Sunday, November 08, 2009

Saving for Health Care

The free photo of the week is an absolutely adorable shot of a baby boy.

Considering that the defenders of the American free market tradition suffered a major loss today, I decided to use the picture to remind people that it the children of tommorrow who will suffer from Congress's actions.

I made the page to emphasize that the savings is the best way to fund health care.

Insurance tries to fund health care on a pay-as-you go basis. People buy a policy that pays for the expected experience of a group during the year.

One does not build equity in a pay as you go plan.

Since people do not build up equity in their insurance account, they suddenly find themselves unable to pay the premiums when the pay off.

Pelosi's plan has the nation borrowing and spending to build a massive bureaucracy with some one hundred new regulatory agencies. This plan is even worse than pay as you go. It is borrow and go.

Insurance, at its best, is a stable ponzi scheme. Yes, people get hurt on an ongoing basis as they find the hundreds of thousands thrown into the policies build no equity. When done right, the scheme does not collapse.

The health care power grab undertaken by Pelosi is an unstable ponzi scheme destines to blow up in the face of our children. This weekend's health care vote is self-destructive partisan politics at its worse.

Anyway, here's my snipy page about this weekend's vote. I hope that someone wakes up and realizes someday the best way to fund health care is to save for it. Ponzi schemes (like insurance) lead to systemic faults. Borrowing for health care leads to complete societal collapse. Saving for health care leads to a bright future.


egb said...

(part 1)
Instead of a lone, I'm thinking the person just uses his Medical debit
card. All people have them just like social security numbers. The whole
bit about applying for a loan and having the care giver wait for money
seems unnecessary with a Medical Debit Card.

Your system isn't much different than an HSA. How to compel someone to
pay into without transgressing constitutional liberties is the problem.
I would guess the best way is to model it after the original SS law, as
a tax. Originally SS was a funded plan -- your money was kept separate.
4 years after SS was invented (1939) FDR and congress changed it to pay
as you go so they could give more benefits to the very first people who
would collect. That was politics for "buying votes" with no fiduciary
morality. With an HSA that goes into the red, the person keeps on paying
in and it eventually goes back in the black. This scheme conveniently
covers unemployment too, because while he can't pay in, he can still use
the medical debit card. The HSA could also be used to continue payments
on catastrophic insurance premiums which are still run by private
enterprises. All money paid into an HSA that is in the red does two
things. The dollars go to the government paying them back (at zero
interest) and the amount of dollars is added to the red balance making
it less red. Eventually, both the government will be paid back and the
account will be in the black.

The Social Security discussion, of course, is only valid if you accept
the concept of the government forcing universal health care.
Reluctantly, I do, because if I don't, we will soon have a completely
government run health care system. If the Gov does only two things, we
can get universal coverage and have almost no gov control. 1) pay the
overdrafts of the HSA; 2) tax gross income at 8% and put the money in an
account that cannot be take from the individual. #2 is the hard part
because next year the congress can just change the law. Something more
than what the original SS law did is necessary. It must be the private
property of the individual. If that is written into the law, then the
only constitutional way it can be taken away is if the government
"condemns" it and takes it under eminent domain.

About premium payments amounts: Does one take out a loan to have a baby?
This is one aspect of today's payment system that seems absurd to me.
Insurance for planned medical care is just income redistribution. I
don't quite understand the loan scheme you propose. For a person
starting out in life in my scheme, he simply pays into his HSA and uses
his debit card as needed. How does a young person start out in life with
your scheme and won't his credit rating effect his ability to receive
health care?

As for someone who has a large amount (say $300K) in his HSA, I would
suggest he can give some or all of his $300K to someone else's HSA. He
can also will it to his wife or kids. Eventually, the 8% I suggest will
drop somewhat because individuals will redistribute their own "health
care" wealth without any assistance from the government.

egb said...

(part 2)
The MS&L would have control over things. I favor not having other people
judge behavior. The HSA method makes people responsible for their own
behavior and suffer the consequences of their own behavior.

As for the amount that would go in, I'm guessing you're right about this
-- it might fluctuate. However, one might go by this rule of thumb:
$4600/yr is what Google tells me the average American is paying for HC.
Google also tells me that the average American salary is $40,000 -- so
11% or so of the gross pay is paid in HC. That doesn't account for
people who aren't working and for dependents. The HSA scheme eliminates
middle men in the patient doctor relationship. You walk in and pay the
doctor before you see him. That is almost guaranteed to lower HC costs.
I looked at a web site in Chicago where they made available many of the
prices for procedures in hospitals. There was a more than 2 to 1
variance between hospitals and more than one hospital gives a 50%
reduction in fees if you pay when you go in. Also, when it's your HSA
money you'll ask a lot more questions about costs.

You say a person who consumes a lot of Health crae should pay more. I'm
not sure I agree. More total money, yes, but a heavier burden paying
back, I'm not so sure. Eventually, the HSA will go back into the black,
except at end of life. Then either he cannot afford an aortic stent or
he can. With a loan mechanism, why would a lender lend money he is
unlikely to get back? Also what prevents a lender from just not lending
the money at all?

I'm not enthusiastic about inserting different agencies (different than
the current insurance companies) in the doctor patient relationship.
That's why I think individually owned HSA's make sense because people
are then directly responsible for their own decisions.

When I hear "loan" "loan officers" and panels who will judge whether or
not I can get a loan and then when I don't I go to another company --
all the while, wasting away awaiting my medical procedure.

Interesting discussion.

y-intercept said...

The way the system works is that people pay a premium to have access to a guaranteed loan. The purpose of the loan is to simply assure that people have the medical resources they need in case of unexpected expenses.

For example, the typical pregnancy might cost $3k. A premature birth might cost $50k. You can't expect a couple to have $50 in the bank before having a kid.

The trick of the MS&L is that people pay the premium for the loan upfront. You pay to have access to a guaranteed loan. If your medical expenses exceed the amount in the HSA; you still have the money to get the needed care.

The other trick of the MSL is that the loans anticipate a high default rate. This allows default of the loan outside of the bankruptcy courts, eliminating all the whining about medical expenses leading to bankruptcy.

BTW, the contract allows default on the loan to occur outside the bankruptcy court ... in the case a person declares bankruptcy, the loan would be drawn into the court.

The goal of the loan is to assure that people have the buying power to handle a medical crisis and to pay for any preventative medicine recommended by doctors. I do not know how well the system will be able to stand against the followers of Cloward and Piveen who advocated overloading a system to lead to social change.