Healthcare

As we approach the day when the Supreme Court rules on Obama care, the question has come up as to what Plan B is, in case Obama care is ruled unconstitutional. No one has put forward a plan so I will step up to the plate. Back three years ago before Obama care we faced a situation with two main problems. 85% of people were insured primarily through their employer and poll showed they were satisfied with their coverage but were concerned about the rising cost and that was problem number one. The second was the 15% (48 million) who were uninsured. Let’s tackle the uninsured first. They fall into four about even groups. The first 12 million are illegal aliens and they will continue to use the emergency rooms, until such time as we solve the immigration situation. The second group is young people who could buy insurance but refuse because they are indestructible. The third group is people eligible for Medicaid but don’t sign up because there are no preexisting conditions, so they wait until the get sick and then sign up. The forth group of 12 million are people who need health care but cannot afford it and this is the group we will attempt to help. Before we lay out how we will help them, we first have to solve the problem of cost. The main reason that health care cost increase at twice the inflation rate can be explained with three words, “third party payer”. The best way to explain this is to use the metaphor of food insurance. Suppose you could purchase a food insurance plan. You would pay a monthly premium to the insurance company and then when you bought food you would present your food insurance card to the clerk and the bill would be forwarded to the food insurance company. As time passed, you would become more and more concerned with the quality of the food and the location of the store and less concerned with the cost and this is just what has happened with health cost. Have you heard someone joke, while looking at their hospital bill, about two dollar cotton balls and four dollar aspirin? Now let’s look at the 85% who are insured and I will use 3M as a typical company to explain their health insurance. It cost the company about $15,000 per year for a family plan and the plans typically have a deductible, a co-pay and a stop loss provision. You would pay a $200 family annual deductible and 20% co-insurance and when your out of pocket expenses for the year reached $2,000 the company would pay the rest. This year the company comes to you and says our new plan will ask you to pay the first $5,000 of your health care cost for the year but the will put $5,000 of tax free money into a special account in your name. They can buy such a plan, called Major Medical, for about $5,000 per year. This leaves the excess $5,000 as savings for the company. How with this effect how you handle your health care cost. You realize that any money in your medical account that you don’t spend, will accumulate for you to use at retirement, so you will start shopping for health care the way you shop for other items. If your family doctor says your child needs a tonsillectomy you shop around to find the best deal considering cost and quality. In other words the way you shop for other things. This in itself will bring cost down. Look at what happened to Lasik surgery which is not covered by most insurance. Twenty years ago the cost was $2,500 per eye and today it is one tenth of that or $250. This is because more people were demanding the service and more doctors got into the business which led to competition which led to lower prices. This is the way the free market works. Everything we buy today cost less as a percent of our income than in the past. My first car was a new 1958 Buick and it cost me $3,500 and that was my earnings for the year. Today I can buy a new Buick for $30,000 which would be half my earnings. Using this approach we can get health care cost in line with the cost of other items but where does the savings come in? Health care cost, which represent 16% of the GDP, come to 2.4 trillion dollars per year and 27% of that cost or $648 billion is for administration which is a euphemism for paper work. When we remove the handling of all claims under $5,000 we eliminate 90% of the paper work and this saves 583 billion dollars per year. If we set up the same plan for the uninsured this cost $10,000 per year for each of the 12 million uninsured or 120 billion dollars. We have now solved both the problems we started out with, the first being the uninsured and the second the cost. We now have everyone insured with no need for pre-existing conditions and the cost is under control. No one need worry about reaching the limit of their coverage and no one will be cancelled. Do the doctors like getting paid up front instead of having one or two people in the office filing claims and waiting months to get paid? How about the clinics and hospitals that have a whole rooms full of people working on claims. Now what is the downside? We have essentially eliminated 12 million jobs in the insurance industry. Their average salary is $50,000 and this times 12 million is the $600 billion in savings. What is to become of these people? First off, they are mostly high school graduates with many having college degrees and most are computer literate. In addition they are productive citizens who know how to get and maintain a job. They will be absorbed into the system. The first year they can have their health insurance paid for out of the savings. Jack