law-of-freedom

By Leighton Weese, independent talking head

I suggest a healthcare policy that combines mandatory health savings accounts for regular preventive care, mandatory high-deductible insurance that covers unexpected large health expenses, and welfare payments to cover these mandates for people that can't afford them. 

Mandatory savings accounts make consumers more aware of the true costs of things, and they will get to keep whatever money they don't spend, which means they will have an incentive to shop around and avoid unnecessary procedures.  On the other hand, regular recommended checkups, lab tests, and cancer screenings would be required, to make sure that no one is avoiding procedures that will save lives and money in the long run.

Mandatory high-deductible insurance with full coverage for unexpected large health expenses (after the deductible) makes sure that no one waits until they get sick to buy coverage, that no one is rejected due to pre-existing conditions, and that full coverage is provided without exclusions or additional coinsurance payments required after the deductible is satisfied.  (I am open to arguments that exclusions are necessary to make coverage affordable, but let's have an open debate on each exclusion, so that everyone knows exactly what they are buying).

Welfare payments would be based on available healthcare income and premium costs for high deductible insurance plans.  Available healthcare income would be based on poverty guidelines (which consider housing costs, etc) and allowances for important investments such as education and transportation.  Allowances would not be made for luxuries like dining out, entertainment, and cell phones.  If someone claims healthcare as a right but says they cannot give up these other things, then the real debate is whether dining out and entertainment are rights.  See below for an "average" individual and affordability.

Policymakers have some options for regulating the health savings account.  Either it would be on a year-by-year basis, which means the person could spend any remaining money at the end of the year however they see fit, or it would need to stay in the account to keep the individual's health care costs low as they age (or to cover retirement health care when income is lower).  I prefer the year-by-year to basis, at least for now, since I believe it is best to solve one problem at a time instead of trying to craft a policy that solves EVERYTHING and ends up being a big mess.

Here are some numbers to consider:

Healthcare costs (18% of GDP in 2009, eg, on average, 18% of income)
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Persons      Poverty guideline
1                $10,830
2                 14,570
3                 18,310
4                 22,050
5                 25,790
6                 29,530
7                 33,270
8                 37,010
For families with more than 8 persons, add $3,740 for each additional person.
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Average car payment: $378/month for 63 months (source: http://www.finalcall.com/artman/publish/article_2267.shtml). 
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Average car insurance: $1,837/year (source: http://www.carinsurance.com/kb/content17532.aspx).  (I pay $360 a year for car insurance here in Duluth, Georgia, so I don't know why other places are so high.)
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Median HOUSEHOLD income in United States was around $50,000 in 2006; per CAPITA income in United States was around $27,000
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Example Individual

45 year old single male, no kids, no prescriptions or pre-existing conditions, located in Duluth, Georgia.  $27,000 annual income.  Making car payments of $378/month.  No student loans.

Expected healthcare costs = 18% * 27,000 (Based on 18% of GDP figure quoted above) = $4,860

In my proposed policy, each individual would be required to spend and save on healthcare at least the amount of expected healthcare costs.  Here, that is $4,860 a year.  If available healthcare income is less than that (eg, if the individual cannot afford health insurance), the government would supply the difference.

The individual would also be required to purchase the highest deductible plan they can afford. 

Internet Quote: $2,340/year for a $3,000 deductible, 0% coinsurance.  (Keep in mind these plans may have other exclusions or limits, which means that a person may not be TRULY insured for ALL their healthcare costs above the deductible.  Especially when you consider things that are commonly insured separately like dental and vision.)

Adding this to the deductible (which must be put in the healthcare savings account), the total cost is 5,340. 

A $27,000 income, according to 2008 tax instructions, owes a federal income tax of $2,303, a social security tax of $1,674, and a Medicare tax of $392.  So income after taxes is $22,631.  After subtracting poverty level spending and an allowance for his car payment and insurance, his available healthcare income is $5,428.  No government welfare payment is necessary.  (I repeat, the consumer will have to sacrifice luxury items that they may not consider luxuries, but we are having a debate about basic human rights, not the right to luxuries).  $5,428 meets the requirement that the individual invest at least $4,860, so no further modification is necessary.