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Conservative Hideout Health Care Plan II: Competition & HSA

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In the ongoing health care debate, there is so much time spent on he Democrats plan(s), that other options are overshadowed.  Of course, much attention needs to be spent on the Democratic plan, particularly with HR 3200, as single payer, “death panels,” taxpayer funded abortion, care for illegals, and others are all allegedly part of that legislation.

However, there are other options that are worth a look.  We’ve already covered Tort Reform in Part I, so today; let’s take on increasing competition and Health Savings Accounts (HSAs).

Increasing Competition:

Here’s some explanation from the Cato Institute.

These are exceptions rather than the rule because we have disabled market competition throughout the health care sector. Government tax, spending, and regulatory policies limit the pool of competitors, restrict consumers’ freedom to choose, and discourage consumers from shopping for value. The result is too little competition, too little choice, and too little attention paid to costs and quality.

As usual, government intervention has created an environment where costs are higher, services are decreased, and patients are left out.  It might be a variation on the Cloward –Piven strategy-to create a situation that causes a crisis, and then hold up single payer as a “solution.”

The Obama plan purports to increases competition, but even many on the left state that this is not the case, and the plan is to actually end all competition, leaving the government in control of all health care.  Clearly, that is not the competition we seek.

Here are some thoughts on increasing competition:

  • First, transparency should be the rule of the day.  Prices, re-imbursement rates, eligible facilities and options should be simple and easy to understand.
  • Employers and consumers should be able to select the plan that fits their needs without boundaries.  Government often limits this ability, preventing employers and consumers from selecting lower priced plans from other states.  Removing these restrictions will allow everyone to shop from a wider range of options.  In turn, companies will have to try harder to reduce cost to the consumer, lest they go to a cheaper option.
  • It’s the free market.   It works with cars, food, clothes, pet supplies…you name it. More options mean more competition.  Competitors lower prices or offer more “bang for the buck” to get more customers.   People go where they chose, they might pay more to get more, or they might pay less for something they don’t think is a need or priority.  At any rate, the consumer chooses.  No nanny state required.

Now, the left will claim that the free markets have not worked, as evidenced by the current situation.  The truth to the matter is that government has been interfering with the free markets for some time now.  It’s the government intervention that has caused the problems in health care today.  Allowing the market to set prices, with consumers leading the way, prices can at least stabilize.

Health Savings Accounts (HSA):

Health Savings Accounts were passed into law by President Bush in 2003.  They have, in my opinion, been underutilized, and represent a great savings opportunity for many, if not most consumers, as well as employers.  This plan consists of a medical savings account, and a high deductible insurance plan.  The money from the account is taken from pre-tax income, and is reserved for legitimate medical expenses.

Here are some details from the Small Business Administration:

Deductions – Individual contributions are allowed as a deduction even if you don’t itemize; employer contributions are excluded from income and wages.

Savings – You can save the money in your account for future medical expenses and grow your account through tax free investment earnings.

Flexibility – You can use the funds in your account to pay for current medical expenses that your insurance may not cover, or save the money for future needs such as:

- Health Insurance or medical expenses if unemployed

- Medical Expenses after retirement (before Medicare)

- Long-term care expenses and insurance

- Medicare premiums

Affordability – You should be able to lower your health insurance premiums by switching to higher deductible coverage.

Security – Your high deductible insurance and HSA protect you against high or unexpected bills.

Control – You make all of the decisions about:

- How much you put in the account

- Whether to save the account for future expenses or pay current medical expenses

- Which medical expenses to pay for with the account

- Which company will hold the account

- Whether to invest any of the money in the account and which investments to make

Portability – You can keep your HSA even if you: change your job, change your medical coverage or become unemployed.

The benefits of this type of plan are clear.  If a person is young and healthy, they many use little of their account.  During the same time, the insurance plan is not touched, keeping premiums lower.  As years go by, the account grows, and the insurance is always available, after the deductible is paid.  So, if a person starts an account in their 20’s, and then have a car accident in the 40’s, or gets cancer in their 50’s, the account is still there, and the insurance kicks in after the deductible is met.  The consumer has the control, and the plan is still there, as a back up in the event of something catastrophic.  This will help keep costs down, while keeping the patient in control.  No nanny government intervention needed!

Think I’m being overly optimistic?  Take a look at this from Heritage.org:

HSAs and Premiums

Average premiums for employer-sponsored health insurance have been rising steadily since 1996. They rose 11.2 percent in 2004, a slight decrease from 2003’s 13.9 percent increase but still significantly above inflation.[2] While the data available on HSAs is limited, as they have been available for less than 2 years, the early results are promising.

According to sales data from ehealthinsurance.com, the average premium for an individual HSA-qualified high-deductible plan dropped 19 percent in the first 6 months of 2005 relative to the 2004 price, from $137.94 to $111.57 per month.[3] Total savings from this drop, on average, amount to $316.44 per year.

