Best Plan is NO Plan
Whether by reaction to charges from Obamacare supporters on the Left, or by their own lack of faith in freedom over planning, Republicans, not one of whom voted for the Affordable Care Act, along with conservative allied groups, think tanks, or prominent individuals, are, by last count, now promoting close to a dozen different concepts of how to replace one version of federal government planning with another less abrasive one. Despite many replacement proposals, Republicans in congress seem unable to coalesce around any one approach, still leaving the impression they have none.
Some of the proposals are introduced bills. Others are wish lists of items to be in bills. All have myriad suggestions that either move money around by extending tax deductions or refundable credits, allow formation of small business associations, require price transparency, reform medical malpractice, enhance health savings accounts, shuffle money to states for high risk pools, or various changes to Medicare and Medicaid, among others.
Far away the most popular inclusion is selling health insurance across state lines, itself a dangerous (and here) invitation to Federal micromanagement under the twisted modern interpretation of the Commerce clause.
Such is the pressure and propensity for government to “do something” that bears on both sides of the political spectrum. This is the plan trap.
Rarely is there a peep from anyone suggesting that no plan is the proper path, that simple policies to promote, restore, and support the proper functioning of the free market, usually by removing government intrusion rather than supplanting it, should be the goal. One lone voice, Association of American Physicians and Surgeons past-president Dr Alieta Eck, GOP candidate for the 12th Congressional district from New Jersey, wrote an article defending freedom over planning in January 2014. She opens:
We constantly are told that “while ObamaCare might not be perfect, the right has not come up with a better plan.” Is it possible that we do not need a “plan” at all?
Think about it. Has the federal government set up a food plan for all? A housing plan? Is the Secretary of Whatever empowered to decide what and when we eat? What kind of house each of us lives in? Of course not. We work, we plan and we buy what we need, saving up for the big-ticket items. Government does not control us, nor should it.
Yet one element contained in a few of the plans and wish lists can be the basis for a market revolution. Unfortunately, no one seems to have grasped the power of its singular focus. Had Dr Ben Carson simply stopped at Step 1 of his still in progress 5 step plan he would be almost completely there.
Relatively simple modification, enhancement, and expansion of tax policy surrounding HSAs, done right, has the power to be a true game changer by its potential to encourage employers to drop their long standing provision of health insurance in favor of a defined contribution approach. It is the magic bullet. It hides in plain sight, and here is how to get there:
Please follow these simple policy modifications:
1) Decouple HSAs from the requirement to be attached to any insurance policy. While HSAs could still be attached to insurance (suitable for many), anyone should be allowed (and perhaps even required) to have an HSA. Monies in HSAs receive rare triple tax advantage and protect others from the owner’s potential inability to pay for needed medical services.
2) Allow the purchase of health insurance or medical services through an HSA. This establishes favored equal tax treatment without the need for separate legislation.
3) Greatly expand contribution limits to allow #2 to happen. The HSA can be the tax advantaged conduit for all medically related purchases allowed under it.
4) Allow employers to contribute pre tax to an employee’s private HSA. This is the crucial trigger for a spontaneous move of employers away from policy provision to defined contribution. Resulting individual ownership solves portability and suitability issues for those who choose to buy health insurance in the open market through their HSA. Employers could offer direct contributions or matches to employee HSAs. Contributions from several employers could be combined, as well as HSA assets among family members’ accounts to purchase one insurance contract if desired.
5) Establish a permanent mechanism whereby Americans can look to each other rather than government for assistance by allowing gifting from one HSA to another both within and beyond family connections. This is similar to the medical sharing ministry concept without the structure of membership or formal organization. Any groups could pledge to come to the assistance of each other as needed. Such transfers could keep some people away from Medicaid, where access problems are well known or safely allow lower cost policies with higher deductible amounts.
6) For those in need fund a portion of all government assistance transfer payments into personal HSAs to be used ahead of Medicaid. The power and influence of ownership is stronger than artificially concocted restrictions on use. Funds from HSA extend dignity of choice and equal access until exhausted
Nothing more at the federal level may be necessary. States would have to do their part by discovering their proper constrained regulatory role, requiring sufficient reserves to pay claims and enforcing rather than defining terms of health insurance contracts buyers and sellers find right for them. All this, of course, requires and follows total Obamacare repeal.
While the benefits of defined contribution in a free market (not to escape or game Obamacare) have been recognized (tops list in American Doctors for Truth Plan) and discussed, no one has suggested a good way to transition. Less attention has been paid to the damage done by employer provision of health insurance, which itself was propelled by government tinkering with wage controls in World War II.
Frank Chodorov, in his 1959 book The Rise and Fall of Society, provides clues to understand why employer provision has been the enabling force of most of our problems. He argues that a natural law of human behavior leads men to seek the highest degree of satisfactions with the least expense of labor to thereby pursue limitless desires, in order to obtain even greater gratifications. This leads to efficiencies of effort and specialization of tasks via cooperation with others in forming societies.
Unfortunately this natural inclination also presents a weakness to seek something for nothing. Such is the case when the employer provision of health insurance disconnects the employee from its cost. As soon as the employee disassociates health insurance with being a part of his employer’s total cost of his employment, rather than realizing he is really giving his employer permission to spend his money in ways that may be against his best interest, he’s in trouble. He will request or even demand more, without consideration of alternatives that would be likely choices if he was paying directly.
This then is the source of a gradual movement away from direct payment, even for that normally within the ability to easily afford otherwise, to prepayment schemes that defy the normal purpose and function of insurance to protect assets from expenses that are beyond the ability to pay.
This excess third party payment itself bolsters the illusion of getting “covered” services for free or almost free, even as the premium includes the incentivized overuse of others when not getting one’s own. It is through these false satisfactions that we accept in healthcare what we don’t see anywhere else in our economy, a situation where almost every transaction involves, at least in part, someone else’s money, driving overuse from both the consumer and provider side along with the associated administrative costs to accomplish it.
It’s not hard to imagine how employer provision of car insurance over time would look just as ridiculous. Oil changes would require a small copay and many other services would be “covered”. The brake lobby would have used safety as an excuse to convince legislators to require brake “coverage” in every policy issued, all as employees, under the illusion of something for nothing, would keep asking and demanding more “generous coverage” from employers.
On the other hand, employees reconnected to cost through defined contribution, sparked by simple modification of tax policy related to HSAs, in states that likewise get government out of the way to allow multiple market choices, will make wise decisions that fit their specific financial needs. The abuses of excess third party payment will naturally end and the free market magic bullet solution some say cannot exist will be a reality. No one thing can accomplish so much by doing so little.
Note: This article shared to Watchdogwire-Pennsylvania