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POLICY: C’mon Don; how we going to fix this safety net?

So yesterday I poked a little at Don Johnson from the Businessword in an article called What’s wrong about Don Johnson? Like the sporting gent he is, Don has replied in kind. So please go over there and read it first, then come back.

As is his right (after all I had called him mean) Don was somewhat feisty in his post.  I’m not going to get into the rights and wrongs of invading Iraq, other than to point out that it showed that we could as a nation come up with $100bn a year  if we felt it was important. I’m not ever going to comment on Don’s lack of understanding about what it means to be left-wing–after all he didn’t have the benefit of a Cambridge education on the subject and I did! I’m not even going to say much about his desire to get all those uninsured immigrants out of the country, although for a guy who runs a parenting magazine I assume Don knows something about parents employing cheap labor as nannies– but suffice it to say that the illegal immigrants are not flooding over the border to get cheap health care (although the Canadians are seeing that phenomenon to a minor extent). I’m not even going to ask Don to explain how the government by definitively regulating the price and purchase quantity of something in a particular way when pressured into it by a strong lobbying group (in this case raising doctors fees under Medicare) is creating a "market" when the determination of price and quantity by buyers and sellers without the interference of a third party is the hallmark of a market, as understood by generations of free-market conservatives who railed at government interference from FDR’s time onwards.

Instead I’m going to pose a simple question for Don to answer. He claims the problem is that a relatively small number of people (some 7% of the population) are uninsured for a full year or more.  That is roughly true.  But what Don doesn’t mention is that over 80 million people or more than 25% of the population are uninsured for up to 4 months in a two year period. Furthermore, once you are uninsured, if you have a chronic health condition becoming insured again is very hard and very expensive. But let’s ignore all that and let’s ignore the hordes of Latin Americans overrunning our country and stealing those $4 an hour jobs from the Americans queuing up to pick vegetables and work in meat packing plants.

Instead given the current state of the market for the individual in which family insurance can run up to $1000 a month for those without health conditions, how does Don propose to enable (and force) poorer families and sicker individuals to buy insurance without giving them a subsidy (i.e. taxing someone else)? And how is that taxation different than what I suggest we need to get to universal (and compulsory) health insurance?

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  1. Geez … the tension is palpable around here, ain’t it?
    Okay Don,
    ||you’ll see that in the next post I found the sources of the numbers IBD was using. And it’s 11 million out of 19 million, or 58% of those uninsured for a full year ||
    I didn’t realize there was more to the argument than contained in your original post and I’ll accept it rather than going into a stupid “my statistic is better than your statistic thing.”
    I’ll also avoid the “you know why there are illegal immigrants?-don’t-you-dude?” response.
    The thing that worries me is this. (Feel free to to stop me if I’m wrong.) It seems as though the official position on the uninsured is evolving.
    Not so long ago, almost nobody questioned these numbers. The number was what it was. It was accepted. It was generally known. And everybody seemed fairly comfortable with it.
    Is the question now about whether the uninsured “exist” or not? It never was before. If we keep reducing that number, pretty soon we’ve redefined the problem completely. A million here. A million there. Pretty soon you’re talking about — no problem at all.
    To be clear: I’m not arguing that something sinister is going on (well, maybe I am to a limited degree). My point also has nothing to do with the single-payer system.
    I’m just frankly curious: don’t you think its a bit odd that the statistical landscape is suddenly “transforming itself” at the same time that major changes are being attempted across the board on Medicare, Medicaid and other government services?

