Read this article on Health Care by Steve Forbes.
It succinctly describes the problems with Obama's socialized medical scheme. It also explains the vastly superior free market alternatives to his plans. I agree with his sentiments to the word.
Showing posts with label Health Care. Show all posts
Showing posts with label Health Care. Show all posts
Wednesday, April 29, 2009
Saturday, October 18, 2008
Government Run Health Insurance: More Hope than Reality
In 1993, President Clinton tried to pass a single payer government run healthcare system, derisively labeled “HillaryCare” as Hillary became the first First Lady to take on such a public role. This system was to move the United States to a system like the U.K. where the government owns all the hospitals and clinics, and employs all of the doctors. Because of the failure of HillaryCare and the truly abhorrent stories that come out of Canada and the U.K., Democrats have now switched to pushing government run health insurance. Barack Obama is pushing his own version on the campaign trail.
The question then becomes, did these arrangements cost as little as promised where they have been tried in the United States.
Romney Care
Mitt Romney, former governor of Massachusetts and Republican Presidential Primary Candidate helped craft a universal health care plan for that state. Included in that plan was a subsidized health care insurance program called Commonwealth Care. It was designed to offer competitive insurance for those currently without insurance and incomes below 300% of the federal poverty line. (For a family of 4 that would be $63,600 a year.)
The insurance program was supposed to be relatively inexpensive. Like Obama’s plan there is a fine for not signing up for insurance. The theory went that if they could pool all the uninsured, including a large number of young people who use very little medical services, the premiums wouldn’t have to be very high. This is the essence of Barack Obama’s plan as well.
Did the plan stay in budget? Not by a long shot. According to Massachusetts Governor Patrick’s new 2009 budget, how big will this next year’s budgeted amount and increase have to be?
“$869 million for Commonwealth Care, an 84 percent increase over the fiscal year 2008 General Appropriations Act”
Furthermore, according to an article from the Boston Globe:
“...the state expects to spend substantially more for insurance subsidies than the $869 million Governor Deval Patrick proposed in his 2009 budget just two months ago, because of increasing enrollment and higher payments to insurers. In private briefings, she has told coalition members that the cost could be $100 million more, according to several who were present.”
If you do the math, that’s a 105% increase in costs for the program in a single year.
Keiki Care
In 2007, Hawaii created a free insurance program called Keiki (Child) Care. Like the SCHIP expansion championed by the Democrats and vetoed by President Bush in the same year, children who’s parent(s) made too much to qualify for Medicaid could get free basic health insurance.
The Washington Times quoted the President after vetoing the SCHIP expansion:
"If this bill were enacted, one out of every three children moving onto government coverage would be moving from private coverage."
When Hawaii passed a very similar program, what happened? According to the Associated Press:
“State health officials argued that most of the children enrolled in the universal child care program previously had private health insurance, indicating that it was helping those who didn't need it.”
"People who were already able to afford health care began to stop paying for it so they could get it for free," said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. "I don't believe that was the intent of the program."
So, President Bush was wrong. It was not going to be just 1 out 3 children dropping out of private coverage to get the free government insurance, it was more than 1 out of 2.
What did Hawaii do once they figured out that the insurance plan was going to cost far more than estimated? They ended it, after a mere 7 months. How refreshingly responsible.
Obama’s Plan
What will Obama’s plan cost? Whatever you hear them quote, it could easily be double. Will people drop their private health care coverage to get on the government dole? By the millions. Can we really believe that Obama and his fellow skeptics of the free market could so blindly underestimate the costs of their plans? Everyone together: YES, WE CAN!
The question then becomes, did these arrangements cost as little as promised where they have been tried in the United States.
Romney Care
Mitt Romney, former governor of Massachusetts and Republican Presidential Primary Candidate helped craft a universal health care plan for that state. Included in that plan was a subsidized health care insurance program called Commonwealth Care. It was designed to offer competitive insurance for those currently without insurance and incomes below 300% of the federal poverty line. (For a family of 4 that would be $63,600 a year.)
The insurance program was supposed to be relatively inexpensive. Like Obama’s plan there is a fine for not signing up for insurance. The theory went that if they could pool all the uninsured, including a large number of young people who use very little medical services, the premiums wouldn’t have to be very high. This is the essence of Barack Obama’s plan as well.
Did the plan stay in budget? Not by a long shot. According to Massachusetts Governor Patrick’s new 2009 budget, how big will this next year’s budgeted amount and increase have to be?
“$869 million for Commonwealth Care, an 84 percent increase over the fiscal year 2008 General Appropriations Act”
Furthermore, according to an article from the Boston Globe:
“...the state expects to spend substantially more for insurance subsidies than the $869 million Governor Deval Patrick proposed in his 2009 budget just two months ago, because of increasing enrollment and higher payments to insurers. In private briefings, she has told coalition members that the cost could be $100 million more, according to several who were present.”
If you do the math, that’s a 105% increase in costs for the program in a single year.
Keiki Care
In 2007, Hawaii created a free insurance program called Keiki (Child) Care. Like the SCHIP expansion championed by the Democrats and vetoed by President Bush in the same year, children who’s parent(s) made too much to qualify for Medicaid could get free basic health insurance.
The Washington Times quoted the President after vetoing the SCHIP expansion:
"If this bill were enacted, one out of every three children moving onto government coverage would be moving from private coverage."
When Hawaii passed a very similar program, what happened? According to the Associated Press:
“State health officials argued that most of the children enrolled in the universal child care program previously had private health insurance, indicating that it was helping those who didn't need it.”
"People who were already able to afford health care began to stop paying for it so they could get it for free," said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. "I don't believe that was the intent of the program."
So, President Bush was wrong. It was not going to be just 1 out 3 children dropping out of private coverage to get the free government insurance, it was more than 1 out of 2.
What did Hawaii do once they figured out that the insurance plan was going to cost far more than estimated? They ended it, after a mere 7 months. How refreshingly responsible.
Obama’s Plan
What will Obama’s plan cost? Whatever you hear them quote, it could easily be double. Will people drop their private health care coverage to get on the government dole? By the millions. Can we really believe that Obama and his fellow skeptics of the free market could so blindly underestimate the costs of their plans? Everyone together: YES, WE CAN!
Friday, October 17, 2008
Shock! Free Gov't Healthcare Had Bad Incentives
This is just an AP article, but I think it illustrates well the problems with offering free healthcare to certain citizens who "need" it for free. The state of Hawaii quickly figured out that providing free health insurance for middle class children was a bad idea. This also proves that President Bush's reasons for vetoing the SCHIP expansion was completely accurate when he said that it would encourage those with coverage to drop it in favor of the cheaper government subsidized health care.
"People who were already able to afford health care began to stop paying for it so they could get it for free," said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. "I don't believe that was the intent of the program."
State health officials argued that most of the children enrolled in the universal child care program previously had private health insurance, indicating that it was helping those who didn't need it.
The universal health care system was free except for copays of $7 per office visit.
"People who were already able to afford health care began to stop paying for it so they could get it for free," said Dr. Kenny Fink, the administrator for Med-QUEST at the Department of Human Services. "I don't believe that was the intent of the program."
State health officials argued that most of the children enrolled in the universal child care program previously had private health insurance, indicating that it was helping those who didn't need it.
The universal health care system was free except for copays of $7 per office visit.
Wednesday, July 30, 2008
John McCain the Radical?
John Goodman, President of the National Center for Policy Analysis, had an article in the Wall Street Journal today explanation John McCain’s Health Care plan, entitled “McCain Is the Radical on Health Reform”.
Dr. Goodman is the inventor of Health Savings Accounts, which I have been a fan of for quite some time. However, McCain’s plan does not make wider use of HSAs, taking efforts to remove some of the distortions caused by employer provided plans. His plan also removes the bias of tax treatment away from higher wealth individuals and gives everyone the exact same tax treatment. Some excerpts:
Right now the federal government encourages private health insurance primarily through the tax system -- handing out more than $200 billion in tax subsidies every year. Mr. Obama would leave this system largely intact. Mr. McCain would completely replace it with a fairer, more efficient system with a much better chance of insuring the uninsured and controlling health costs at the same time.
Under the current system, every dollar in health-insurance premiums paid by an employer is excluded from employee income and payroll taxes.
But this system is extremely arbitrary. There is virtually no tax relief for people who work for the 40% of employers who do not provide insurance, for part-time workers or people not in the labor market, or for anyone else who for any reason must buy his own insurance. The self-employed get a slightly better deal: They can deduct 100% of their premiums, but they get no relief from the payroll tax.
According to the Lewin Group, a private health-care consulting firm, families earning $100,000 a year get four times as much tax relief as families earning $25,000. In other words, the biggest subsidy goes to those who least need it, and who probably would have purchased insurance anyway.
Under the McCain plan, no longer would employers be able to buy insurance with pretax dollars. These payments would be taxable to the employee, just like wages. However, every individual would get a $2,500 credit (and every family would get $5,000) to be applied dollar-for-dollar against taxes owed.
The McCain plan does not raise taxes, nor does it lower them. Instead, it takes the existing system of tax subsidies and treats everyone alike, regardless of income or job status.
Whereas Mr. Obama would continue the current practice of giving the vast bulk of federal help to the rich (through tax subsidies) and the poor (through spending programs), the McCain tax credit would give the most new tax relief to the middle class.
