I believe this plan has appeal across all classes and political spectrums. It has been bubbling around in my mind for years but I have never stopped to put it in writing because I just knew that such a plan would eventually have to come along and of course all our politicians and economic experts already knew that this was the plan that we needed and that it was just a matter of time before the existing system broke down enough to provide the political will to implement this plan.
Well, I’m tired of waiting, and I’ve begun wondering if the reason I haven’t seen "my" plan proposed yet is that I have overlooked some crucial factor which makes this plan unworkable. So, fellow kossacks, please explain to me why my plan would not work so that I can finally "rest in peace" and sit back and wait for someone else with better ideas and some actual political power to solve this problem.
The plan starts below the fold...
As I see it, there are two general categories of health care costs: normal and catastrophic. Normal costs are frequent and low, and catastrophic costs are infrequent and high. If the United States were to set up a single payer system it could fund catastrophic costs through the existing general income tax revenue scheme and normal costs through a mandatory individual savings account scheme with inheritance rights. For the purposes of this diary I will abbreviate the normal costs scheme NCS and the catastrophic costs scheme CCS.
Imagine with me for a few paragraphs that my "perfect" plan had already been in force since my birth 52 years ago, and that I am a participant in the United State National Health Care System (USNHCS) proposed in this diary...
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...With my first regular job at age 20, the internal revenue service determined three things about my place in the USNHCS: 1) What was the then current average cost per participant across all participants regardless of age or geography for catastrophic costs (CCS)? 2) What was the then current average cost per participant across all participants regardless of age or geography for normal costs (NCS)? 3) What percent of my income if accumulated at a reasonable rate of return in a mandatory health costs savings account, or MSA, would by my age 60 accumulate to an amount so great that just the interest earnings would be enough to fund both the CCS and NCS for the rest of my life?
Under the pre-USNHCS system the CCS would have been equivalent to the average premium across all ages of a short-term policy like insurance companies used to sell to people between jobs. Something with a huge deductible (in those days $5000 -- $10,000) that had to be paid first before any benefit was due. Now, though, the "premium" or cost to the system for this part of the USNHCS is extremely low because the "deductible" is $50,000, and all marketing and most administrative costs have been stripped out. Those few claims to the systems that exceed $50,000 are just handled by the same administrative system that handles normal costs – which I will explain in greater detail further in the diary. .I’ll also later explain where that $50,000 amount came from, but for now, just basically understand this high "deductible" and almost zero administrative costs make CCS costs just a blimp within the normal income tax system. The USNHCS determines the cost and works it into the income tax system as a kind of basic tax rate "floor".
Under the pre-USNHCS system the NCS would be equivalent to major medical insurance premiums with some very important adjustments, though. First, costs would be averaged across all ages, and secondly all profit and marketing costs would be stripped out. Let’s assume for the sake of overall analysis of this proposal that the average NCS for all participants in the USNHCS is $150 per month. Now I know this is a key assumption in this proposal, but please just accept it for now. Think about all those young workers whose average costs might only be $50 per month subsidizing those older folks whose average costs exceed $150 per month. For a full time worker working 150 hours per month, this amounts to $1.00 per hour worth of wage that would have to go towards the NCS portion of the USNHCS.
The mandatory saving account or MSA has as its goal the "self-insurance" of normal health care costs over generations of citizens through savings by those citizens who can work. In this case at age 20 an additional $50 per month was taken by the IRS and credited to my individual MSA. Growing at 3% interest it was targeted to reach $50,000 by my age 60. At that amount it would generate enough interest income to pay my NCS and CCS costs through my retirement years and my "health care taxes" will cease when that $50,000 target is reached. During my retirement years, my individual health costs, though, that exceed the NCS and CSS would be deducted from the amount of the MSA that is eligible for my heirs to inherit into their MSA’s. If through inheritance or accelerated voluntary contributions one is able to reach the $50,000 level before age 60 then not only do the taxes stop, but any earnings in excess of the amount necessary to keep the fund capable of paying the NCS and CSS are refunded in the current tax year. Also, any medical charges the USNHCS deems excessively above market prices (those high fees charges by doctors that cater to the rich) or "voluntary" (such as most cosmetic surgery) would be deducted from the accumulating value of ones MSA. While working, tax charges to "fill-up" ones MSA continue until the fund is "full".
Over the years I took advantage of every incentive built into the plan. I received bonus deposits into my MSA for making sure my children had regular check-ups, all their shots, and hit reasonable fitness targets. I received bonuses for staying off drugs, especially nicotine or excessive alcohol, for keeping my weight under control, and for getting regular check-ups and recommended preventative medical testing. Occasionally, the USNHCS debit card I used to pay medical providers was even used to put some cash in my pocket! My doctors occasionally cut a deal with the USNHCS and passed some of the savings on to me in cash incentives I could redeem using my card at any ATM! Believe it or not it was that $20 cash bonus that finally made me schedule that colonoscopy that my doctor has been bugging me to get for the last two years.
Eventually, I am told, (even though it might take 3 or 4 generations), most citizens will be born with a substantial amount in an MSA that provides immediate financial rewards for maintaining healthy habits, motivates them to keep medical costs by being wise health care consumers, and provides a bedrock of capital upon which stable health care costs can be managed across generations.
Of course the transition to this plan from the old work-related insurance plans took quite a lot of political work, but it was amazing how easy it was to find the money to set up this plan once older citizens saw how much they would save versus the insurance premiums they were paying and the increased burdens on younger citizens were temporary subsidized with military budget cut-backs. Of course, there will always be that 10% of society that can’t produce enough income and has to be subsidized no matter what plan is employed -- but it was found that plans for the disabled and unemployed were easily folded into this plan. This plan, though, at least let everyone go to any doctor they wanted, had them pay with the same USNHCS card whether they were in a subsidization mode or not, let doctors charge whatever they wanted, and still allowed individual health cost insurance contracts for those rich folks who will always find a way to afford something beyond the reach of the masses anyway. All in all, in hindsight, most politicians were amazed we didn't implement this plan sooner than we did.
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OK everyone – that’s my plan – have at it!