Wednesday, January 18, 2012

Answer to a Question

Prd2bnAmerican asked "What happens to the ppl who dont save? Who cant save for future HC?"
The answer to your question is long because I have to look at different populations. This post has four sections:
  • The MS&L as an Alternative to Insurance
  • The MS&L for the self employed
  • The MS&L as Public Policy
  • People in Desperate Need

The MS&L as an Alternative to Insurance

Most people these days work for an employer. So the primary market for the MS&L will be as an alternative to insurance. The employer makes the payments into the MS&L. The employees would be asked to sign contracts that they will only use the money for health care.
There are big questions about how ironclad one can make the contract and the tax status of the compensation.

The MS&L for the self employed

The second big group for the product is the self employed. The self employed are looking for an alternative to insurance and are generally motivated to save. The big problem with the self employed is that they suffer big ups and downs in their life.

The MS&L as Public Policy

The Medical Savings and Loan can be used in public policy. For example, if a person has no savings and requests medical care; you would give the person a loan for the care, assign the person a case worker then slam them into a structured savings program. The fact that you gave out a loan gives you a little bit more control than simply giving free health care.

People in Desperate Need

There are people who either have really high medical expenses or really low earning potential.
No matter how you go about financing health care, such people end up consuming more than they produce.
A person with a lifetime income of $400,000 might only have $20k to spend on health care. They don't have the income to pay for insurance. The Medical Savings and Loan gives such people direct control over the amount they have for care while providing substantial supplements.
Likewise, people with middle incomes and wicked nasty health care costs are unable to pay for their care. Again, the program gives such people direct control over some money while receiving supplements.


The Medical Savings and Loan is more flexible than insurance pools. By breaking an insurance pool into individual accounts, it is possible to create a system that can be customized to meet the different needs of different people.
The primary goal of the program is to help those people who can self fund their health care accomplish this goal. This is the bulk of health care in America. Helping working class Americans self-finance their care is empowering. It also reduces the stress on social services.
The Medical Savings and Loan exposes itself in an elegant way to social welfare. While the Medical Savings and Loan does not start with public policy, public policy can draw on the program to give incentives for good behavior. Notably, rather than giving free health care to the poor, the system would give loans and place people into structured savings plans to repay the loans.
No system provides a perfect solution to the problem of people who must consume more than they produce to survive.


Craig Casey said...

The transition from public dole to MS&Ls would be interesting. it would definitely lower taxes and possibly save the dollar. But like a flat tax, it makes sense, saves money, but can't be implemented.

Also getting backers and employers to fund the healthcare up front could be a real issue. They would also have power and control and have a vested interest in limiting the amount of care and hence their losses in the receiver does not pay back the loan.

Employees can just find other jobs, they are getting rewarded for quitting. It could hurt moral and increase turnover of highly trained employees.

y-intercept said...

The question of control over workers would be a big sticking point for corporate and unionized America. Allowing people direct control over their health care gives the people greater freedom.

However, there are many people in the small business community who are looking for a solution like this.

My goal in implementing this plan was as an alternative to insurance targetted primarily at the small business community.

I wrote a reply to your question about adverse selection (not published yet). In the reply, I point out that the MS&L is not insurance and not subject to adverse selection.

If we had a market with both insurance and a Medical Savings and Loan, people with health problems would seek employment in corporations for the insurance. Dynamic healthy people would seek work in small business where they have the MS&L and greater freedom.

Craig Casey said...

Good points, but dynamic healthy people become sick people with medical needs when they get older so the MS&L could help them their also.

The problem is the time horizon. Since people have little discretionary income, any savings they do have is going to pay rent, food, etc. And Seniors use a majority of the care in their final years. So younger workers would have low incentive to get a delayed benefit down the road.

The other side of the employment coin is that instead of an employer putting time and energy into hassling with a health plan, they can pay higher wages and focus on their core business. Just one less distraction.

y-intercept said...

Young healthy workers will not be thinking about their retirement when they join the plan. They will actually be thinking about the direction of their career.

When the health care advocate models a structured savings plan for the young worker, the young worker will see that they build equity in the plan.

Different business cultures would gravitate to different ways of funding health care.

People of the corporate mindset wand employees who are beholden and dependent on the corporation. They would prefer insurance.

Small business is in the dynamic game of building equity and would gravitate to the MS&L model as it promotes workers who have the same vision.

Craig Casey said...


Group health insurance with good benefits and low coinsurance amounts can build employee loyalty.

I've seen major medical or mini med, high deductible plans hurt employee moral, so it can work both ways. Companies like to write off their matching contribution, so it's often done for tax reasons.

Again, in the Obamacare economy we are now in, it's not a struggle to attract high quality workers without any health plan because of bleak jobs picture.

y-intercept said...

I agree that high deductible insurance is problematic.

The MS&L is different from high deductible insurance. The MS&L doesn't have a deductible. It doesn't have copayments or any of that stuff.

Employees get money deposited into their account that they manage.

They get supplemental grants if their medical expenses fall outside the norm; otherwise, they are expected to self fund their care.

There are organizations built entirely around the concept of loyalty. But this is not the whole of the economy. Many people are outside of this feudal type of corporation.

Employer based insurance is the best answer for corporations designed as feudal kingdoms. But it is not a good answer for the parts of economy which are not organized around the feudal order.