Dr. Goodman is the inventor of Health Savings Accounts, which I have been a fan of for quite some time. However, McCain’s plan does not make wider use of HSAs, taking efforts to remove some of the distortions caused by employer provided plans. His plan also removes the bias of tax treatment away from higher wealth individuals and gives everyone the exact same tax treatment. Some excerpts:
Right now the federal government encourages private health insurance primarily through the tax system -- handing out more than $200 billion in tax subsidies every year. Mr. Obama would leave this system largely intact. Mr. McCain would completely replace it with a fairer, more efficient system with a much better chance of insuring the uninsured and controlling health costs at the same time.
Under the current system, every dollar in health-insurance premiums paid by an employer is excluded from employee income and payroll taxes.
But this system is extremely arbitrary. There is virtually no tax relief for people who work for the 40% of employers who do not provide insurance, for part-time workers or people not in the labor market, or for anyone else who for any reason must buy his own insurance. The self-employed get a slightly better deal: They can deduct 100% of their premiums, but they get no relief from the payroll tax.
According to the Lewin Group, a private health-care consulting firm, families earning $100,000 a year get four times as much tax relief as families earning $25,000. In other words, the biggest subsidy goes to those who least need it, and who probably would have purchased insurance anyway.
Under the McCain plan, no longer would employers be able to buy insurance with pretax dollars. These payments would be taxable to the employee, just like wages. However, every individual would get a $2,500 credit (and every family would get $5,000) to be applied dollar-for-dollar against taxes owed.
The McCain plan does not raise taxes, nor does it lower them. Instead, it takes the existing system of tax subsidies and treats everyone alike, regardless of income or job status.
Whereas Mr. Obama would continue the current practice of giving the vast bulk of federal help to the rich (through tax subsidies) and the poor (through spending programs), the McCain tax credit would give the most new tax relief to the middle class.
**********
There’s lots of good stuff in the article and if you want to read a succinct synopsis of his plan this is where to get it. If you have a question for Dr. Goodman his blog is located here.Monday, June 23, 2008
Let's Be Like The French
...and Switzerland
Last week I attended a business conference in lovely Corpus Christi, Texas. Among the speakers was a gentleman named Dr. Selvoy M. Fillerup, MD. He has written a book called Chronic Crisis in which he analyzes health care systems around the world and reports what seems to work and what doesn't. I don't agree with him 100%, but I wouldn't be heartbroken if his suggestion were inacted in the United States.
What I did find interesting in his presentation was the revelation that the single-payer socialized medicine model of the UK and of Canada is actually quite rare. Much of Europe allows for extensive private insurance. The universal mandate is very common, but often it is only for limited coverage.
The percentage of population with Private Health Insurance for various industrialized countries:
(No private primary, just supplementary)
UK - 3.3%
Canada - 11%
(With Private primary)
Germany - 10%
Netherlands - 31%
Australia - 46%
Ireland - 49%
Japan - 60%
France - 86%
Switzerland - 99%
I'm not sure what America's percentage is exactly, but I have seen number in the range of 66% for the amount of health care expenditures paid by private insurance companies and individuals. The rest being from Medicare, Medicaid, and Veterans Administration.
It was the opinion of Dr. Fillerup that all of the countries in the (with Private Primary) list had superior health outcomes than the UK, Canada, and the United States. All countries with a single-payer socialized plan had very long lines. The U.S. is the rare exception that does not mandate that every citizen have insurance.
When asked, he had criticisms for both Hillary and Obama's health plans, saying they failed on 3 of 5 points he suggests. He made no comment on any of John McCain's positions. However, I talked with him afterwards and he did support my position of dropping the tax breaks for employer provided health care. I think McCain also supports this position, and proposes a tax credit for buying personal coverage.
Last week I attended a business conference in lovely Corpus Christi, Texas. Among the speakers was a gentleman named Dr. Selvoy M. Fillerup, MD. He has written a book called Chronic Crisis in which he analyzes health care systems around the world and reports what seems to work and what doesn't. I don't agree with him 100%, but I wouldn't be heartbroken if his suggestion were inacted in the United States.
What I did find interesting in his presentation was the revelation that the single-payer socialized medicine model of the UK and of Canada is actually quite rare. Much of Europe allows for extensive private insurance. The universal mandate is very common, but often it is only for limited coverage.
The percentage of population with Private Health Insurance for various industrialized countries:
(No private primary, just supplementary)
UK - 3.3%
Canada - 11%
(With Private primary)
Germany - 10%
Netherlands - 31%
Australia - 46%
Ireland - 49%
Japan - 60%
France - 86%
Switzerland - 99%
I'm not sure what America's percentage is exactly, but I have seen number in the range of 66% for the amount of health care expenditures paid by private insurance companies and individuals. The rest being from Medicare, Medicaid, and Veterans Administration.
It was the opinion of Dr. Fillerup that all of the countries in the (with Private Primary) list had superior health outcomes than the UK, Canada, and the United States. All countries with a single-payer socialized plan had very long lines. The U.S. is the rare exception that does not mandate that every citizen have insurance.
When asked, he had criticisms for both Hillary and Obama's health plans, saying they failed on 3 of 5 points he suggests. He made no comment on any of John McCain's positions. However, I talked with him afterwards and he did support my position of dropping the tax breaks for employer provided health care. I think McCain also supports this position, and proposes a tax credit for buying personal coverage.
Wednesday, May 28, 2008
Et tu Singapore?
I found a great article at the American Magazine by Rowan Callick about Singapore’s medical system. While it is not a libertarian’s dream is shows that the government need not have a heavy hand in medical coverage to achieve high health outcomes, and not every country has pursued socialized medicine.
Are they healthier? Who pays?
“Singaporeans are considerably healthier than Americans, yet pay, per person, about one-fifth of what Americans pay for their healthcare. A major reason is that Singapore’s system does not focus on the question that seems to preoccupy both Europe and America: who pays? Ultimately, whoever signs the checks, the money comes out of the pockets of individuals.”
“Here are some comparisons: Life expectancy at birth in the United States is 78 years; in Singapore, 82 years. The U.S. infant mortality rate is 6.4 deaths per 1,000 live births; in Singapore, just 2.3 deaths per 1,000.”
How much do they spend?
“The World Health Organization’s most recent full report on global health statistics says the United States spends 15.4 percent of its GDP on healthcare, while Singapore spends just 3.7 percent. “
“In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health—or one-seventh what the U.S. government spends.”
For those of you who don’t know, the World Bank ranks Singapore as being wealthier than the United States on a per capita basis. The U.N. ranks Singapore as having only slightly more income inequality than the United States.
I also thought this quote sounded awfully similar to my sentiments on Health Savings Accounts
“In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect.”
Are they healthier? Who pays?
“Singaporeans are considerably healthier than Americans, yet pay, per person, about one-fifth of what Americans pay for their healthcare. A major reason is that Singapore’s system does not focus on the question that seems to preoccupy both Europe and America: who pays? Ultimately, whoever signs the checks, the money comes out of the pockets of individuals.”
“Here are some comparisons: Life expectancy at birth in the United States is 78 years; in Singapore, 82 years. The U.S. infant mortality rate is 6.4 deaths per 1,000 live births; in Singapore, just 2.3 deaths per 1,000.”
How much do they spend?
“The World Health Organization’s most recent full report on global health statistics says the United States spends 15.4 percent of its GDP on healthcare, while Singapore spends just 3.7 percent. “
“In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health—or one-seventh what the U.S. government spends.”
For those of you who don’t know, the World Bank ranks Singapore as being wealthier than the United States on a per capita basis. The U.N. ranks Singapore as having only slightly more income inequality than the United States.
I also thought this quote sounded awfully similar to my sentiments on Health Savings Accounts
“In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect.”
Monday, March 17, 2008
Updates on Housing Bubble and Health Care
Friends,
From time to time I feel the need to prove that I am not the only one who believes what I write and that other smart people feel the same way.
Housing Bubble
Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist.
His recent article (March 17th) at Bloomberg.com echoes many of my sentiments that I referenced on my blog a few weeks ago (Feb. 27th) concerning the fact that land regulations are the root of the U.S. housing mess. Excerpts from his article include:
“…a recent study by Cato Institute scholar Randal O'Toole that draws on broad economic literature documents that the price swings are, in fact, not so difficult to understand. Out-of- control government regulation started the mess.”
“When land use is constrained, supply can't respond to higher prices, forcing prices to climb even higher. This is exactly the impetus that can start a catastrophe like the current episode. ``It's a regular cycle,'' O'Toole told me last week. ``States adopted land-use regulations, and then their real estate prices skyrocketed and then crashed. Early movers like California have seen the cycle a number of times.''
“The evidence is clear. Regulations that inhibit the supply response to higher prices are the primary culprit in this mess. “
“For the long term, draconian land-use regulations must be reconsidered by local and state governments. If not, it will only be a matter of time before we experience this all over again.“
I wrote:
“Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.”
“My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.”
Clearly, I should be charging more for this newsletter :)
Health Care
Shawn Tully, editor-at-large for Fortune magazine wrote a column called “Why McCain has the best health-care plan”
He wrote:
“McCain's main pillar is the elimination of a tax break that employees receive if their employer provides their health care.”
“So what types of policies would they buy? Employees (and their families) with corporate plans - about 150 million Americans - would probably rush toward high-deductible, low-premium insurance, and use what's left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts,”
I wrote several months ago:
“I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan.”
Also in the article, he explains that McCain’s plan includes ideas that we should be able to purchase insurance across state lines. On first glance, I agree with this, and I may write something in the future about it.
