Until the last few years, the national debate over health care reform was frequently loud but produced few changes in public policy. Most people still relied on their employers or the government to provide health insurance, and most policies were “one size fits all” with low deductibles and copays. Everyone complained about rising costs and the number of people without insurance, but nobody did anything about it.
The events of the past few years have put an end to that. We’ve seen more real change in the health care marketplace in the past four years than took place in the past three decades. Some of it is bad, but most of it is good.
Health Savings Accounts
The biggest change taking place is the rapid replacement of traditional health insurance by health savings accounts (HSAs). HSAs are like 401(k) plans, only the money deposited into them can be used for medical expenses rather than saved for retirement.
Employers and employees can make monthly deposits into the HSAs. Since deposits aren’t counted as taxable income, employees get a significant tax break. Having money in the account to pay for small and routine expenses means an insurance plan with a higher deductible can be chosen without risk to the employee. Not having to process small claims allows insurance companies to charge much lower premiums.
The 2003 Medicare Modernization Act removed many regulatory restrictions from HSAs. The result has been explosive growth in the number of policies. In just two years, 3 million HSA policies have been sold. Experts predict 15 to 25 million policies will be in effect by 2010, with the accounts holding more than $75 billion in assets.
I Love My HSA
I love HSAs for three reasons. First, by letting consumers decide how to spend a larger portion of their health care spending, HSAs force hospitals and doctors to compete based on price and quality. Reliance on “third-party payers” is greatly reduced. Armies of managed care bureaucrats will get pink slips and move on to more productive employment.
Competition and choice lead to lower prices and better quality. Deloitte Services announced survey results in January that found premiums for consumer-driven health plans such as HSAs, health reimbursement arrangements (HRAs), and flexible spending accounts (FSAs) rose 2.8 percent from 2004 to 2005, while other types of insurance plans rose an average 7.3 percent.
Second, HSAs are an important part of the solution to the looming long-term care crisis. Too many seniors think Medicaid is going to be there for them when they need nursing home care. Wrong. Medicaid can’t cope with millions of middle-income seniors hiding their assets and qualifying for its benefits.
With HSAs, people save now for their future health care needs. To see how much you could save in an HSA by the time you retire, go to http://www.wageworks.com and use the nifty HSA calculator. (Click on “How You Can Save.”)
Finally, HSAs are a nail in the coffin of single-payer health insurance (aka socialized medicine). People with HSAs rate them very highly and when given a choice, don’t give them up. Millions of health care consumers with billions of dollars in their own private accounts, entering their doctors’ offices empowered by their HSAs to pay cash for services or choose a different doctor, won’t want to give up that power to stand in line for government-run health care.
New Health Care Institutions
The second big change is the arrival of new institutions delivering health care services at lower prices and on more consumer-friendly terms. For example, small investor-owned specialty hospitals have sprung up around the country. By specializing in a few areas of surgical practice, such as heart or orthopedic surgery, these hospitals deliver superior levels of care and are more responsive to their patients’ concerns.
Another new institution is the insurance-free doctor’s office and pharmacy. These firms refuse to accept insurance payments, or they offer steep discounts to customers willing to pay cash. The costs and delays associated with processing insurance claims are so great these doctors and pharmacies are more profitable even though they lose some customers.
A third innovation is quick clinics, scaled-down doctors’ offices set up in malls or inside big retail stores such as Cub Foods, CVS pharmacies, and Target. A national network of such clinics, called MinuteClinic, says on its Web site: “MinuteClinic is: Quick (about 15-minute visits and no appointment needed); Affordable (treatments cost between $28 and $110, and reimbursed by most insurance plans); Convenient (open seven days a week, located near pharmacies).”
You can find the nearest MinuteClinic by going to http://www.MinuteClinic.com.
Prescription Drugs
Depending on who you believe, the new prescription drug benefit for seniors (Medicare Part D) is either the best thing since sliced bread or a complete disaster. It is neither.
On the positive side, adding a drug benefit to Medicare was long over-due. We know treating diseases with drugs is often much less costly than surgery and results in less time away from work and family and less pain and suffering. Only a government-run health insurance plan would be so poorly designed as to exclude the most cost-efficient treatments for so many illnesses!
On the negative side, the benefit is projected to cost taxpayers $700 billion during its first 10 years and adds a staggering $18.2 trillion to the national government’s unfunded liabilities, according to the Cato Institute. It is the largest expansion of a public entitlement program since the Great Depression.
On the positive side, the average premium is turning out to be $25 a month, not the $37 originally predicted, thanks to lively competition among drug plans and their ability to negotiate low prices from drug companies. The government says costs this year should be about 20 percent less than predicted.
Most seniors will save more than 50 percent on their drug spending, but not all will save. That is why the program is voluntary. Fewer people are signing up for it than expected, opting to keep their private insurance. That’s a good thing.
A Partisan Battle
Following President George W. Bush’s State of the Union address in January, the White House released a 17-page document titled “Reforming Health Care for the 21st Century.” It lays out a free-market vision for health care reform that rivals any released in recent years by free-market think tanks.
Democrats in Congress, by contrast, want to put the free-market genie back into its bottle by shutting down HSAs, mandating that employers pay for health insurance, extending a moratorium on new specialty hospitals, and gutting the market-based provisions of the prescription drug benefit.
The Democrats’ worst idea is expanding Medicaid to cover everyone. This is akin to having each state’s Department of Motor Vehicles take over the auto manufacturing plants inside their borders. Who would ever support such a thing? Majorities of state legislators in Illinois and Maine, to name just two states headed down this dark path.
The nation’s smartest governors are following a different path, finding ways to modernize their Medicaid programs by introducing competition and choice and relying less on regulations and price controls. Florida’s Jeb Bush and South Carolina’s Mark Sanford are leaders in this regard.
Conclusion
We are witnessing the end of a long and harmful experiment with too much government involvement in health care. The return to market-based health care institutions is one of the biggest success stories for proponents of free markets in the past four years.
We can help ensure this victory by the choices we make as consumers, employees, and employers. Take advantage of HSAs and seek out efficient health care providers. Don’t tolerate bureaucracy, and don’t waste other people’s money.
Government must never again be allowed to play so large a role in our health care decisions.
