Wednesday, January 20, 2010

Accounting for Health

In the last awkward post, I brought up the fact that health concerns of an individual may not be in line with ideas about the health of the group.

Insurance plays a large role in the current health care regime. With insurance, people pool together their resources with the hope of funding their individual care by withdrawing funds from the pool.

The people administering insurance inevitably stop seeing the individuals and start seeing themselves as administering to the care of the group. Pooling resources for health care immediately creates a conflict between the individual and group.

The conflict between the group and individual becomes most pronounced in employer based insurance. When a person changes employment, that person is no longer part of the group. Attending to the needs of the former employee is no a priority of the group insurance plan.

The conflict also shows up when some members of group insurance game the system to get more than their fair share of care. Some policy holders blatantly commit fraud. If you look at any group policy, you will find that there are some people who get a great deal of care, and others who are underserved.

Group funding of private care also creates a moral hazard: The simple fact that policy holders spend group money on their individual health care means that they are less attentive to costs than they would be if they were spending their money.

The conflict between the individual and insurance pool is the source of most our angst in health care. The solution is to create a new business model that creates a healthier balance between the individual and group.

The Medical Savings and Loan is a new business model for funding health care. The business model differs from standard insurance in that it centers all of the accounting on the individual. The heart of the system is the individual's savings account. Policy holders deposit a portion of their income into their savings account for anticipated medical needs.

In addition to savings, policy holders will have access to interest free guaranteed loans.

Considering that people who suffer medical emergencies often see a decline in income, the program will anticipate a high default on the medical loans.

Like insurance, the Medical Savings and Loan transfers some wealth from the healthy to those in need. The difference between the medical savings and loan is that the accounting is done on an individual basis and that each policy holder ends up owning their individual medical history and ends up building equity in their policy.

The Medical Savings and Loan does not eliminate the conflict between individual and group. Nor does it completely eliminate moral hazard. The main thing the program does is create a more accurate accounting of one's individual health care to help the individual take better control of their health care resources and consequently of their health.


Wellescent Health Blog said...

There really has to be a better instrument to protecting one's health than a Medical Savings and Loan given that such an approach does little to protect individuals from the various chronic illnesses that have a genetic component. Such an approach also does little to protect those who are young and have had little opportunity to accrue savings before they become ill.

y-intercept said...

It is a big mistake to develop the health plan for all based on a few exception. Yes, there childrens who have genetic diseases that costs millions of dollars to treat. No society has come up with a good answer to this dilemma. For example, Cuba aggressively screens pregnancies and aborts up to half of all pregnancies every year to stop childhood disease. Those who see babies as a form of human life don't really see killing babies as a disease.

The single payer sytems in Europe shows a high fatality rate for these children. Socialized medicine makes cost benefit analysis for the state and rejects claims for a lot of diseases.

That said, the Medical Savings and Loan does well by people suffering both catastrophic illness and chronic disease as it helps with financial planning and gives the patient direct control over their health resources.

This post did not jump into the repayment mechanism for the loans. The repayment mechanism will be set in accord to the patient's income (and wealth).

A person who has the means to pay for their chronic condition will end up having the tools to be self sufficient. A person who does not have the resources will end up defaulting on some of the loans.

There is a point at which a person with a chronic condition will need to seek public assistance.

The medical savings and loan creates a paradigm where it takes all the people who can be self sufficient off the table and clarifies just who needs public assistence.

Once you have a large number of strong, healthy people ... they start helping others.

The alternative of forceing everyone into a state of dependency to handle simply impoverishes the entire society while not saving the patients used to justify the power grab.

Your notion that we should make others weaker to render aid just results in a dysfunctional society.