As always, tell me what you think.
From time to time I feel the need to prove that I am not the only one who believes what I write and that other smart people feel the same way.
Housing Bubble
Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist.
His recent article (March 17th) at Bloomberg.com echoes many of my sentiments that I referenced on my blog a few weeks ago (Feb. 27th) concerning the fact that land regulations are the root of the U.S. housing mess. Excerpts from his article include:
“…a recent study by Cato Institute scholar Randal O'Toole that draws on broad economic literature documents that the price swings are, in fact, not so difficult to understand. Out-of- control government regulation started the mess.”
“When land use is constrained, supply can't respond to higher prices, forcing prices to climb even higher. This is exactly the impetus that can start a catastrophe like the current episode. ``It's a regular cycle,'' O'Toole told me last week. ``States adopted land-use regulations, and then their real estate prices skyrocketed and then crashed. Early movers like California have seen the cycle a number of times.''
“The evidence is clear. Regulations that inhibit the supply response to higher prices are the primary culprit in this mess. “
“For the long term, draconian land-use regulations must be reconsidered by local and state governments. If not, it will only be a matter of time before we experience this all over again.“
I wrote:
“Smart Growth urban planning restricted the supply of houses and drove up prices. A number of economists believe along with a gentleman named Wendall Cox who I was privy to hear speak on Feb. 26, believe that smart growth planning has been the largest contributing factor to the home price spike in many cities around the U.S. Smart Growth limits the supply of new houses and condos, and in a popular city that will lead prices to soar.”
“My concern for the next few years is that the housing bubble will be solely blamed on reckless mortgage companies, and not on smart growth urban planning. If smart growth does not get the blame, this cycle will repeat in just a few years. Excessive urban planning is the main reason why prices have soared and plunged.”
Clearly, I should be charging more for this newsletter :)
Health Care
Shawn Tully, editor-at-large for Fortune magazine wrote a column called “Why McCain has the best health-care plan”
He wrote:
“McCain's main pillar is the elimination of a tax break that employees receive if their employer provides their health care.”
“So what types of policies would they buy? Employees (and their families) with corporate plans - about 150 million Americans - would probably rush toward high-deductible, low-premium insurance, and use what's left over to pay cash for routine procedures. They would couple those high-deductible policies with Health Savings Accounts,”
I wrote several months ago:
“I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan.”
Also in the article, he explains that McCain’s plan includes ideas that we should be able to purchase insurance across state lines. On first glance, I agree with this, and I may write something in the future about it.
As always, tell me what you think.
Thursday, January 31, 2008
Update and a Book Review
State of the Union
I was pleased to hear the President continue his support for Health Savings Accounts. He’s a lame duck and the Democratic controlled Congress is likely to do nothing about them, but at least he’s keeping the concept in the public eye. I was also pleased that he made a stand on earmarks. I wrote recently about the corrupting influence of earmarks a few weeks ago. If, like me, you happened to send an e-mail through the link I gave voicing your support to the executive order to ignore the earmarks, take note that you may have made a small difference.
Book Review
I was planning to suggest a few books that I have read since Christmas, but 3 of 4 were not easy reads. For one of them, I have had to wear out dictionary.com and wikipedia to explain all the terms. However, I read Freedomnomics by Economist Dr. John Lott. This book was a pretty easy read and I found some of the information jaw dropping. His specialty is crime and punishment and Chapter 4, which focuses on that, just blew me away. It really showed how conventional wisdom is flat out wrong when you look at the data on crime.
On a personal note, I sent him an e-mail to ask a question about an op-ed he wrote for Foxnews.com. From time to time I write more famous people to ask them a question or send a rebuttal, but I never hear back. Well, Dr. Lott not only e-mailed me back, but took the time to further explain his position. Even more, I sent the e-mail late in the evening and he replied by 6:30 the next morning. Wow! I think it says a lot about Dr. Lott, given that he wrote a top selling book and op-eds to the biggest names in media, but still takes the time to answer questions from average people.
His book is available at Amazon.com, but I checked it out from my local library.
Read the book, and as always, let me know what you think.
I was pleased to hear the President continue his support for Health Savings Accounts. He’s a lame duck and the Democratic controlled Congress is likely to do nothing about them, but at least he’s keeping the concept in the public eye. I was also pleased that he made a stand on earmarks. I wrote recently about the corrupting influence of earmarks a few weeks ago. If, like me, you happened to send an e-mail through the link I gave voicing your support to the executive order to ignore the earmarks, take note that you may have made a small difference.
Book Review
I was planning to suggest a few books that I have read since Christmas, but 3 of 4 were not easy reads. For one of them, I have had to wear out dictionary.com and wikipedia to explain all the terms. However, I read Freedomnomics by Economist Dr. John Lott. This book was a pretty easy read and I found some of the information jaw dropping. His specialty is crime and punishment and Chapter 4, which focuses on that, just blew me away. It really showed how conventional wisdom is flat out wrong when you look at the data on crime.
On a personal note, I sent him an e-mail to ask a question about an op-ed he wrote for Foxnews.com. From time to time I write more famous people to ask them a question or send a rebuttal, but I never hear back. Well, Dr. Lott not only e-mailed me back, but took the time to further explain his position. Even more, I sent the e-mail late in the evening and he replied by 6:30 the next morning. Wow! I think it says a lot about Dr. Lott, given that he wrote a top selling book and op-eds to the biggest names in media, but still takes the time to answer questions from average people.
His book is available at Amazon.com, but I checked it out from my local library.
Read the book, and as always, let me know what you think.
Wednesday, January 16, 2008
Thoughts and Ideas
Two topics this week.
More thoughts on Health Care
Over the last few months I have written a number of posts concerning the universal health care proposals. My three main criticisms of these plans are:
1. The Universal insurance plans proposed continue the HMO style of health insurance. HMO style insurance encourages over use of medical services by separating us from the actual expense of health care.
2. These Universal HMO plans by Obama, Edwards and Clinton also discourage people from finding the least expensive doctor or treatment. We don’t pay the costs so we don’t bother finding this information
3. HMO style insurance over insures us and leads us to take less care of our health because they don’t face the financial repercussions.
Well, I came up with yet another criticism of these proposed moves towards government run health care systems like those that exist in Canada and Western Europe. To be fair, none of the Universal Insurance plans Democrats have proposed would cause side effects of the size I’m talking about. However, all three have mentioned the “excessive profits” that drug companies are making and their party has been pushing to confiscate these profits or mandate lower prices by law. These moves could easily cause the effects that I fear.
According to the Kenneth Shadlen of Development Studies Institute, between 1996 and 2000 the United States accounted for 63% of all medical patents worldwide even though we make up only 5% of the population. Even when you compare the U.S. to Western Europe we blow them away. On a per capita basis, the U.S. puts out 2 to 2 ½ times the medical advances of the UK, France, Canada, and Germany. Clearly, our medical system, based on profits, outperforms the European countries with socialized medicine. The rest of the world is relying on our free market system because we choose not to exclude them from new medicines and technologies.
All else being equal, if the United States were to switch to a similar system for medicine as the four mentioned, worldwide medical advances would fall by almost 40%. Instead of finding cures and treatments for say 500,000 people next year, it would only be 300,000. That treatment you were hoping for that was only 10 years off could be 18 years off. How much needless suffering and pain would we inflict upon the world if we were to do as others have chosen to do?
Before we barrel down the road towards socialized medicine, we need to appreciate what could be the catastrophic consequences.
It’s a Nice Idea, But It Can’t be Done
Recently, in this newsletter, on my blog, and other blogs I have been defending the idea of Texas dropping the property tax for a sales tax in the spirit of the Fair Tax. I’ve come across general support, but also some doubt that it could ever be accomplished. I'm told that like the flat tax, fair tax, and many of the ideas that I have proposed, these changes are too ambitious to ever occur. I have run across some evidence that these doubt are unfounded.
The state of Utah recently switched from a complicated income tax with lots of loopholes and deductions to a Flat Tax. Read about it here:
http://www.sltrib.com/ci_7766094
The governor of the state of South Carolina recently proposed a budget that includes a flat tax option where citizens can choose whether to pay their state income tax under the existing system of deductions and loopholes or pay a flat tax.
“Under the plan, residents could choose to pay a flat 3.4 percent income tax rate. In exchange, they could claim no tax deductions or credits.”
http://www.thestate.com/local/story/262697.html
When the winds are blowing against the ideas of the free market and small government, it seems like an impossible task to significantly reduce the size of our government. Over the last 20 years, Ireland has shown that it can be done.
In 1985, government spending accounted for 54% of the Irish economy. The Irish made a choice to reduce the size of government and they did. Over the last twenty years, the Irish have cut government spending by 35% as a percentage of GDP. Their country now has a lower overall tax rate than the United States. They have moved from one of the poorest countries in Western Europe to one of the wealthiest. The Heritage Foundation lists them as having a more free economy than the United States. In 1985, the average Irish family made 40% less than their French and German counterparts. Today, because of the massive spending cuts and massive growth from that, the Irish make 40% more than the French and the Germans according to the IMF.
Do you think that we can move to less government in the United States? Tell me yes or no. Tell me what you think is the easiest government spending to get rid of. Send me an e-mail or go out to my blog.
As always, tell me what you think and pass this newsletter along to anyone who might be interested.