  2. David Hanson,
    You say, “Talk about “lying with statistics”. This is a good one, Ron. Take rates for a young healthy family and compare them with rates given groups filled with older, sicker families: That’s good retoric, but pathetic economics…..The differences are far from as dramatic as you would “LIE” us to believe, Ron.”
    David calm down. A quote of $150 a month for HSA health insurance for the above family, on file with the state, is not a lie, geeesh.
    Every 30 year old family makes exactly this choice when they are sold health insurance from their employer. Let’s discuss your so-called economics David. Many small employers don’t offer health insurance benefits to employees. Many small employers will pay for employee’s single insurance but require the employee to pay the difference for family coverage. If the single coverage costs $400 a month and the family cost is $1,000 a month, the employee would have to pay $600 a month to cover the family.
    The employee’s choices are:
    1) Employee coverage for $600 a month unless he is fired or quits and the COBRA premium is 102% of the original $1,000/ month or $1,020/ COBRA premium. The COBRA premium of $1,020/month lasts 18 months (can vary) and then is terminated.
    or
    2) Individual HSA family coverage for $150 a month. This insurance premium remains constant regardless if the employee quits or is fired from their place of employment.
    Where is your so-called LIE David????????????????

  3. I am not a fan of HSA’s because they are tax shelters. I believe they will help professional and middle class people who were previously counted as “uninsured”. I doubt the take-up numbers for HSA of the previously uninsured. I think HSAs are great for self-employed or small business owners, but in an employer setting they suck.
    First, HSA contributions from an employer are automatically vested with the employee. Hence the employee can quit tomorrow and take the money and run. Second, the types of medical services that HSA funds can be spent on are broad and would include non-emergent health needs like cosmetic surgery, and other non-traditionally covered medical services. You thought DTC advertising was bad wait until providers learn how to scam people out of their HSA money. Third, withdraws can be made for nonmedical purposes but are assessed a penalty (35%). Imagine an employer who contributes money to an employee’s HSA fund finds out the employee is withdrawing funds to pay for a vacation or gambling debt. Then he gets sick and has no money to pay the deductible.
    I think they have a place, are a welcomed product to the marketplace but it falls short of their touted promise to reduced the uninsured through tax-sheltered accumulation. Simply because many in the lower income brackets don’t pay very much in taxes anyway and will enjoy little, if any, of the so-called tax benefit. For evidence just check-out the take-up rates for low income individuals maxing out their 401(k) contributions where there is an employer match. There is a corollary here.
    Under an employer-sponsored environment, HRAs are the way to go. The insurance component provides premium relief. The funding component is determined by the employer with strict rules for its use (no boob jobs, or vacations under this program) and if the employee leaves, the money stays with the employer. There are no minimum deductible rules. Many plans that I have seen brokers partner an HRA up with have only a Hospital deductible of $500 or $1000 and the employer funds 80-90% of the deductilbe. The employer still receives a substantial savings (5-10%) from insurance premium without the deductible.

  4. //How can you argue when you don’t know what you are talking about?//
    I’m just learning about HSAs now, so I’m raising questions rather than arguing from a position of expertise. I did, however, work in a bank call center that dealt with IRAs for a couple of years. My working impression is that HSAs are Roth IRAs with contribution amounts related to income. Let me know if I’m wrong about that.
    //In order to have a tax free HSA you must have Qualifying Health Insurance. //
    I take the insurance is the “coverage” for a catastrophic situation, and the HSA is for deductibles and uncovered expenses? This is a bit confusing to me as a tendered solution for the unemployed who may not be able to afford or even qualify for private insurance. Instead, this is sounding more and more like a scam for the rich to accumulate tax-free interest on their investments.

  5. Gladfly,
    In order to have a tax free HSA you must have Qualifying Health Insurance. The insurance must pay 100% after the deductible.
    How can you argue when you don’t know what you are talking about?

  6. //admit that citizens should save for retirement health care expenses don’t you?//
    I think the worry is for citizens who don’t have the resources to save in this way. And furthermore for people who have to deal with a catastrophic health crisis and find the HSA isn’t enough to cover the situation.
    Based on what I’ve read here, I suspect people who are arguing for HSAs are the affluent members of society who benefit from the tax shelter.
    If I happen to get cancer, it probably won’t be diagnosed until it’s too late. There will probably be a big hassle getting the right tests even if cancer is likely. Who knows what kind of cancer treatment a person can get when they are at the “show up in Emergency Rooms” level. An uninsured friend of mine was recently thrown out of a clinic when she just asked for a payment plan for a biopsy. From what I can see, the stress of trying to deal with cancer without insurance would probably kill me before the actual cancer.

