More on health care

PROPOSITION: That politics is the reason that the government cannot solve today’s problems. I propose that the main reason we cannot solve the major domestic problems of our time, which include social security, Medicare, Medicaid and health care, is that politics gets in the way. I will prove my statement by offering simple solutions to these problems in a way that is understandable and feasible. Let’s begins with social security since it is the most expensive and with the onslaught of the baby boomers approaching retirement the most pressing. It requires four steps each of which can be implemented immediately. First, raise the age for full retirement benefits to 72. This does not mean that you cannot retire at age 62 but it means that your benefit will be less. Second, require that benefits paid to individuals with more than $100,000 be phased out and all benefits cease as the income reaches $150,000. For couples these income limits would be $200,000 and $250,000. Third, begin withholding social security tax on all income not just the first $110,000. This is currently done with Medicaid. Forth, consider all benefits as taxable income. All these changes to begin with people who are now under age 55. The history of social security is replete with reductions in benefits but most people are not aware, since most people have no idea what the benefits are to be and therefore cannot recognize a reduction. Back in the 60’s the government begin tightening up on the definition of disability and the number of applicants who were declined increased dramatically but social security didn’t change the law for those already receiving benefits and instigated a procedure that they use in all cases known as grand fathering. This means that those receiving benefits under a given program are not affected by changes. Survivor benefits used to be paid to children of the deceased until their ages 22 but that was changed to 18 and once again those getting benefits were grand fathered in. The mother used to get benefits until the youngest child was 18 and that has been lowered to 16. The retirement age for full benefits used to be 65 but now for all people born after 1937 that is raised up to 67. Once again no one noticed since you can still get benefits at 62 but they are less. Since no one knew what they were supposed to be, no one knew they were less. Social security benefits have been taxed since 1984, which means double taxation since money paid into social security was already taxed when received. Medicare and Medicaid have the same solution and it requires that we ration benefits. We have done this for years but no one talks about it. We cannot afford to offer all procedures to everyone and things like quality of life and cost/benefit ratios must be taken into account. For example, for many years there were not enough dialysis machines and a committee was set up in most cities to determine who got to use the time on the machine. We have the same set up today with various organ transplants. On a subtler basis, people have been advised for years by hospital staff on less expensive ways to achieve acceptable results. Does this mean that very wealthy people will get more expensive care? Yes it does but that is the case throughout our society, the most obvious cases being in the court system where the best lawyers get the best results and cost the most money. We must be mature enough to recognize that we cannot risk destroying the entire system in the name of fairness, if fairness means spending unlimited amounts of money on each case. We live in a world of limited resources and we must act accordingly. We must face the fact that death panels have been around for a long time. Reform of the health care system is the hot item in the news and it is easy to see how politics has distorted the issue. Since 85% of the people are currently insured and polls show the majority of those are satisfied let us leave them alone and focus on the 15% who are not insured. Who are those 45 million people? They fall into three categories not counting illegal aliens. One third are people who are eligible for Medicaid and SCHIP who have not signed up. The reason they are not signed up is that it cost a modest fee and since there are no pre-existing conditions, people just wait until they need help and then they sign up. Another one-third are young working people who can afford health care but choose not to buy it. And finally one-third who need help. The first two groups can be forced by persuasion or by law to sign up for health care. The third group can receive government aid based on their income. A formula can be devised based on percent above poverty level to help this group. It is estimated that this will cost about $50 billion per year and much of this cost can be offset with tort reform and allowing everyone to purchase insurance across state lines which will increase competition and lower premium cost. Once everyone is insured the pre-existing condition clause can be eliminated. Illegal aliens will continue to use the emergency rooms until such time as they are removed from the country or made legal and this will put pressure on congress to take up this problem instead of just talking about it. This is just the first step in health care reform and should be followed up with the elimination of the third party payer concept, which is the basic cause of the high cost of health care. To understand this concept, consider the purchase of a food insurance policy. With this policy you go to the super market and purchase your food items and present the clerk with your food insurance card. The bill is then forwarded to your insurance company and they pay. As long as you continue to pay your monthly premium the insurance remains in force. As time passes you will become more concerned with the quality of the food and the location of the store and less concerned with the price of food. This in turn will cause the price of food to rise at a higher rate than other items since you will no longer be price shopping. Everyone is familiar with the hospital bill that shows two dollars for a cotton ball or four dollars for an aspirin. People actually laugh about this since those costs are borne by the insurance company. The door was opened in 2003 with the passage of the Medicare drug bill. A part of this bill allowed for the idea of the health savings account. If you work for a major company your group health care cost them about $14,000 per year for a family plan with the standard deductible, co-pay and stop loss. They can purchase a plan for you with an annual family deductible of $10,000 for about $5,000 per year. When they do this they agree to put $5,000 per year into a pretax account in your name. You agree to cover all medical expenses up to $10,000 per year out of your own pocket. Now you will begin to purchase health care the same way you purchase other items, that being, you will shop around. In doing so you introduce competition into the market, which will lower cost dramatically. A recent example is the cost of Lasik eye care. The cost of that has come down by half in just a few years. But the real cost savings will be in paper work or what is called administrative cost. Under our current system health care the annual cost is $2.2 trillion, and 25 to 30 percent of that is for paper work. Since 95% of all claims are less than $10,000, once you start the pay as you go system you eliminate 95% of all claims and thus save about $500 billion per year. This is ten times the cost of insuring the poor as mentioned above. The doctors will love this since they no longer have to have a full time insurance person on their staff and they get paid up front with cash or your credit card, the way you pay for other items. What this means for you is that any money you save by being a wise shopper belongs to you. Let’s take the worst-case scenario. The very first year you have a $100,000 medical bill but your insurance only pays everything over $10,000. Now your company only put $5,000 in your account so where are you going to get the other $5,000. Well you go to the hospital and show them your plan and ask for a monthly payment plan and in a couple of years you have them paid. Now look at a more likely case. Each year your medical expenses are less than $5,000 and the savings in your account continues to grow on a tax-deferred basis. Any money that is in this account when you retire is yours to keep. Recent legislation has been introduced to allow you to withdraw this money tax free after retirement even if it is not used for medical expenses. I think it is amazing that someone sitting on the sidelines like myself can come up with a solution to these major domestic problems while experts sitting in Washington seemed completely baffled. The difference is politics. I am not running for office and unlike our elected officials I put country ahead of party.