More thoughts on Health Care
Over the last few months I have written a number of posts concerning the universal health care proposals. My three main criticisms of these plans are:
1. The Universal insurance plans proposed continue the HMO style of health insurance. HMO style insurance encourages over use of medical services by separating us from the actual expense of health care.
2. These Universal HMO plans by Obama, Edwards and Clinton also discourage people from finding the least expensive doctor or treatment. We don’t pay the costs so we don’t bother finding this information
3. HMO style insurance over insures us and leads us to take less care of our health because they don’t face the financial repercussions.
Well, I came up with yet another criticism of these proposed moves towards government run health care systems like those that exist in Canada and Western Europe. To be fair, none of the Universal Insurance plans Democrats have proposed would cause side effects of the size I’m talking about. However, all three have mentioned the “excessive profits” that drug companies are making and their party has been pushing to confiscate these profits or mandate lower prices by law. These moves could easily cause the effects that I fear.
According to the Kenneth Shadlen of Development Studies Institute, between 1996 and 2000 the United States accounted for 63% of all medical patents worldwide even though we make up only 5% of the population. Even when you compare the U.S. to Western Europe we blow them away. On a per capita basis, the U.S. puts out 2 to 2 ½ times the medical advances of the UK, France, Canada, and Germany. Clearly, our medical system, based on profits, outperforms the European countries with socialized medicine. The rest of the world is relying on our free market system because we choose not to exclude them from new medicines and technologies.
All else being equal, if the United States were to switch to a similar system for medicine as the four mentioned, worldwide medical advances would fall by almost 40%. Instead of finding cures and treatments for say 500,000 people next year, it would only be 300,000. That treatment you were hoping for that was only 10 years off could be 18 years off. How much needless suffering and pain would we inflict upon the world if we were to do as others have chosen to do?
Before we barrel down the road towards socialized medicine, we need to appreciate what could be the catastrophic consequences.
It’s a Nice Idea, But It Can’t be Done
Recently, in this newsletter, on my blog, and other blogs I have been defending the idea of Texas dropping the property tax for a sales tax in the spirit of the Fair Tax. I’ve come across general support, but also some doubt that it could ever be accomplished. I'm told that like the flat tax, fair tax, and many of the ideas that I have proposed, these changes are too ambitious to ever occur. I have run across some evidence that these doubt are unfounded.
The state of Utah recently switched from a complicated income tax with lots of loopholes and deductions to a Flat Tax. Read about it here:
http://www.sltrib.com/ci_7766094
The governor of the state of South Carolina recently proposed a budget that includes a flat tax option where citizens can choose whether to pay their state income tax under the existing system of deductions and loopholes or pay a flat tax.
“Under the plan, residents could choose to pay a flat 3.4 percent income tax rate. In exchange, they could claim no tax deductions or credits.”
http://www.thestate.com/local/story/262697.html
When the winds are blowing against the ideas of the free market and small government, it seems like an impossible task to significantly reduce the size of our government. Over the last 20 years, Ireland has shown that it can be done.
In 1985, government spending accounted for 54% of the Irish economy. The Irish made a choice to reduce the size of government and they did. Over the last twenty years, the Irish have cut government spending by 35% as a percentage of GDP. Their country now has a lower overall tax rate than the United States. They have moved from one of the poorest countries in Western Europe to one of the wealthiest. The Heritage Foundation lists them as having a more free economy than the United States. In 1985, the average Irish family made 40% less than their French and German counterparts. Today, because of the massive spending cuts and massive growth from that, the Irish make 40% more than the French and the Germans according to the IMF.
Do you think that we can move to less government in the United States? Tell me yes or no. Tell me what you think is the easiest government spending to get rid of. Send me an e-mail or go out to my blog.
As always, tell me what you think and pass this newsletter along to anyone who might be interested.
Tuesday, October 23, 2007
Doesn't Money Fix Everything?
Over the last few months, I have explained some problems with our current health care set up. My chief complaint about the plans that Hillary, Obama, and Edwards have put up is that they fail to address the bad incentives HMO and PPO style insurance creates. Even though I supported Bush’s veto of S-Chip, I knew that he and other free-market supporters would get bad press. When it boils down to a moral argument, it is hard to win against “Helping the Children” by complaining about cost over runs. Having said that, something remarkable struck me over the weekend that dramatically changed my thinking on Universal Health Care.
It Will NOT Work. We will be no healthier with Universal Health Care than without it. In fact, I think there are reasons to believe that our health will be worse under Universal Health Care.
The reason? Moral Hazard. Moral Hazard, is an insurance term, and happens when one party is insulated from risk and therefore behaves more risky than before they were insured. It can pop up in many forms. A person with a large life insurance policy might be more likely to commit suicide because family members won’t suffer financially. A company with fire insurance may choose to spend less time on fire prevention. Sometimes Moral Hazard is a conscious choice, but many times our behavior changes without even thinking about it. We feel safe, so we act a little more recklessly.
The following is from Tim Harford, a member of the Financial Times editorial board, in his column The Undercover Economist. This effect described by Mr. Harford is known as the “Peltzman Effect”. It is akin to Moral Hazard in the insurance world.
“The idea that seatbelts cause accidents is so ridiculous it could only have come from an economist. That economist is Sam Peltzman, who in 1975 published a paper demonstrating that drivers did indeed drive more dangerously after mandatory seatbelt laws were passed in the US. He argued that despite technological evidence showing that seatbelts save lives in a given accident, there was no evidence that the seatbelt laws had reduced driver fatalities. In other words, drivers take advantage of seatbelts to drive more dangerously rather than to live longer. More compellingly, Peltzman detected a rise in pedestrian and cyclist fatalities when seatbelt laws were passed.”
One might think it is a stretch to compare a seatbelt law with health care coverage. So let’s compare the outcome of a much larger government run insurance program. Welfare can be considered poverty insurance. It pays out money in the event that someone slips into poverty. I have argued before that Welfare distorted behaviors in many negative ways, but how well did it actually reduce poverty?
In 1959, the poverty rate in the U.S. was measured at around 23%. The “War on Poverty” passed under Lyndon Johnson in August of 1964, going into effect in 1965. In 1965, the poverty rate was about 16%, meaning that before welfare became a nationwide program the poverty rate had fallen by 7 percentage points in 6 years. While the poverty rate fell to an all time low of 11% in 1973, by 1983 the poverty rate increased up to 15%, wiping out previous gains. It dipped afterwards, but again rose to 15% in 1993.
If welfare had much of a positive benefit, it is hard to tell. Maybe it worked for a few years, but if it did work, shouldn’t the poverty rate start to climb in 1995 after Bill Clinton and the Republican Congress reformed welfare and the number of recipients declined by over 50%? In 1995, the poverty rate was about 14%, declining to around 11.5% in 2000. Today, it is at 12.6%. Poverty rates improved after we radically cut back Welfare benefits.
The answer is then clear. If the poverty rate failed to decline permanently after Welfare passed in 1965, and getting rid of the program led to lower poverty rates the program never worked. If the poverty rate was declining rapidly before Welfare was passed, and then came to a halt afterwards, the conclusion can be drawn that not only did it not work, it made things worse. The power of Moral Hazard outweighed the no-strings-attached checks we handed to the poor.
How does Moral Hazard affect health insurance? In three ways: First, as I’ve talked about before, we tend to use more health services than we need under an HMO or PPO style plan. Second, we have less personal incentive to shop for the least expensive doctor, hospital, medicine, or service provider because the insurance dramatically reduces our out of pocket costs. Third, those with generous insurance are likely to feel safer and act more reckless with their health.
Some may scoff at the third one, but let me relate a story to you of a gentleman I met a couple years ago. He was in his early 30’s, college educated, with a professional job (and generous health insurance). He happened to order a big chicken fried steak so we started talking about heartburn. He related to me that he was on name brand high blood pressure medicine, heartburn medicine, and cholesterol medicine. He said, “It’s great! Now I can eat whatever I want and not have to worry about it.” Do you really think he would have the same reckless attitude if he had to pay full price out of pocket for all of those medicines? Not a chance.
Universal Health Care, under the schemes that our Democratic candidates for President are proposing will not just cost too much, they will not improve our health. If mandatory seat belts don’t save lives, if Welfare didn’t cure poverty, universal health care will not make us healthier.
As always, let me know what you think.
It Will NOT Work. We will be no healthier with Universal Health Care than without it. In fact, I think there are reasons to believe that our health will be worse under Universal Health Care.
The reason? Moral Hazard. Moral Hazard, is an insurance term, and happens when one party is insulated from risk and therefore behaves more risky than before they were insured. It can pop up in many forms. A person with a large life insurance policy might be more likely to commit suicide because family members won’t suffer financially. A company with fire insurance may choose to spend less time on fire prevention. Sometimes Moral Hazard is a conscious choice, but many times our behavior changes without even thinking about it. We feel safe, so we act a little more recklessly.
The following is from Tim Harford, a member of the Financial Times editorial board, in his column The Undercover Economist. This effect described by Mr. Harford is known as the “Peltzman Effect”. It is akin to Moral Hazard in the insurance world.
“The idea that seatbelts cause accidents is so ridiculous it could only have come from an economist. That economist is Sam Peltzman, who in 1975 published a paper demonstrating that drivers did indeed drive more dangerously after mandatory seatbelt laws were passed in the US. He argued that despite technological evidence showing that seatbelts save lives in a given accident, there was no evidence that the seatbelt laws had reduced driver fatalities. In other words, drivers take advantage of seatbelts to drive more dangerously rather than to live longer. More compellingly, Peltzman detected a rise in pedestrian and cyclist fatalities when seatbelt laws were passed.”
