In Vermont the health insurance industry is a mess. Premiums are skyrocketing, the number of people covered by insurance is falling, and Medicaid roles are increasing as the state tries to insure more people. There are many HMO horror stories. Many of us believe that if our goal is to make the sick and injured well, then the doctors, not the managers, have to control the treatments.
Today, we have little true insurance. Some say what we have is a prepayment system for using medical care. Because most insurance is through our employer, our private carrier or from a public entity, people use insurance because they?re covered. The use-it-or-lose-it coverage with our current system has bid up the price of insurance because people tend to receive more medical care than they really need.
Insurance in a traditional sense is used to cover a loss. We don’t buy house or car insurance because we expect our house to burn or car to be destroyed. You can’t prevent a catastrophe so you pay an annual premium for insurance protection and that money is pooled to share the risk for those who may experience a loss, hoping that you won’t have to make a claim yourself. It is important to note that insurance doesn’t pay for preventive maintenance of your home or car. You pay for that directly. Also, your premium is based on risk. If you live in a firetrap or have a bad driving record, your premiums are higher.
I think the same approach can be applied to health insurance. If we promoted catastrophic insurance instead of the current prepaid insurance, medical care could be cheaper. The tax-free Medical Savings Account (MSA) is a powerful answer to this problem. The MSA is a simple concept based on the idea of saving for anticipated medical expenses. An employer purchases a high-deductible catastrophic health insurance and an MSA for the employee. The employer uses pre-tax dollars to pay for the inexpensive insurance premium and deposits the pretax money saved into the employee’s MSA. Those dollars in the employee’s account are used, as needed by the employee for health care expenses like deductibles or hospitalization and the employee has control of the money.
The implications to this plan are many. First, the MSA is the employee’s money. If they become unemployed, the money could be used to pay insurance premiums so the family wouldn’t be uninsured. Or if unused the money could accumulate into a substantial amount to set aside for retirement. Or, if we were really radical, we could allow people to use the money to start up a business, educate children etc. Most people like the idea of keeping their own money.
Few people find themselves faced with expensive medical costs. By the time most will incur large costs, they will have accumulated money in the MSA to pay the deductible. A large survey done a few years ago showed that 89 percent of filed claims were for less than $2,000, 73 percent filed claims for less than $500 and one-third filed no claims at all.
Medicaid plays an important role insuring low income Vermonters. In fact, we have one of the highest Medicaid population percentages in the country by our own choosing. We can reform the delivery of Medicaid by using a publicly financed voucher program. This is an innovative solution that will reduce public outlays, reduce health care costs by eliminating cost shifting, increase access to care and empower the poor to make decisions about their health care needs.
This voucher would be used to purchase private health insurance. And, based on what I outlined above, catastrophic insurance could be acquired at a lower cost and some of the difference from what is currently spent, which is over $4,000 per Medicaid recipient, could be placed into an MSA to cover deductibles or other routine costs.
Most insurance companies and bureaucrats don’t like these plans. It means less money passes through their hands. Patients would be in charge of their health care and would be more reluctant to agree to expensive procedures of marginal benefit if they were spending their own money. Although insurers favor controlling costs, they are the ones who benefit from the cost savings realized, not the patients. MSAs would provide the benefit directly to the patient. From a Medicaid perspective, this system would remove government from the health care business, and return it to the original purpose of helping those people who really need help, without destroying the market place for everyone else.
The guiding principle of insurance reform should be to restore individual responsibility; to put the patient back in control of decisions about their insurance coverage and medical care. And that means putting money back in the patients’ pockets.
I read an interesting book by Dr. Jane Orient, Your Doctor Is Not In, and she offers solutions to the health care mess that are bold, thoughtful and based on her experience as a physician. She advocates MSAs and says ?we must return power to its rightful holder, the patients; create true (not managed) competition; and restore the primacy of the physician-patient relationship.?
We should provide incentives for Vermont business to invest in employee MSAs as well as urge Congress to allow the creation of more MSAs and provide the incentives for insurance companies to offer this product. We should also create a state Medicaid program that decreases state expenditures, streamlines the process, and allow recipients to take charge of their health care decisions.
The current system is not working and must be
changed.