  7. //By law the coverage pays 100%//
    My current understanding of HSA is that it’s an IRA for health care – but the contributions can be a lot larger than IRAs, so even if they don’t cover a health crisis, they are awesome tax shelters. However, if an HSA is an IRA, I don’t understand how “coverage pays 100%”. Isn’t the coverage only as much as you’ve saved?

  8. theorajones
    HSAs are the first account with tax free deposits, growth and withdrawals. Now citizens can save for retirement health care expenses. therajones how is that like eating rotten food? You will admit that citizens should save for retirement health care expenses don’t you? Money that is never taxed will last longer in retirement.
    You are correct that employment-based health insurance sucks. Individual insurance where you can’t be singled out for rate increases or termination is were true security is. My client is lucky he lives in America with his bone cancer with insurance that pays to $8 million. He has world wide coverage but I doubt that he will be going to Canada or France for treatment, ha ha.

  9. Ron, you’ve successfully argued that compared to our incredible suck of an employer-based system, HSAs can be a better deal for some individuals. Let me be the first to agree with you–having an HSA is better than having no insurance.
    I’m pretty inspired by that–I now plan to argue that eating rotten food is better than starving to death.
    I don’t mean to give you a hard time–it sounds like you’re doing a really good job helping people make the best of many poor choices. I am glad that your friend isn’t facing financial ruin or death because he made the wrong choice (or couldn’t afford to make the right choice) in our very misleading system. Unfortunately, other people are.
    At the end of the day, HSAs aren’t a solution but are a symptom of our system’s crisis–they’re a goddam investment tool, and they’re STILL competitive as an insurance product. I mean, in all but 7 states, this guy’s kid can afford to get sick–and we consider him lucky! How pathetic is that?
    I think the appropriate sentiment for HSAs should not be “rah rah” and should be more “Are you people kidding? THIS is the best the we can do? Seriously?”

  10. John P,, if you read my home page at http://www.businessword.com, you’ll see that in the next post I found the sources of the numbers IBD was using. And it’s 11 million out of 19 million, or 58% of those uninsured for a full year. And the more accurate estimate of the number of people uninsured during a 12-month period is 36 million, or 80% of the inaccurate 45 million number. Check out the post and the links.

  11. Sorry Gadfly and Lin, you are both wrong.
    Neither HSA or MSA funds are lost if not used. My effective date on my MSA was 1/1/97, the first day. My MSA automatically became an HSA on 1/1/04.
    Lin asked what I would do if one of my HSA clients got cancer. Funny you should ask because I have a friend and HSA client who was diagnosed in December ’04 with bone cancer. He is a doctor who now can’t work because he had a stroke in his first surgery to remove a tumor. His previous health insurance was a group health employee plan that had eligibility requirements of him working to continue to be insured. With his group health plan he would have been put to a short COBRA for insurance termination. Insurance termination and bone cancer is a depressing mix.
    Thank God he switched to individual insurance with an MSA (Now an HSA). By law the coverage pays 100% including all RX after the deductible. More importantly he can’t be singled out for termination or rate increases.
    Plus, one of his teenage sons is now uninsurable. The previous Group Health Plan would terminate the child when he finished college and he is uninsurable. Now his HSA qualifying coverage has a “Dependent Conversion Priviledge” and the boy my keep his coverage, no questions asked, and he may move to 43 states and keep his coverage.
    Group Health Plans are too dangerous. I mean, if you get too sick to work you are cut from the herd and put to a short COBRA for insurance termination, good stuff huh?