One might think it is a stretch to compare a seatbelt law with health care coverage. So let’s compare the outcome of a much larger government run insurance program. Welfare can be considered poverty insurance. It pays out money in the event that someone slips into poverty. I have argued before that Welfare distorted behaviors in many negative ways, but how well did it actually reduce poverty?
In 1959, the poverty rate in the U.S. was measured at around 23%. The “War on Poverty” passed under Lyndon Johnson in August of 1964, going into effect in 1965. In 1965, the poverty rate was about 16%, meaning that before welfare became a nationwide program the poverty rate had fallen by 7 percentage points in 6 years. While the poverty rate fell to an all time low of 11% in 1973, by 1983 the poverty rate increased up to 15%, wiping out previous gains. It dipped afterwards, but again rose to 15% in 1993.
If welfare had much of a positive benefit, it is hard to tell. Maybe it worked for a few years, but if it did work, shouldn’t the poverty rate start to climb in 1995 after Bill Clinton and the Republican Congress reformed welfare and the number of recipients declined by over 50%? In 1995, the poverty rate was about 14%, declining to around 11.5% in 2000. Today, it is at 12.6%. Poverty rates improved after we radically cut back Welfare benefits.
The answer is then clear. If the poverty rate failed to decline permanently after Welfare passed in 1965, and getting rid of the program led to lower poverty rates the program never worked. If the poverty rate was declining rapidly before Welfare was passed, and then came to a halt afterwards, the conclusion can be drawn that not only did it not work, it made things worse. The power of Moral Hazard outweighed the no-strings-attached checks we handed to the poor.
How does Moral Hazard affect health insurance? In three ways: First, as I’ve talked about before, we tend to use more health services than we need under an HMO or PPO style plan. Second, we have less personal incentive to shop for the least expensive doctor, hospital, medicine, or service provider because the insurance dramatically reduces our out of pocket costs. Third, those with generous insurance are likely to feel safer and act more reckless with their health.
Some may scoff at the third one, but let me relate a story to you of a gentleman I met a couple years ago. He was in his early 30’s, college educated, with a professional job (and generous health insurance). He happened to order a big chicken fried steak so we started talking about heartburn. He related to me that he was on name brand high blood pressure medicine, heartburn medicine, and cholesterol medicine. He said, “It’s great! Now I can eat whatever I want and not have to worry about it.” Do you really think he would have the same reckless attitude if he had to pay full price out of pocket for all of those medicines? Not a chance.
Universal Health Care, under the schemes that our Democratic candidates for President are proposing will not just cost too much, they will not improve our health. If mandatory seat belts don’t save lives, if Welfare didn’t cure poverty, universal health care will not make us healthier.
As always, let me know what you think.
Monday, October 15, 2007
Updates on Fair Tax, Immigration, and Health Care
Mea Culpas -
Occasionally I make a mistake or overlook something I’ve written about. Usually, it’s one of you that points it out to me via e-mail.
On Sept 13, I wrote about the Fair Tax in “A Tax Cure All?” :
“A glaring problem is crossing borders to buy big-ticket items in Canada and Mexico…to purchase a car, boat, jewelry...Only a fool would buy any big-ticket item inside the U.S.”
John C. and Ian wrote in to let me know that buying a car in Mexico would be easy to check once you filed the paperwork for registration and license plates here in the U.S. I do still think jewelry would be easy to avoid a national sales tax. It would be hard to prove where you bought it without a massive effort. But, I do feel pretty dumb not thinking that cars have to be registered, titled, and insured.
Also on the Fair Tax I described how the theoretical ABC Services Inc. would be hurt because they would have to pay taxes on all revenue and not just on their thin profit margins. Ian pointed out that if the income tax was replaced, the tax accounting costs and human resources costs for the company would fall substantially. If you don’t pay corporate taxes you don’t really need that extra accountant. If you don’t have to fill out a whole bunch of IRS forms for W2, Social Security, Medicare…you might not need that extra HR staff member. I don’t know if this completely makes up for the extra taxes that are calculated on all revenues, but it shrinks the margin and muddies my argument.
Last week, I wrote about using remittances and work visas as leverage for opening markets in Mexico and Central America. After getting no e-mails for a few days, I felt a little like Ben Stein up at the chalkboard talking about the Smoot-Hawley trade act, “Anyone, anyone?” However, Alex G. who does work for the U.S. State Department sent this lone reply:
“Well I think you are on the right track with *some* of your comments about leveraging the money transfer issue. Your end goal…I think is too small in scope.”
“Our issuance of visas has to be looked at globally, and used as a diplomatic tool with those countries for whom we have the greatest desire to strengthen relationships. If you increase the number of visas to Mexico, India, China and others are going to (rightfully) cry foul.”
Updates –
In an article printed today at CNN.com, a study reveals that even though basic dental coverage is guaranteed by Britain’s National Health Service many British residents have resorted to pulling their own teeth. They cannot find an available government subsidized dentist and cannot afford the more expensive private dentists.
“One respondent in Lancashire, northern England, claimed to have extracted 14 of their own teeth with a pair of pliers.”
Sounds like a great system! Let’s hear it for Government run health care and insurance! Woohoo!
Pass along –
If you are consistently annoyed by many of your local paper’s columnists, like I am, and would like to send a “Letter to the Editor” here are some of their helpful tips from a posting at eHow.com:
Step Five
State your opinion right off the bat in the first line: "I am writing to say ..."
Step Six
Clarify your context. For example, "In response to yesterday's headline, let me say ..." or "In printing John Smith's diatribe against big dogs, you've lost this small reader's subscription ..."
Step Seven
Trim your letter. Column inches are precious, and the newspaper will edit the letter if you don't.
Step Eight
Keep insults, name-calling and hearsay out of the contents if you want your letter published.
Step Nine
Proofread carefully, then hand your missive to someone else to proofread a second time.
Occasionally I make a mistake or overlook something I’ve written about. Usually, it’s one of you that points it out to me via e-mail.
On Sept 13, I wrote about the Fair Tax in “A Tax Cure All?” :
“A glaring problem is crossing borders to buy big-ticket items in Canada and Mexico…to purchase a car, boat, jewelry...Only a fool would buy any big-ticket item inside the U.S.”
John C. and Ian wrote in to let me know that buying a car in Mexico would be easy to check once you filed the paperwork for registration and license plates here in the U.S. I do still think jewelry would be easy to avoid a national sales tax. It would be hard to prove where you bought it without a massive effort. But, I do feel pretty dumb not thinking that cars have to be registered, titled, and insured.
Also on the Fair Tax I described how the theoretical ABC Services Inc. would be hurt because they would have to pay taxes on all revenue and not just on their thin profit margins. Ian pointed out that if the income tax was replaced, the tax accounting costs and human resources costs for the company would fall substantially. If you don’t pay corporate taxes you don’t really need that extra accountant. If you don’t have to fill out a whole bunch of IRS forms for W2, Social Security, Medicare…you might not need that extra HR staff member. I don’t know if this completely makes up for the extra taxes that are calculated on all revenues, but it shrinks the margin and muddies my argument.
Last week, I wrote about using remittances and work visas as leverage for opening markets in Mexico and Central America. After getting no e-mails for a few days, I felt a little like Ben Stein up at the chalkboard talking about the Smoot-Hawley trade act, “Anyone, anyone?” However, Alex G. who does work for the U.S. State Department sent this lone reply:
“Well I think you are on the right track with *some* of your comments about leveraging the money transfer issue. Your end goal…I think is too small in scope.”
“Our issuance of visas has to be looked at globally, and used as a diplomatic tool with those countries for whom we have the greatest desire to strengthen relationships. If you increase the number of visas to Mexico, India, China and others are going to (rightfully) cry foul.”
Updates –
In an article printed today at CNN.com, a study reveals that even though basic dental coverage is guaranteed by Britain’s National Health Service many British residents have resorted to pulling their own teeth. They cannot find an available government subsidized dentist and cannot afford the more expensive private dentists.
“One respondent in Lancashire, northern England, claimed to have extracted 14 of their own teeth with a pair of pliers.”
Sounds like a great system! Let’s hear it for Government run health care and insurance! Woohoo!
Pass along –
If you are consistently annoyed by many of your local paper’s columnists, like I am, and would like to send a “Letter to the Editor” here are some of their helpful tips from a posting at eHow.com:
Step Five
State your opinion right off the bat in the first line: "I am writing to say ..."
Step Six
Clarify your context. For example, "In response to yesterday's headline, let me say ..." or "In printing John Smith's diatribe against big dogs, you've lost this small reader's subscription ..."
Step Seven
Trim your letter. Column inches are precious, and the newspaper will edit the letter if you don't.
Step Eight
Keep insults, name-calling and hearsay out of the contents if you want your letter published.
Step Nine
Proofread carefully, then hand your missive to someone else to proofread a second time.
Monday, September 17, 2007
Updates on Education, Principles, and Health Care
Just a few updates to the posts I had over the last couple of months, but first, I read a quote recently that I thought was great.
Robert Murphy – PhD in Economics – “If the press ignored advances in other scientific fields as much as they do in economics, we'd see weathermen advising readers to offer sacrifices to the rain gods.”
On Education –
According to a study by the Independent Women’s Forum (8/13/2007)
“Overall, private-school teachers are nearly twice as satisfied as public-school teachers with their working conditions.”
