Third Party Payer

The current IRS scandal has brought Obamacare in the news and through all the clutter, I heard a talking head bring up the idea of healthcare and the problem of third party payer. This has prompted me to once again put forth my solution to healthcare. The problem with healthcare is two fold. First is the 15% who are not insured and second is the escalating cost. I will resolve these starting with the uninsured. There are about 48 million in that category and they are in four approximately equal groups. The first are the young single people who can afford insurance but do not buy it thinking they are invincible. The second are those who are eligible for Medicaid but do not sign up as there is a small charge and since there are no pre-existing conditions they can just wait until they get sick and sign up. Third are the illegal aliens and forth are 12 million who need help. The first group can be coerced into buying using any one of several methods. The second will purchase Medicare if you put in a 30 day waiting period before the policy kicks in. The illegal aliens will continue to use the emergency room until such time as we resolve the immigration problem and the forth will need government assistance. This will cost about $20,000 per year per person and to cover the 12 million will take 240 billion per year. Keep that figure in mind, as I will show how to pay later. The second part of the problem is the high cost of health care and first we must determine the reason that health care cost rise more rapidly than the cost of living. The answer to that can be given in three words, THIRD PARTY PAYER. In order to understand this, consider having a food insurance plan. You pay the food insurance company a monthly premium and with your ID card in hand, you prance off to the supermarket where you proceed to pay for your groceries using your food insurance card. As time passes you will become more and more concerned with the quality of the food and the location of the store and less and less interested in the cost of the food. Have you ever heard someone discussing their hospital bill and laughing about the 4 dollar aspirin or the 2 dollar cotton ball. While this is not a funny matter most don’t get too excited about it since they do not pay directly for the service and therein lies the problem. As long as a third party is paying, the cost does not seem important. So how do we get rid of the third party payer? First let’s talk about the 85% of people who are currently insured and in particular those who are insured through their employer. Polls show that these people are happy with their health insurance except for the rising cost. A typical family plan cost about $20,000 per year and contains a small deductible, a co-pay and a stop loss. The company announces that they are going to a major medical type plan and each employee will be responsible for the first $10,000 of family medical expenses each year. The company says they can get a $10,000 deductible plan at a cost of $5,000 instead of $20,000 for a savings of $15,000 per year. The company will then put $10,000 into each employee’s private health care account and this is the money that will be used to cover expenses. In any year where the total family expenses exceed this amount the insurance will cover the rest with no upper limit. Any unused funds will remain in the employees account and can be used to supplement their retirement. The money will be placed into the account on a tax-deferred bases and taxes will be paid at retirement unless used for medical reasons. Now let’s examine how this affects the employee. First off they realize that any money they save is theirs so when they go to purchase medical care they will do so as a consumer and begin to look at the cost and quality and make free market decisions. If a child requires an operation the consumer will evaluate the quality of the doctor and hospital along with the cost and suddenly market forces will take over. A good example of how this works is in laser surgery. Insurance does not cover this and when it first came out 20 years ago the cost was $5,000 and today it is less than $500. The employee is now buying medical care with the same purchasing philosophy that they use for all of their other purchases. How does this affect the doctor and the hospital. You pay your doctor for services rendered using your credit card. He has no paper work and doesn’t have to fight with the insurance company and wait three months to get paid. He no longer pays a person in his office to fill out forms. The hospital or clinic no longer has a room full of people filling out forms. The reason is that 95% of all claims are for less than $10,000 and so we have eliminated 95% of the paper work or what is called administrative cost. It is estimated that this paper work represents 25% of the cost of health care, which means a savings of over 600 billion dollars per year. This is enough money to cover the cost of the 12 million uninsured and have a tidy sum left over. One private nationwide insurance company will remain in business to handle the over $10,000 claims. Each family will keep track of their medical expense and for any amounts exceeding $10,000 they will submit an annual claim to this company. Many times government planners say they will pay for some new program by cutting the fat out of government and while I have heard that claim my entire life the government has only gotten fatter. Now since there is no free lunch where does this 600 billion in savings come from? The answer is that 10 million people in the insurance business will be out of work at $60,000 per year per person. These people have at a minimum a high school education and most are computer literate so they will find work in other areas. The main reason this idea has not caught on is that the insurance industry does not want to go out of business but as more problems develop in Obamacare this idea gains momentum. That is why the talking head suddenly brought it up and why it will increase in popularity as more people hear about it.