  12. Don:
    By the way, I’m going to have to call you on your impact quote from Monday’s post, which has gone completely unchallenged up to this point.
    In your rebuttal, you cite a recent editorial from Investor’s Business Daily as evidence that 58% of the uninsured are “illegal immigrants.”
    You write: “The problem with the editorial is that it doesn’t cite all of its sources. The Census Bureau survey can be found here. This is the closest I could come to finding the source for IBD’s numbers.”
    http://www.businessword.com/index.php/weblog/social_security_retirement_bill_will_hit_house_in_jun/
    Your cite on this do not back up your argument. And you admit as much in your post.
    Now there is certainly plenty of evidence of a link of some sort between illegal immigration and stress on the health care system — but 58% of 45 million people may be a serious stretch.
    If you really deeply care about health care – as many of your comments imply – you may want to back up what you say a little more rigorously.
    Perhaps the issue of illegal immigration needs to be addressed. But if you want to talk about it, why come armed with a clearly shaky statistic?
    You’re not going to convince me or anybody else that way.

  13. Lin – thank you for explaining the difference between HSAs and MSAs.
    //The health plan doesn’t care – it’s not their money!! Are you going to intervene and fix that for her?//
    I heartily agree that a consumer advocate has to be part of any solution.
    *Wonders how new bankruptcy laws will affect eventual bankruptcy filing to deal with Summit’s Hidden Billing scheme…*
    //Stick with the HSA, they are less protected from financial ruin//
    This raises another question. If HSAs accrue, then the longer you are investing in one, the harder it is to opt out and choose another health care option. You would lose your entire investment, right?

  14. Gadfly – no HSAs accrue. MSAs are use it or lose it.
    I have recommended HSAs to some of my clients – for some people it can be an approprite choice. I never said people don’t save money on premiums in an HSA.
    But that is not all the costs, and you, as a broker, should know that. What will you do for your client who comes to you with a miscoded visit for which she is about to over pay $750 because it is in her deductible? The health plan doesn’t care – it’s not their money!! Are you going to intervene and fix that for her?
    What do you do with the patient who has an HSA for a number of years and then gets something prolonged and catastrophic? Cancer, or MS? Underwriting will make any other plan prohibitive, if they can get one at all. Stick with the HSA, they are less protected from financial ruin than with a more traditional plan.
    HSAs can work for some people some times. But it is horrendous and cruel health policy, and can hardly be called “insurance.”

  15. //HSAs aren’t bad (except for the poor who will to some extent avoid needed preventive and early treatments)//
    Forgive me if I’m wrong about this – but aren’t HSAs “use it or lose it” accounts? For healthy people, I think this feels psychologically like throwing money away instead of the surplus going toward shared health costs. I decided to put in toe in this approach by putting in $100.00 under an employer plan. I used all but $10.00, but it really bothered me that the $10.00 was just surrendered. I’ve heard of people doctoring receipts just to make sure they get all their money back.
    I’d personally be more comfortable with the idea I was paying into a pool and taking out only what I need while the rest goes to other people in need. This would allow me to feel socially responsible in return for the money I’m putting in. HSAs (if I’m understanding them correctly) just feel like throwing money into a hole.

  16. Talk about lying with statistics. This was a good one, Ron. Take rates for a young healthy family and compare them with rates given groups filled with older, sicker families: That’s good rhetoric, but pathetic economics. Instead, Ron, compare what the same family with the same health condition is offered under both conventional and HSA plans. The differences are far from as dramatic as you would lie us to believe, Ron.
    Futher, premium differences don’t tell the macro story. HSAs can play the beneficial selection game: It is much more attractive to healthy people to buy an HSA than it is for those with conditions, and thus their healthy pool becomes ever more blessed as more and more relatively healthy people join them, while leaving the sick behind in traditional plans. Premium differences will grow, but won’t mean that HSAs have done anything to limit system costs.
    Matthew wrote recently that 80% of health costs are for 20% of patients; actually it is closer to 85% for 15% of patients. HSAs don’t impact at all the incentives for individuals in that 15% of expensive health care consumers. In fact, they don’t for the next 5% either, so that 90% of health care expenditures wouldn’t be impacted by HSA incentive shifts.
    HSAs aren’t bad (except for the poor who will to some extent avoid needed preventive and early treatments), but they certainly aren’t going to solve anything important. They’re just a repackaging of a tired solution.