“At 82 percent, overall satisfaction rates among charter-school teachers are twice as high as their private counterparts and more than three times as high as their district counterparts. Two-thirds of charter-school teachers report high levels of satisfaction with the influence they have over curricula, student discipline, and professional development, as well as school safety, collaboration with colleagues, and their schools' learning environments. On those same measures, slightly more than half of private-school teachers and slightly more than one-third of public-school teachers report high levels of satisfaction.”
On August 9th I wrote and predicted for teachers at independently run schools a whole four days before the study:
“Increased pay, improved discipline, and being in demand should help these teachers feel more respected.”
On Principles and Pachyderms -
Alan Greenspan has written a new book entitled "The Age of Turbulence: Adventures in a New World". In the book, he reveals that he is a libertarian Republican. Here are his thoughts on where the Republicans went wrong:
"They swapped principle for power. They ended up with neither. They deserved to lose."
Here are my thoughts on the same subject from July 19:
“The conservatives lost power because they became convinced that winning elections was all that mattered.”
“What they failed to do was establish a core set of principles so that America could accept the downsides because of the goodness of the purpose.”
Save the money and just read my newsletter and blog :)
On Health Care -
Apparently, John Stossel did a report this Friday on ABC’s 20/20 about private health insurance versus socialized medicine in Canada. I say apparently because I did not watch it and it was not made available in it’s entirety on the internet as far as I can tell. There are snippets on their website however. My father did watch it and related some of the stories of eye-popping wait times that occur under Canada’s government run health care plan that John Stossel used in his piece. Two of the stories were originally from the http://www.freemarketcure.com/ website that I mentioned back on July 26. They usually run a lot of repeat stories on 20/20 so I can hopefully catch it again sometime in the future.
I highly recommend keeping a nose out for stories by John Stossel. He is one of the few journalists who do actually keep up with Economic science.
Robert Murphy – PhD in Economics – “If the press ignored advances in other scientific fields as much as they do in economics, we'd see weathermen advising readers to offer sacrifices to the rain gods.”
On Education –
According to a study by the Independent Women’s Forum (8/13/2007)
“Overall, private-school teachers are nearly twice as satisfied as public-school teachers with their working conditions.”
“At 82 percent, overall satisfaction rates among charter-school teachers are twice as high as their private counterparts and more than three times as high as their district counterparts. Two-thirds of charter-school teachers report high levels of satisfaction with the influence they have over curricula, student discipline, and professional development, as well as school safety, collaboration with colleagues, and their schools' learning environments. On those same measures, slightly more than half of private-school teachers and slightly more than one-third of public-school teachers report high levels of satisfaction.”
On August 9th I wrote and predicted for teachers at independently run schools a whole four days before the study:
“Increased pay, improved discipline, and being in demand should help these teachers feel more respected.”
On Principles and Pachyderms -
Alan Greenspan has written a new book entitled "The Age of Turbulence: Adventures in a New World". In the book, he reveals that he is a libertarian Republican. Here are his thoughts on where the Republicans went wrong:
"They swapped principle for power. They ended up with neither. They deserved to lose."
Here are my thoughts on the same subject from July 19:
“The conservatives lost power because they became convinced that winning elections was all that mattered.”
“What they failed to do was establish a core set of principles so that America could accept the downsides because of the goodness of the purpose.”
Save the money and just read my newsletter and blog :)
On Health Care -
Apparently, John Stossel did a report this Friday on ABC’s 20/20 about private health insurance versus socialized medicine in Canada. I say apparently because I did not watch it and it was not made available in it’s entirety on the internet as far as I can tell. There are snippets on their website however. My father did watch it and related some of the stories of eye-popping wait times that occur under Canada’s government run health care plan that John Stossel used in his piece. Two of the stories were originally from the http://www.freemarketcure.com/ website that I mentioned back on July 26. They usually run a lot of repeat stories on 20/20 so I can hopefully catch it again sometime in the future.
I highly recommend keeping a nose out for stories by John Stossel. He is one of the few journalists who do actually keep up with Economic science.
Monday, August 27, 2007
HSAs - Your FAQs
I received quite a bit of feedback from last week’s post about HSAs. I also had my first person post on my blog – FreedomistheSolution.blogspot.com. In this post I have included a list of concerns by Craig Williams of Bartlesville, OK.
1) Who puts the money in the HSA? The employer more than likely if he is not providing traditional insurance and can now get a tax reduction for funding the HSA.
This is correct. Under my proposal HSA deposits would still be tax deductible so the employer would still have an incentive to fund them. Premiums would make up a much smaller amount of the costs so the employer does not need to control premiums costs as much by interfering. I still support an employer sponsored high deductible health care plans.
However, when you left that job you would be able to take all of your HSA funds with you. Let’s say you were able to save up $4,000 in your HSA during 8 years you worked for one firm, then they let you go. You could then buy a private $4,000 deductible plan, which should be fairly inexpensive, and you’ll be completely covered.
2) Who is affected the most by the one time funding? The catastrophic illness recipient. Their HSA money is quickly consumed and they are left with a huge deductible and co-pay.
I don't see the HSA as being a one time funding. I would support legislation that encourages monthly deposits (in place of monthly premiums).
This week, I e-mailed a gentleman who works as a Health Plan consultant for a national firm asking him to confirm some points of a presentation he gave while I worked at the same firm. If he ever e-mails me back then I will let you know if he confirmed what I recall from his presentation.
He said that he was working with a company that was considering dropping their HMO style insurance and asked for alternatives. What he was able to tell them was that the incentives under an HSA were so much better that the company could offer a health plan with a $1,000 deductible and deposit $1,000 in a corresponding HSA for no additional costs over their current HMO expenses. What that means is that the employee would not have any out of pocket medical expenses.
3) What happens to all the left over money? If they never use much of their HSA savings, who eventually gets that money? The government is the likely recipient as with the FSA left over funds today.
Let me first clarify first that left over FSA funds actually go to the employer, not to the government. Any money left over at the end of the year would roll over to the next. Younger people who don't spend much on health care would often be able to build up a significant account balance so that insurance becomes less and less necessary. I would also support allowing transfers into a retirement account once the balance reached a certain level (say $25,000). I would also support allowing people to make a full withdrawal at age 65.
4) A number of employers fully fund High Deductible insurance premiums already today. Many employees pay a premium to have the more traditional insurance above the portion their employer pays.
The existence of PPOs is not only a result of the tax incentives given to corporations. There is a market for PPOs outside of employer plans. If a person chooses to take on additional insurance, that is their choice. Let me be clear, I do not support banning HMOs and PPOs, only the tax incentives that encourage them.
5) High deductible insurance only helps the non-employer paid insurance workers by having cheaper premiums. They must still fund their own HSA out of pocket. They still run the risk of having a large debt if they have a catastrophic illness.
It is true that HSAs aren't the best plan for every person in every circumstance. I’ve read a good amount about the subject and brainstorm from time to time, but I haven’t figured out a perfect plan for every person. As soon as I figure out the perfect plan for health care please write your checks to “Friends of Brian Shelley for President”
6) Our Aetna PPO severely limits the price that a doctor, hospital, or lab can charge for services. Many times I have seen reductions of as much as 90%. Which means my employer as well as me saves money, because my company is self-insured and only uses Aetna to administer the policy.
I am not 100% familiar with how organizations administer group discounts, but I imagine that many doctors agree to them so that they get more patients. I don't see a logical reason why group discounts couldn't be coordinated through an employer after the switch to HSAs.
I probably haven’t answered every question or concern, so don’t shy away from putting in your two cents. Our health care system is very complex and coming up with a short and sweet answer is not very likely. I can see now why this why Bush had a hard time getting people excited about HSAs. The principles that I am trying to stick to are slowing the growth of health care costs and expanding individual control and freedom over personal health care protections.
1) Who puts the money in the HSA? The employer more than likely if he is not providing traditional insurance and can now get a tax reduction for funding the HSA.
This is correct. Under my proposal HSA deposits would still be tax deductible so the employer would still have an incentive to fund them. Premiums would make up a much smaller amount of the costs so the employer does not need to control premiums costs as much by interfering. I still support an employer sponsored high deductible health care plans.
However, when you left that job you would be able to take all of your HSA funds with you. Let’s say you were able to save up $4,000 in your HSA during 8 years you worked for one firm, then they let you go. You could then buy a private $4,000 deductible plan, which should be fairly inexpensive, and you’ll be completely covered.
2) Who is affected the most by the one time funding? The catastrophic illness recipient. Their HSA money is quickly consumed and they are left with a huge deductible and co-pay.
I don't see the HSA as being a one time funding. I would support legislation that encourages monthly deposits (in place of monthly premiums).
This week, I e-mailed a gentleman who works as a Health Plan consultant for a national firm asking him to confirm some points of a presentation he gave while I worked at the same firm. If he ever e-mails me back then I will let you know if he confirmed what I recall from his presentation.
He said that he was working with a company that was considering dropping their HMO style insurance and asked for alternatives. What he was able to tell them was that the incentives under an HSA were so much better that the company could offer a health plan with a $1,000 deductible and deposit $1,000 in a corresponding HSA for no additional costs over their current HMO expenses. What that means is that the employee would not have any out of pocket medical expenses.
3) What happens to all the left over money? If they never use much of their HSA savings, who eventually gets that money? The government is the likely recipient as with the FSA left over funds today.
