Kevin O’Neill: Keep It Simple, Stupid

May 8, 2017

From ‘Stocks and Jocks’ on Friday, May 5^th 2017…

Tom Haugh: I have a question for you two mavens regarding the way government works; and Matty, please opine as well. I’ll go back to Lyndon Johnson’s war on poverty. If you just would have taken the money we spent in the war on poverty, and all the people’s fingers in the pie along the way, and divided it by the amount of poor people and sent them a check, we wouldn’t have had any poor people. In this particular situation with Obamacare we had 20 million people that didn’t have insurance. Why the hell couldn’t we have just bought them insurance? I gotta believe in the long run it would have been a hell of a lot cheaper, but we can never do something like that… Someday, somewhere you’ll hear people say that we went from 20 million people uninsured to 80 million people underinsured. It seems like we never can go directly to the source… Why can’t we ever do the simplest thing?

Wayne Madsen: One reason is that you don’t want to be sending individuals checks because they have no guarantee they’ll use that money for what it’s intended. It’s like the old story about someone who lives in the hills of West Virginia and doesn’t have a dime to their name and wins the Powerball lottery. Then they go back five years later and the individual is not in a mansion but is back in the same double-wide trailer with no money because he spent it all.

Of course we can do the simplest thing, and I’m here to tell you how.

The Math

The Obama Administration claimed 20 million people have been added to the rolls of people covered by insurance since ACA passed. It’s a debatable number for two reasons. We don’t know how many people enrolled via Obamacare exchanges after their existing plans were canceled; and we don’t know how many people logged on, enrolled, and never paid a premium or let policies lapse after being unable to afford their premiums after a few payments.

But let’s not quibble. I’ll go with 20 million.

The most recent 10-year CBO score said Obamacare is costing $2.004 trillion, that is to say $200.4 billion per year. That means we’re paying $10,200 per person enrolled per year just to have them enrolled. Taking it to monthly cost, we’re spending $835 per person per month just to get the 20 million people enrolled. They still have to pay their premiums.

Some of those premiums are subsidized to the tune of $56 billion per year, so let’s take that off of the enrollment cost and call it the largesse of taxpayers. That lowers the monthly cost of enrollment per person to $602.

Think about that. A good policy could be had for $200 per month before Obamacare, and a deluxe policy might have cost as much as $400 per month. Now we’re paying $602 per month just to get people to sign up, and we’re patting ourselves on the back for it.

That leads us back to Mr. Haugh’s question. Why can’t we do the simplest thing? Why can’t we just buy insurance for those who can’t afford it? And while we were at it, why couldn’t we have left everyone else alone instead of imposing substantially higher premiums and deductibles on them?

If being sure the money is spent on health care is the problem, I have a solution… and easy and obvious solution.

I tired of explaining my position repeatedly during health care debate #1 back in 2009 and 2010, so I committed my thoughts to a document I could share. I’m convinced more than ever that it’s the direction we should go. Read it for the full reasoning. Here’s the proposal.

Health Savings Accounts

Make the following changes to HSAs:

1. Allow insurance premium payments from HSAs.
2. Fund HSAs directly for those who qualify for government health benefits, and let recipients choose their own insurance carriers and plans. This will reduce the cost of getting people enrolled dramatically; and if we need to turn some of that cost reduction into education about buying insurance, money is better spent creating well educated consumers.
3. Encode HSA debit cards to be designated as such, and restrict purchases using those cards to insurance premiums, medical care, prescription drugs, and over the counter health care items. This will prevent HSA owners from misusing funds. Debit cards have special encoding, so that part is built into the credit card processing system just waiting to be activated; and every purchase item has a UPC bar code. We aren’t inventing here. We’re using existing functionality.

But there’s more.

If people can use HSAs to buy insurance, insurance can easily be uncoupled from employment. That eliminates the biggest reason for the pre-existing condition problem – loss of insurance because of job loss or job change. People will be able to buy individual policies that remain in force as long as they pay premiums; and as an alternative, they should be able to buy group policies via non-employment affiliations that aren’t transient.

That doesn’t mean employers shouldn’t or can’t provide health care benefits. They would be welcome, even encouraged by competition for talent, to make contributions to their employees’ HSAs. This is an arrangement employers should love. Provide a health care benefit without all of the expenses related to offering several insurance options to employees, and don’t worry about being a referee every time an employee has a dispute with the carrier.

Other Benefits

Aside from lowering the government’s overhead cost, funneling more spending through HSAs actually can bend the cost curve. That’s a promise Obamacare hasn’t kept.

‘Stocks and Jocks’ contributor Karl Denninger has written extensively about eliminating unnecessary health care costs via rational administrative expenses, better health habits, and other solid ideas. I’d like to add the notion of lowering premium costs by building an HSA balance; and by proposing that everyone including poor people will have HSAs, it’s a benefit that would accrue to one and all.

It’s simple… At least is was simple before Obamacare drove up the price of everyone’s insurance. Higher deductibles mean lower premiums. As an HSA builds a balance that would be used to pay a deductible, the owner can lower his premium by purchasing a higher deductible plan. Build a $5,000 balance; buy a plan with a $5,000 deductible. Build a $10,000 balance because you haven’t had a major medical expense for years; buy a plan with a $10,000 deductible. Build the balance over the course of a typical adult’s lifetime and maybe it won’t cost so much to have insurance in the time between qualifying for the senior discount at the buffet and qualifying for Medicare.

Simplicity

It’s a simple solution. It’s less expensive. It solves problems. It gives consumers more freedom.

Too bad the government is involved. It will never happen.

 

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