  17. Math says it all Don.
    There is a little confusion here on HSA health insurance and the Tax Free HSA. Lin has no problem with a family spending $1,000 a month or $12,000 a year on health insurance premiums. My above example of $150 a month or $1,800 a year cost for HSA insurance produces an annual SAVINGS of $10,200 a year in premium. Lin is correct that maximum out of pocket for the family is $5,200 a year, then all covered services, including RX, are paid at 100% for the entire family. If the family hit their deductible every year the deductible and the premium is only $1,800 plus $$5,200 or $7,000 annually.
    How Lin thinks $12,000 a year in premiums plus co-pays is less expensive than $7,000 total, in a worst case situation, is beyond me.
    If a 30 year old couple spent half of their HSA deposit annually, that would be $2,600 a year in expenses, with 4% interest on their HSA, their balance at 65 years of age would be $211,000. If their $211,000 HSA balance is dedicated to retirement health care expenses the money is never taxed. Money that is never taxed will last longer in retirement.
    The Bush administration reported the first insurance company with HSAs reported 43% of HSAs had no previous insurance. So HSAs do help uninsured families get insurance.

  18. I see tremendous misunderstanding of HSAs and insurance, but I don’t have the time nor the inclination to get into it here.
    I think Ron’s reply to Matt pretty well answers his question. I’ve also partially answered the question in my reply to the Don Johnsn thread.

  19. The burden is also on the consumer to clear up their own credit record and deal with collections agencies even if the Provider fixes the error. So the consumer ends up paying a fee (in time and hassle) for the attempted robbery.
    The saddest think here is the only enforcement for the consumer is the threat to go to the press or to get a lawyer. But both are increasingly regarded as empty threats. Journalists will only report what their readers want to hear, and it’s not like one article will create a public outcry. Information overload has decreased the power of the press. As for lawyers, they are more unaffordable than health care, and large corporations can gamble that the time, effort, and cost will eventually wear any individual consumer down. I’ve tried writing the Better Business Bureau a few times when I’ve had a problem, but they were only able to help me once: they apparently rely on the voluntary cooperation of businesses.
    I do think business have been confused about how to manage “customer relations”, “reputation”, and “brand” – and this has helped with resolving problems. For a while banks would at least research the issue if you were “irate” on the phone. This is because people were building careers on showing their good customer mollification skills. I think most corporations regard their customer efforts as costly sandtraps now, and their efforts toward automating and out-sourcing CRM have radically decreased the customer’s chances of getting problems addressed.
    Customers have very little power. Billing is 99% of the law. Efforts to protect the consumer are made on a “mass” basis, to shape policy and law. What people need, though, are ways to fix such problems at the specific, local level. In religious societies, this is a moral issue: the church-leader steps in to smooth things over between neighbors. In a pluralistic society, there is no advocacy for the individual – the individual is responsible for their “personal problems”, even thought they have no power of enforcement. Businesses, including health providers, are going to take advantage of this because all paeans to community and business ethics aside, profit is their logic. The consumer can’t expect businesses to set their own limits for the sake of the Greater Good. The consumer needs to have a real “threat” on their side: some advocate “with teeth”, so businesses would rather fix the problem than tangle over it.