Let me first clarify first that left over FSA funds actually go to the employer, not to the government. Any money left over at the end of the year would roll over to the next. Younger people who don't spend much on health care would often be able to build up a significant account balance so that insurance becomes less and less necessary. I would also support allowing transfers into a retirement account once the balance reached a certain level (say $25,000). I would also support allowing people to make a full withdrawal at age 65.
4) A number of employers fully fund High Deductible insurance premiums already today. Many employees pay a premium to have the more traditional insurance above the portion their employer pays.
The existence of PPOs is not only a result of the tax incentives given to corporations. There is a market for PPOs outside of employer plans. If a person chooses to take on additional insurance, that is their choice. Let me be clear, I do not support banning HMOs and PPOs, only the tax incentives that encourage them.
5) High deductible insurance only helps the non-employer paid insurance workers by having cheaper premiums. They must still fund their own HSA out of pocket. They still run the risk of having a large debt if they have a catastrophic illness.
It is true that HSAs aren't the best plan for every person in every circumstance. I’ve read a good amount about the subject and brainstorm from time to time, but I haven’t figured out a perfect plan for every person. As soon as I figure out the perfect plan for health care please write your checks to “Friends of Brian Shelley for President”
6) Our Aetna PPO severely limits the price that a doctor, hospital, or lab can charge for services. Many times I have seen reductions of as much as 90%. Which means my employer as well as me saves money, because my company is self-insured and only uses Aetna to administer the policy.
I am not 100% familiar with how organizations administer group discounts, but I imagine that many doctors agree to them so that they get more patients. I don't see a logical reason why group discounts couldn't be coordinated through an employer after the switch to HSAs.
I probably haven’t answered every question or concern, so don’t shy away from putting in your two cents. Our health care system is very complex and coming up with a short and sweet answer is not very likely. I can see now why this why Bush had a hard time getting people excited about HSAs. The principles that I am trying to stick to are slowing the growth of health care costs and expanding individual control and freedom over personal health care protections.
Thursday, August 23, 2007
More Health Care Solutions
Today, the vast majority of Americans with health insurance receive it through their employer. The employer typically pays a large portion and the employee pays the rest in premium. The reason why the employer offers health insurance is that premium payments are not taxed, meaning the company can offer a slightly more generous compensation package than with just salary alone. Most companies offer either HMO or PPO coverage.
An HMO requires you to be part of a network of medical providers, and typically requires a referral before seeing a specialist. Doctor visits cost the employee a co-pay (normally $5 to $20). Hospital visits also charge a co-pay ($100 is common). Beyond the co-pay, there is a very high dollar maximum for charges in a year. However, the company controls costs by limiting services available and often limits doctors on the care they can give you.
A PPO encourages you to be part of a network by offering discounts. A PPO does not typically require a referral before seeing a specialist. An employee must incur enough medical cost to meet the deductible (usually a few hundred dollars) before the insurance company begins to cover costs. After meeting the deductible, the insurance company will typically pay between 70 and 90% of the medical expenses, up to an annual maximum, after which they pay 100%.
Imagine if you will, that your local grocery store offered families a flat $100/week fee for groceries and then $5 per visit, and the family could pick whatever they wanted. What do you think would happen? People would take home more groceries than normal and they would choose the highest quality food in the store. I personally would die of a coronary after 50 straight days of eating my body weight in meat and Blue Bell ice cream. Few would exercise self-control about the kind of foods and the amount. Why get one Hershey’s bar when you could get three Godiva ones? Why not buy the free-range-slept-on-a-satin-pillow-with-daily-massage-and-yoga-classes eggs that cost $25 a dozen? The extra cost to the family to pick up a few more items would be zero, but it would still cost the grocer. The store would quickly go out of business.
This scenario is called “Income Smoothing” and it creates terrible incentives. Income smoothing is exchanging a random stream of expenses for a smooth and level one, which is exactly what an HMO does. An HMO does not actually meet the technical definition of insurance. Insurance is a financial arrangement to mitigate the risk of an unforeseen event, whereas an HMO covers all medical events expected and unexpected. There are a few special arrangements such as futures and swaptions in the financial world where income smoothing works, but it would not work well for our grocery store and it does not work well for health care.
Under an HMO, you pay a flat monthly fee and then just a few dollars for every doctor visit. There is an incentive to go to the doctor too much because your costs do not equal the actual costs. There are times when I could see myself spending $5 on a doctor visit and $5 on a prescription, because I can barely buy a bottle of Tylenol for that amount. There aren’t as many times when I would spend the real costs of $100 on a doctor visit and $150 on a prescription. A PPO is not as bad, but once the deductible is met and the policyholder only pays 10 or 20% of the actual costs, the incentives can be as bad as under an HMO. The added demand these health plans create increases the price of health care services nationwide.
Some may wonder just how big a problem these bad incentives really are. If the design of HMOs and PPOs caused every American to go to the doctor and get a prescription just one more time than needed each year (assuming an average doctor’s visit is $50 and a prescription is $50) this adds up to $30 Billion in wasted resources.
The general problem with the system of HMOs and PPOs is that they separate the costs from the consumer. The solution, as I have mentioned before, is Health Savings Accounts (HSAs). If you do not spend all the money in your account, you get to keep it. Every dollar of health care you use you have to pay for. Charges are not pooled with everyone else in the plan like an HMO or PPO. This incentive helps people control their use of medical services.
When the government started giving tax deductions for employer sponsored health plans, we lost control of our own medical care. We fear quitting a job we dislike because we are afraid of losing health care coverage. Some spend health care dollars irresponsibly because someone else is picking up the tab. To keep costs down, employers and insurance companies make many decisions for us and try all kinds of techniques to manipulate not just our decisions but also those of your doctor as well.
An HSA allows you to take your health care savings with you no matter what your employment situation. It corrects the bad incentives that have led to skyrocketing health care costs. It gives control of health care choices to doctors and patients, not employers and insurance companies.
Because of this, I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan. This would help fix the problems with the bad incentives caused by income smoothing. It frees us, and our doctors, from manipulation and interference by a cost-cutting bean counter sitting in a cubicle. It would also allow portability of insurance, and it gives you ownership of your health care funds.
An HMO requires you to be part of a network of medical providers, and typically requires a referral before seeing a specialist. Doctor visits cost the employee a co-pay (normally $5 to $20). Hospital visits also charge a co-pay ($100 is common). Beyond the co-pay, there is a very high dollar maximum for charges in a year. However, the company controls costs by limiting services available and often limits doctors on the care they can give you.
A PPO encourages you to be part of a network by offering discounts. A PPO does not typically require a referral before seeing a specialist. An employee must incur enough medical cost to meet the deductible (usually a few hundred dollars) before the insurance company begins to cover costs. After meeting the deductible, the insurance company will typically pay between 70 and 90% of the medical expenses, up to an annual maximum, after which they pay 100%.
Imagine if you will, that your local grocery store offered families a flat $100/week fee for groceries and then $5 per visit, and the family could pick whatever they wanted. What do you think would happen? People would take home more groceries than normal and they would choose the highest quality food in the store. I personally would die of a coronary after 50 straight days of eating my body weight in meat and Blue Bell ice cream. Few would exercise self-control about the kind of foods and the amount. Why get one Hershey’s bar when you could get three Godiva ones? Why not buy the free-range-slept-on-a-satin-pillow-with-daily-massage-and-yoga-classes eggs that cost $25 a dozen? The extra cost to the family to pick up a few more items would be zero, but it would still cost the grocer. The store would quickly go out of business.
This scenario is called “Income Smoothing” and it creates terrible incentives. Income smoothing is exchanging a random stream of expenses for a smooth and level one, which is exactly what an HMO does. An HMO does not actually meet the technical definition of insurance. Insurance is a financial arrangement to mitigate the risk of an unforeseen event, whereas an HMO covers all medical events expected and unexpected. There are a few special arrangements such as futures and swaptions in the financial world where income smoothing works, but it would not work well for our grocery store and it does not work well for health care.
Under an HMO, you pay a flat monthly fee and then just a few dollars for every doctor visit. There is an incentive to go to the doctor too much because your costs do not equal the actual costs. There are times when I could see myself spending $5 on a doctor visit and $5 on a prescription, because I can barely buy a bottle of Tylenol for that amount. There aren’t as many times when I would spend the real costs of $100 on a doctor visit and $150 on a prescription. A PPO is not as bad, but once the deductible is met and the policyholder only pays 10 or 20% of the actual costs, the incentives can be as bad as under an HMO. The added demand these health plans create increases the price of health care services nationwide.
Some may wonder just how big a problem these bad incentives really are. If the design of HMOs and PPOs caused every American to go to the doctor and get a prescription just one more time than needed each year (assuming an average doctor’s visit is $50 and a prescription is $50) this adds up to $30 Billion in wasted resources.
The general problem with the system of HMOs and PPOs is that they separate the costs from the consumer. The solution, as I have mentioned before, is Health Savings Accounts (HSAs). If you do not spend all the money in your account, you get to keep it. Every dollar of health care you use you have to pay for. Charges are not pooled with everyone else in the plan like an HMO or PPO. This incentive helps people control their use of medical services.
When the government started giving tax deductions for employer sponsored health plans, we lost control of our own medical care. We fear quitting a job we dislike because we are afraid of losing health care coverage. Some spend health care dollars irresponsibly because someone else is picking up the tab. To keep costs down, employers and insurance companies make many decisions for us and try all kinds of techniques to manipulate not just our decisions but also those of your doctor as well.