Those aged 45 to 64 and purchasing HSAs saw the most dramatic price reductions, with average monthly premiums falling from $225.05 in 2004 to $187.07 in the first six months of 2005. That works out to annual average savings of $455.76.[4]

One of the most appealing aspects of high-deductible health plans is that purchasers can choose what level of deductible they wish to carry, balancing the chance of higher-than-expected health care expenses against savings from lower premiums. The data show that consumers are taking full advantage of this choice. Among the HSA-eligible high-deductible plans sold by ehealthinsurance.com in the first half of 2005, 14.9 percent cost less than $50 or less, 47.7 percent cost $51 to $100 per month, and 30.1 percent cost $101 to $200 per month.[5]

Granted, this is somewhat dated, however, it is encouraging that a program created such an impact in such a short period of time.  Which leads me to another important point.  I believe that one of the factors in the increase in medical expenses is that someone else is paying for it.  Yes, increased use of expensive technology, wages, supplies, and other expenses all contribute to the cost of care, but one important factor is the fact there is a disconnect between the customer and the cost.  With the advent of insurance, and especially after the government got involved in paying for insurance, the customer, by in large, stopped caring about cost.  After all, if someone else is paying, “why should I care?”  We don’t treat our car payment like that-we look for a deal.  We pick our cable or satellite TV provider based on “bang for the buck.”  We go to the grocery store that has the best quality for the price.  Why?  Because we personally pay the bill!  We look at the item(s), and decide if we think the item is worth the cost.  But the insurance companies and the government has taken us out of the loop in medical care, so many people simply don’t care about how much it costs.  Ask any hospital administrator, or insurance executive, and they’ll tell you that one of their issues is people using the ER for routine care rather than emergencies.  This is probably one of the largest wastes in the system.  It costs more for both insurance and hospitals, but people continue to do it because they aren’t paying the bill!

The Health Savings Account will help this, and other wasteful situations.  When the consumer is personally in charge of much of their routine medical expenses, they will look at the price.  I think it is safe to say that they will put downward pressure on prices.

Additionally, the overall cost comes down because insurance companies have a large pool, and most of them are not accessing the benefits.  If most of the people in these plans are getting their routine care from their accounts, the insurance is not accessed, reducing the risk to the companies to have these plans.  The more people that go into them, the risk decreases further, as this effect is amplified.

So, here’s the plan; Make them available to anyone who wants one!  Since they are less expensive, they would seem to be an attractive option for the consumer.   If a limited number of these plans brought premiums down, what do you think will happen if millions of Americans choose one?   This will also be attractive to companies, as it will decrease their overhead, which is crucial in a poor economy.

There’s two  parts of the plan.  More is to come.  Again, it doesn’t take a government bureaucrat or Ivy League “expert” to see where savings are.  It only takes research and some logic.  Of course, this plan leaves the government out of the equation, so I doubt they’ll like it.

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  • http://totus-blog.blogspot.com Ron Russell

    A great indepth post on the Health Care Bill. Anytime the government attempt to regulate it almost invariably causes more problems that it solves—history has shown this over and over again and yet, many still cling to the idea that government has the solutions. I reminded of an old economics 101 fact on price controls. If the government sets a price to low they the demand for the produce goes up and the price is agreeable to the consumer, but at the same time the producer produces less of the product because of low price and the result is a SHORTAGE. And conversely, when the government set a price artifically high, the demand for the produce is decrease while those producing the said produce produce more in hope of reeling in more profits—the result in this case is a SURPLUS. It is always best to let the laws of supply and demand determine the outcome—government agencies, tsars are totally in over their heads when they try and control the market place.

    Actually, I may not know what in the hell I’m talking about—economics is not my ball of wax!

  • http://conservativehideout.com Matt

    Sounds pretty good to me! Supply and demand matters not to the left as they have a Marxist sense of economics. It’s apparently “reality optional.” And, in the end, we all know how that works out.

    Thanks for the kind words.

  • http://www.womanhonorthyself.com/ Angel

    great Matt!..but alas we have the state of Statism now with Hussein as the head honcho..Lord help us and keep up the tea parties !!:)

  • http://thelibertypen.blogspot.com theLibertyPen

    Superb, as usual. I would expect nothing less. It is amazing what the human mind can accomplish when it doesn’t try to control everyone else. The community organizations would learn much from reading your post, if they could read.

  • http://conservativehideout.com Matt

    Thank you again sir. Community organizations wouldn’t want any of what we write. We write about giving power to people-not them!

  • http://www.trialsofmegaman.com/ Megaman the Madman

    As usual well written article, intelligent presentation of the facts-the solutions always are harder to come by though.

    Washington has it’s hands in too many pies…DownSize DC

  • http://ignorancebreedstyranny.blogspot.com Keith Rodebush

    Nicely written. I too tried to tackle health care on my blogpost “Health Care Solutions for America”. Part of the problem is that government is already ensconced in the system. To fix it we must first get them out. A VERY difficult proposition. Imagine a candidate for office running on the platform of killing Medicare. Even if he/she has a better proposal they would be savaged in the media.
    This is why it is so important for Americans to understand that once you give up liberty, it takes blood to get it back!

    Kudos

  • http://conservativehideout.com Matt

    @ Megaman the Madman, Thank you sir. You are right, solutions come with far more difficulties. The essential problem is that government has already sunk it’s teeth so far into health care, and distorted the market to a great deal, that extracting them will be very difficult.

    @ Keith, Medicare and Medicaid have achieved that magical “third rail” status. Unfortunately, or not, both programs will sink under the weight of their own corruption and failure. The challenge, as you pointed out, is to get people to actually report realistically on that. We certainly can’t rely on the MSM to do that. Thanks for the visit and comment, and I’ll be stopping by your place.