Friday, October 15, 2004
Health care at a crossroads
[David Gratzer, "HSA Man Vs. Healthzilla," The Wall Street Journal, 12 October 2004.]
Well, the final debate is over and few can claim to be all that much more enlightened about the particulars of the two candidates' plans for health care. One thing is certain, though - what can be found out outside of the debates reveals two starkly different visions for the future direction of health care in this country:
John Kerry has offered up more of the same for health reform. In sharp contrast, President Bush proposes a package that could rout Hillary Clinton's statism and create a health-care revolution.
There have been two major reform ideas that dominated the years since the Health Care Security Act of 1994: government meddling and managed care.
While the White House failed in its grand design, many states forged ahead -- expanding Medicaid, and regulating the price and scope of insurance. Today, across America, there are many more regulations on the books and the number of Medicaid enrollees has swelled (from 30 million in 1994 to 44 million today), but the political enthusiasm for statist interventions has waned. No wonder. Consider Medicaid. Between 1999 and 2002, the program's bottom line grew 36%, from $189 billion to $258 billion.
Support for managed care proved just as transient. The original impulse for Hillarycare was cost-control. The White House in 1993 predicted that, without major reforms, health spending would suck up 19% of the GDP by decade's end. Managed care was the private sector answer to the problem of health inflation. And it worked: health spending was reined in. Hospital spending actually dropped through much of the mid-1990s (in 1997, by an astonishing 5.3%). But the thuggish methods employed by HMOs led to a consumer and political backlash.
Why did both fail? Government meddling and managed care awkwardly attempt to compensate for the central problem: Americans don't directly pay for the health care they receive. Out-of-pocket expenses -- that is, the amount not covered by public and private insurance -- account for just 14 cents on every health dollar spent in the U.S. American health care is dominated by third-party payment. Nelson Sabatini, Maryland's secretary of health, observes: "Using health care in this country is like shopping with someone else's credit card." If the last decade seems to have done so little to address the woes of the system, no wonder: Consumers were never brought into the equation.
A decade after Hillarycare, there is an alternative that places Americans, not government bureaucrats, in charge of their own health care.
Created by the Medicare Modernization Act of 2003, HSAs are personal medical savings accounts used in conjunction with a high-deductible health insurance plan. For smaller expenses, then, individuals pay out of their HSA -- money that can follow them from employer to employer and can accrue from year to year. Catastrophic insurance covers larger expenses.
How much could this help? Writing on this page, economist Martin Feldstein noted that a typical Blue Cross of California family policy costs $8,460 (with a $500 deductible per member). But a similar HSA-style high deductible policy costs just $3,936 (with a $2,500 deductive). The difference ($4,524), then, far exceeds the maximum additional out-of-pocket expense that the family would face if they reached the maximum deductible ($2,500). In other words, the HSA approach results in great savings. Data from eHealthInsurance, a leading online insurance brokerage, suggests that a majority (55%) of customers purchasing health insurance through the HSA approach pay less than $100 per month. Not surprisingly, about a third of these HSA-plan enrollees were previously uninsured.
HSAs have the potential, though, to do more than just save some money on premiums. Individuals empowered with health dollars will begin to act like consumers of health care. Third-party payment, in fact, will be pushed to catastrophic events. Thus, the market forces that reshaped the rest of the economy may soon transform the health industry.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
[David Gratzer, "HSA Man Vs. Healthzilla," The Wall Street Journal, 12 October 2004.]
Well, the final debate is over and few can claim to be all that much more enlightened about the particulars of the two candidates' plans for health care. One thing is certain, though - what can be found out outside of the debates reveals two starkly different visions for the future direction of health care in this country:
John Kerry has offered up more of the same for health reform. In sharp contrast, President Bush proposes a package that could rout Hillary Clinton's statism and create a health-care revolution.
There have been two major reform ideas that dominated the years since the Health Care Security Act of 1994: government meddling and managed care.
While the White House failed in its grand design, many states forged ahead -- expanding Medicaid, and regulating the price and scope of insurance. Today, across America, there are many more regulations on the books and the number of Medicaid enrollees has swelled (from 30 million in 1994 to 44 million today), but the political enthusiasm for statist interventions has waned. No wonder. Consider Medicaid. Between 1999 and 2002, the program's bottom line grew 36%, from $189 billion to $258 billion.
Support for managed care proved just as transient. The original impulse for Hillarycare was cost-control. The White House in 1993 predicted that, without major reforms, health spending would suck up 19% of the GDP by decade's end. Managed care was the private sector answer to the problem of health inflation. And it worked: health spending was reined in. Hospital spending actually dropped through much of the mid-1990s (in 1997, by an astonishing 5.3%). But the thuggish methods employed by HMOs led to a consumer and political backlash.
Why did both fail? Government meddling and managed care awkwardly attempt to compensate for the central problem: Americans don't directly pay for the health care they receive. Out-of-pocket expenses -- that is, the amount not covered by public and private insurance -- account for just 14 cents on every health dollar spent in the U.S. American health care is dominated by third-party payment. Nelson Sabatini, Maryland's secretary of health, observes: "Using health care in this country is like shopping with someone else's credit card." If the last decade seems to have done so little to address the woes of the system, no wonder: Consumers were never brought into the equation.
A decade after Hillarycare, there is an alternative that places Americans, not government bureaucrats, in charge of their own health care.
Created by the Medicare Modernization Act of 2003, HSAs are personal medical savings accounts used in conjunction with a high-deductible health insurance plan. For smaller expenses, then, individuals pay out of their HSA -- money that can follow them from employer to employer and can accrue from year to year. Catastrophic insurance covers larger expenses.
How much could this help? Writing on this page, economist Martin Feldstein noted that a typical Blue Cross of California family policy costs $8,460 (with a $500 deductible per member). But a similar HSA-style high deductible policy costs just $3,936 (with a $2,500 deductive). The difference ($4,524), then, far exceeds the maximum additional out-of-pocket expense that the family would face if they reached the maximum deductible ($2,500). In other words, the HSA approach results in great savings. Data from eHealthInsurance, a leading online insurance brokerage, suggests that a majority (55%) of customers purchasing health insurance through the HSA approach pay less than $100 per month. Not surprisingly, about a third of these HSA-plan enrollees were previously uninsured.
HSAs have the potential, though, to do more than just save some money on premiums. Individuals empowered with health dollars will begin to act like consumers of health care. Third-party payment, in fact, will be pushed to catastrophic events. Thus, the market forces that reshaped the rest of the economy may soon transform the health industry.
[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]
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