ii]"Health Savings Account (HSA)," HealthCare.gov, accessed Oct. 11, 2019, https://www.healthcare.gov/glossary/health-savings-account-hsa/.
[iii]"Health Savings Account (HSA)," HealthCare.gov, accessed Oct. 11, 2019, https://www.healthcare.gov/glossary/health-savings-account-hsa/.
[iv]Amelia M. Haviland, Susan Marquis, et al. "Growth of consumer-directed health plans to one-half of all employer-sponsored insurance could save $57 billion annually." Health Affairs (blog) May 2012, accessed Jan 25, 2020, https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2011.0369.
[v] Theodore McDowell, "Mandatory Health Savings Accounts and the Need for Consumer-Driven Healthcare, "The Georgetown Journ. of Law & Pub. Pol.," 2018Vol. 16, No pp. 315-337, accessed on Jan. 25, 2020, https://www.law.georgetown.edu/public-policy-journal/wp-content/uploads/sites/23/2018/05/16-1-Mandatory-Health-Savings-Accounts-and-the-Need-for-Consumer-Driven-Health-Care.pdf.