  20. Lin,
    Your comments are right on. If we pay at time of service or even have reasonable expectations of being able to reconcile charges with anticipated costs in buying health care, HSAs would be a great thing. I worry about double billing and about not being able to understand my costs going in. I remember a few years ago my grandmother was in intensive care at Doctor’s Hospital in Coral Gables, Fl. My mother didn’t want to leave the hospital to stay at a hotel and they had a program where you could “rent” empty hospital rooms to have a place to sleep and shower. We rented two rooms and had to pay upfront. I did this with a credit card. A month later my mother starting receiving bills for those rooms as part of the hospital charges for my grandmother. She called them and pointed out that the rooms had been paid in advance and we had receipts. They apologised for the mistake and then started billing me for the rooms. I called the accounting department and they assured me that I had never paid for the rooms (in spite of the fact I still had receipts). The admin person at the hospital when we arranged the room had told us paying in advance was a strict policy that they never deviated from. I watched my payment data entered into their system and received both a paper receipt from them, plus the credit card transaction slip. I finally got the charges cancelled by calling the hospital administrator’s office and threatening to take my receipts to the Miami Herald and provide them with a great example of out-of-control hospital billing practices. It took two months to resolve this issue. I can imagine how hard it is to deal with tests, multiple doctor charges, anesthesia, etc. on a given stay if something as simple as guest room billing can’t be correctly accounted for because the actual procedural charges are a lot harder to track. HSAs won’t work until billing and costs are understandable. I honestly believe the confusion in billing is deliberately designed to make it difficult for patients to understand costs and actually “shop” for better value and I think the system is full of gaming because many providers believe negotiated rates are too low and try to work the system by double billing. The impression I got on my experience was that consumers were intimidated into paying whether the accounting was correct or not. Until I threatened negative PR at a management level there was zero interest in exploring whether or not accounting errors were being made–it was one of those “if the charge is in the system, you must owe it mentalities”.

  21. Enjoy your HSA as long as you are well. If you become hospitalized, that first dollar coverage comes out of your pocket – for a family that’s @ $5000. If you have a chronic disease, you’ll be spending up to the deductible every year; stop-lossed only if you stay in-network.
    People don’t realize that HSAs are also subject to the same managed care rules to limit access as we’ve become used to. Of course, since they are all PPOs, the claim is you now can control where you go – you just get to pay more. See any doctor you like – just prepare to be balance billed.
    I’m a Medical Billing Advocate – and within one month of these plans hitting the market, we already found fraudulent billing by providers gaming the system. And the paperwork for the insured is enormous and confusing. I predict these will make a splash in the market, will find a niche with people who have few health care costs or can afford to essentially self insure anyway and use it as a tax shelter, but will not replace employer sponsored more “traditional” (whatever that means any more)coverage. And people are going to hate these.
    HSAs will not significantly lower the number of uninsured. They will not improve any mesurement of “health” or make the population more secure. They will not reduce paperwork or administrative costs.
    What insurance companies have done is very clever: they have shifted not only the costs of first dollar coverage (which is where most health care payouts occur), but also the rationing mechanism. Insurers have been working mightily to increase their bottom lines by finding rationales to deliver less care. First, the insurer did the rationing, but that proved unpopular. Then the physician was expected to limit costs, but that didn’t work either. With an HSA, the patient (“customer”) will ration their own care, even though we have precious few statistics demonstrating overutilization (except in imaging).
    If HSAs work the way they are intended, people will not access medical care until they “have to.” Suffering will increase; we may be creating little reservoirs os disease (bird flu, anyone?). Without preventive care coverage, we may have fewer innoculations during early childhood, or less medical intevention before a serious disease takes hold.
    Proponents seem to believe that HSAs will reduce our total espenditure on health care (although I doubt it), but it will not make us a healthier or more economically competitive country.

  22. HSA Qualifying health insurance is $150 a month for a family of four in Lansing, Michigan (30 year old couple plus 2 children). Sure Michigan state employees family coverage is over $1,000 a month and Oakland County teachers coverage costs tax payers over $1,500 a month.
    If Michigan state employees were given the HSA option and the savings went into their tax free HSA, I’m sure it would be a very popular option.
    Employee based coverage will give you the results of uninsured individuals for periods of time between jobs. Individual insurance will not be terminated with employment and has greater security for the individual. Individual insurance costs less too.

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