An HSA allows you to take your health care savings with you no matter what your employment situation. It corrects the bad incentives that have led to skyrocketing health care costs. It gives control of health care choices to doctors and patients, not employers and insurance companies.
Because of this, I support ending the tax deduction for companies offering health care plans like HMO and PPO plans and instead create a tax deduction for money placed in an HSA with a high deductible insurance plan. This would help fix the problems with the bad incentives caused by income smoothing. It frees us, and our doctors, from manipulation and interference by a cost-cutting bean counter sitting in a cubicle. It would also allow portability of insurance, and it gives you ownership of your health care funds.
Thursday, July 26, 2007
Health Savings Accounts
This is the first of a longer discussion about health care. It’s a technical topic, so I will spread it out with easier reads in between.
Recently there has been a lot of talk by Barack Obama and John Edwards about Universal Health Care. Hillary has not committed to a particular plan, but leans that way. Republican Candidate Mitt Romney helped pass Universal Health Insurance in Massachusetts. A massive new tax hike to cover this new program is definitely at odds with the ideals of small government. Experiences in other countries have shown that it is impossible to provide every citizen cheap and high quality medical care. Attempts to do so are very expensive or low quality, and sometimes both. Many voters, however, are moving in favor of a government run system that guarantees health insurance for all Americans.
My health insurance, including the portion that my employer pays, costs around $400/month for just me. There are 45 million Americans without health insurance and if it costs the same $4800/year this gives us a $216 Billion tax hike for one year. At a conservative 5% increase in premiums per year, this adds to $2.7 Trillion dollars over the next ten years.
On Barack Obama’s website, he discusses his plans for socialized medicine. He states that he “will create a new national health plan to allow individuals without access to affordable insurance coverage to buy coverage similar to that available to members of Congress”. My analysis above may be too simple, but Congress does not have a cheap or flimsy medical plan. The scale of what he is proposing is enormous. The reality is that being uninsured does not mean that people are not receiving medical care. There are scores of government and charity programs that help with medical costs and many young people simply choose not to go to the doctor. Unfortunately, reality and perception are not always the same. Uninformed sympathies portray conservatives as denying basic medical care to the poor and unemployed by being selfish and miserly. The difficulty is coming up with a strategy that breaks this negative image.
The Club for Growth, a limited-government political action committee sponsors a website called www.freemarketcure.com, which provides an in-depth analysis of the problems with government run medicine. They have some dramatic videos to watch about Canada’s government run system. They also advocate Health Savings Accounts (HSAs), which are the key to fixing our nation’s health care problems. What are HSAs? A Health Savings Account allows someone to put tax-free dollars into a bank account to use on medical expenses. These accounts are often combined with a high deductible health insurance policy. If you don’t spend all the money, you get to keep it for next year. If you don’t spend it by retirement, you get to keep it all to spend on whatever you like. HSAs are nice in that they would let you keep your money to cover medical expenses if you lose your job. A Health Plan Consultant named Michael Rodriguez recently related to me how they keep down medical costs much better than HMOs or PPOs. Their shortcoming in the debate is that they do not do much in regards to expanding health insurance to more Americans.At the end of a recent trip to the ER for my youngest son, I was thinking about this idea of expanding health care coverage without increasing taxes. My idea needs more details ironed out, but it’s a starting place. Right now, the Child Tax Credit gives all households who earn below a certain salary $1,000 per child off their taxes (We are one of these households). Money from the child tax credit could be directed into an HSA for your child instead of receiving this as a tax refund. This would mean $1,000 per year, per child, of medical coverage that would not cost taxpayers one extra cent. You read that right, not one extra cent. Virtually every child in America could have some medical coverage without increasing taxes at all. Call it a Health Savings Refund for Children. If the parent already has insurance for their child, they could fill out an extra form that shows evidence of coverage. This would let them continue to receive the child tax credit in cash. Most parents would likely put some money into this savings account regardless of existing coverage just to be safe. This option is available so that those with no need to put money away would not have to. How do you access your account? Every bank that offered HSAs would be required to have a special debit card that would work at doctors’ offices and certified medical facilities. Can they deny your claim? No, because it’s your money. Do you lose it when you lose your job? No, it’s your money. Can you have a preexisting condition that keeps you from receiving medical care? No, it’s your money. As long as there is money in the account for that child, nobody can take away this medical coverage. What happens if you don’t spend it all? It rolls over to next year, with interest. So, if you don’t have big bills for several years thousands of dollars will build up to cover a major emergency. Imagine being unemployed and finding out that your child needs surgery, but knowing that you already have most of the money in the account to help cover the costs. No paperwork hassles, no getting pre-qualified, no sitting on hold with customer service for hours, and no government bureaucrat arguing with your doctor about medical necessity. Just swipe your card and it’s already paid for.I have debated whether this is a hidden tax hike. I don’t like the idea of the government telling us how to spend our money, but we at least get to keep it. This isn’t perfect and I need to work out some more details, but I figured I would throw it out there and see what people had to say.
As always, tell me what you think. I had my first person disagree this past week, which is always healthy. Pass this on to anyone interested.
Brian Shelley
Recently there has been a lot of talk by Barack Obama and John Edwards about Universal Health Care. Hillary has not committed to a particular plan, but leans that way. Republican Candidate Mitt Romney helped pass Universal Health Insurance in Massachusetts. A massive new tax hike to cover this new program is definitely at odds with the ideals of small government. Experiences in other countries have shown that it is impossible to provide every citizen cheap and high quality medical care. Attempts to do so are very expensive or low quality, and sometimes both. Many voters, however, are moving in favor of a government run system that guarantees health insurance for all Americans.
My health insurance, including the portion that my employer pays, costs around $400/month for just me. There are 45 million Americans without health insurance and if it costs the same $4800/year this gives us a $216 Billion tax hike for one year. At a conservative 5% increase in premiums per year, this adds to $2.7 Trillion dollars over the next ten years.
On Barack Obama’s website, he discusses his plans for socialized medicine. He states that he “will create a new national health plan to allow individuals without access to affordable insurance coverage to buy coverage similar to that available to members of Congress”. My analysis above may be too simple, but Congress does not have a cheap or flimsy medical plan. The scale of what he is proposing is enormous. The reality is that being uninsured does not mean that people are not receiving medical care. There are scores of government and charity programs that help with medical costs and many young people simply choose not to go to the doctor. Unfortunately, reality and perception are not always the same. Uninformed sympathies portray conservatives as denying basic medical care to the poor and unemployed by being selfish and miserly. The difficulty is coming up with a strategy that breaks this negative image.
The Club for Growth, a limited-government political action committee sponsors a website called www.freemarketcure.com, which provides an in-depth analysis of the problems with government run medicine. They have some dramatic videos to watch about Canada’s government run system. They also advocate Health Savings Accounts (HSAs), which are the key to fixing our nation’s health care problems. What are HSAs? A Health Savings Account allows someone to put tax-free dollars into a bank account to use on medical expenses. These accounts are often combined with a high deductible health insurance policy. If you don’t spend all the money, you get to keep it for next year. If you don’t spend it by retirement, you get to keep it all to spend on whatever you like. HSAs are nice in that they would let you keep your money to cover medical expenses if you lose your job. A Health Plan Consultant named Michael Rodriguez recently related to me how they keep down medical costs much better than HMOs or PPOs. Their shortcoming in the debate is that they do not do much in regards to expanding health insurance to more Americans.At the end of a recent trip to the ER for my youngest son, I was thinking about this idea of expanding health care coverage without increasing taxes. My idea needs more details ironed out, but it’s a starting place. Right now, the Child Tax Credit gives all households who earn below a certain salary $1,000 per child off their taxes (We are one of these households). Money from the child tax credit could be directed into an HSA for your child instead of receiving this as a tax refund. This would mean $1,000 per year, per child, of medical coverage that would not cost taxpayers one extra cent. You read that right, not one extra cent. Virtually every child in America could have some medical coverage without increasing taxes at all. Call it a Health Savings Refund for Children. If the parent already has insurance for their child, they could fill out an extra form that shows evidence of coverage. This would let them continue to receive the child tax credit in cash. Most parents would likely put some money into this savings account regardless of existing coverage just to be safe. This option is available so that those with no need to put money away would not have to. How do you access your account? Every bank that offered HSAs would be required to have a special debit card that would work at doctors’ offices and certified medical facilities. Can they deny your claim? No, because it’s your money. Do you lose it when you lose your job? No, it’s your money. Can you have a preexisting condition that keeps you from receiving medical care? No, it’s your money. As long as there is money in the account for that child, nobody can take away this medical coverage. What happens if you don’t spend it all? It rolls over to next year, with interest. So, if you don’t have big bills for several years thousands of dollars will build up to cover a major emergency. Imagine being unemployed and finding out that your child needs surgery, but knowing that you already have most of the money in the account to help cover the costs. No paperwork hassles, no getting pre-qualified, no sitting on hold with customer service for hours, and no government bureaucrat arguing with your doctor about medical necessity. Just swipe your card and it’s already paid for.I have debated whether this is a hidden tax hike. I don’t like the idea of the government telling us how to spend our money, but we at least get to keep it. This isn’t perfect and I need to work out some more details, but I figured I would throw it out there and see what people had to say.
As always, tell me what you think. I had my first person disagree this past week, which is always healthy. Pass this on to anyone interested.
Brian Shelley
Subscribe to:
Posts (Atom)