Monday, October 04, 2010

Charitable Giving Works

Several posts back, I announced a major change to the Medical Savings and Loan. The original design attempted to supplement a policy holder's savings with reinsurance. I removed the reinsurance in favor of a system of grants.

When people in the MS&L have medical costs that go beyond their ability to self-fund their care, the MS&L triggers a search for grants. There is likely to be the same (if not more money) in the grant program than in re-insurance. The primary difference between the medical savings and loan and insurance is that the medical savings and loan openly acknowledges charity as charity.

Because the medical savings and loan calls the overages "grants" instead of "reinsurance," people's knee jerk reaction to the Medical Savings and Loan is that the non-profit community could never absorb the hit from people switching from employer funded to self-funded care.

I should emphasize that the Medical Savings and Loan does not lean on existing charities. It brings its own money to the table. The MS&L breaks down the money in the current insurance system into separate accounts called savings, loans and grants.

It is likely that grants would be administered by existing charities, but the money distributed would come from the MS&L income stream.

The video below shows Representative Senator John Thune who supports attaching a Charitable Giving Amendment to be attached to the budget to preserve tax credits for charitable giving. The piece leads with an interesting fact that Americans already give $300B to charities.

The infrastructure to do big things is already in place. The Medical Savings and Loan simply adds to this wonderful tradition of giving.

Rather than requiring policy holders to buy re-insurance (administered by a wall street fund), the Medical Savings and Loan channels the money from reinsurance through the existing charitable organizations.

Lets say the MS&L would have bought $100B in re-insurance. I changed the program so that same $100B goes through the charitable infrastructure. When a person can't afford to self fund their care, they system would hit up the charities who just happen to have recently received an influx of cash for charitable giving.

The charitable sector is already massive and has proven to be the most cost effective way to help supplement care. It makes sense to expand those things that work well.

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