Friday, December 07, 2007

Alternative to (most) health Insurance

For those of us in the work force, how much are we paying for health insurance? Currently, I pay $486.95 a month, plus $62.05 for dental insurance.
Ridiculous? I'll say. Especially when that covers only me. April's not included. And health care insurance costs are skyrocketing (by 16% a year). We have an emergency on our hands.
So, what to do? I propose an alternative. I know this is long, but stay with me.
How it will work:
Instead of paying insurance, everyone in the US will be required to put a certain percentage (say, 10%) of the money they earn into a savings account (one that makes enough interest to make up for inflation). Each family has a savings account pool for this purpose. The money can only be removed for health-related costs.
The goal would be to get, over time, a certain amount of money into this pool. For each family member under, say, 30, there would need to be a minimum of, say, $5,000 in the account. So April and I would need to put, over time, $10,000 into it. If we have a baby, that amount goes to $15,000. People 30-40 would need $7500 in it, 40-50 $10,000 in it, and so forth.
Once the savings account is filled (so April and I have $10,000 in it), 10% of our income can go instead into some sort of mutual fund (or, if we want, it can continue going into the savings account). It needs to be an approved fund, but April and I decide on how high-risk it is. We can move this money around all we want, and we can put it into our savings account if we wish, but it can only be used for health-care reasons. It's a back-up for the savings account.
If we turn 30, or acquire a new addition to our family, more money is funneled into the savings account until it's at the new minimum. So if I turn 30 and we have a baby, the new minimum would be $17,500 (5000+5000+7500). That seems like a lot...but it's only 10% of our income. Compare that to what we pay for insurance. Meanwhile, the money that's already in the mutual fund stays there if we want it to, but the 10% of what we make goes into the savings account until it's at the new minimum. The only way that money leaves the mutual fund is if we decide to put it into our savings account, or if we need it for a health expense.
Parents are legally responsible for using the money to help their children until their children are no longer dependents. When children become independent (legally), they take $5000 from the family savings account and put it into their new account. Obviously, the family savings account now has lower requirements (by exactly $5000). If the mother and father consent, and there's money to spare in the mutual fund, the child can also take up to $20,000, but not exceeding 20% of the parent's funds, of the mutual fund.
All this, of course, is tax-free. The money can only be spent on health-related expenses, and only on expenses that would be covered by a good health insurance. It will not cover alternative (ie-non-scientific) medicine. It will also not cover your nose-job, etc.
Once both parents die, the money left in their accounts is not given to their posterity. Instead, it is put into a fund that assists the poor and helps them set up their own accounts.
This will not do away with the need for insurance. Depending on how much money you have in savings and in the mutual fund, you may still need to carry a low-cost insurance plan that will help cover serious, expensive diseases.
Benefits of this alternative to insurance:
1. Healthy lifestyles are encouraged. Unhealthy people have higher health care costs...and with this plan, they pay for those costs themselves. Overall health in the United States improves.
2. Health care costs decrease. I asked April a few weeks ago how much she thought a simple blood test costs. She's run the test many times at the hospital, so I figured she'd have an idea. The actual average cost of that blood test is more than ten times the amount she thought it would be (over $200 instead of $20). If we pay for almost all of our health care costs ourselves, approved health care providers will be forced to become more competitive, and we as consumers will want to be more selective about which care we choose. The result? Less expensive services.
Problems:
The biggest problem here is how we'd transition from our current system to this one.
Oh, and the fact that insurance companies yield a lot of power, and we'd need politicians who don't worship the god of money, and could say no to money coming in from the insurance companies.
If you have any input or recommendations, please comment.
Really, though, I'm tired of paying ridiculous amounts for health insurance, when I never see the benefits and never get the money.

14 comments:

Woodine said...

Can I suggest a different solution?

First, I don't think prices will lower all that much. Gas stations, for example, are only competitive to a point and usually reflect their neighbors prices, but they never seem to battle down past a set amount, which they both stay at. Point being, I don't think the cost of these processes will decrease much because you're not just talking the doctors. You're talking doctors, hospitals, companies that make the blood tests, companies that make the special fluids, companies that make the needles, etc.

Then, there are situations like a friend of ours when say, your baby is hospitalized for months before you ever have a chance to save for them. Thats hundreds of thousands of dollars to pay out of pocket, sinking them for life. Or the loved one of mine who had cancer.... how would that be covered? No, rates for that kind of treatment, good treatment at least, wouldn't be that much lower.

Now, I too am alarmed at the price of health insurance. It is unreasonable. When Wood is back in school we will be paying significantly more then you while we are making significantly less. Ridiculous? Definitely.

I do NOT think the solution is socialized health care, and I do think there would be a place for some increase in making the market more competitive so doctors lower their rates.

But, I think one of the biggest problems is the legal overhead doctors face. Lawyers who specialize in tort law convince juries that absurd, unreasonable and unfeasible amounts of money should be awarded to those who sue. What they are doing is criminal in my opinion. The amount of insurance doctors, particularly specialists, are required to purchase in order to cover themselves is insane. Truly. This, in my opinion, is the place to start. We need to legislate this and protect our doctors. Is there malpractice? Yes, and this does need to be brought to justice. But more often then not, good doctors are facing outrageous lawsuits that are sinking all of us by raising their (and then our) health insurance.

I agree with you - something needs to change.

Cougarg said...

Hey, maybe this is the kind of law you should practice! Reversing this trend that Woodine is talking about. It would probably make you quite unpopular with lawyers that do what you would be fighting. Just a thought.

Tim said...

Please notice that I mentioned having emergency insurance to help those like our mutual friend who have a high-cost emergency.
Lawsuits definitely contribute to the cost problem...but there are other issues as well.
I worked as a sleep tech for quite a while, and I saw a lot of people get treated for sleep apnea. Some of these people, I felt, did not have a serious enough problem to get treated in that manner. Instead of an expensive sleep study ($3500 if I remember correctly), an expensive follow-up (the same cost), and an expensive CPAP machine, they should have changed their behavior, stopped drinking alcohol before bed, lost a little weight, and turned off the TV an hour before bedtime. Their sleep problem could've been solved for much less insurance money. My thinking is that if people are directly responsible for the cost, they will rethink if it is really necessary.

Woodine said...

Okay, I did miss the part about low-cost health insurance for high-cost medical issues. But where do you draw the line for high cost.... expensive medication for morning sickness at $50/pill? Insulin for life? I guess I would have to be certain that costs for Doctors and medications would decrease significantly, very significantly, before I would subscribe to a pay-out-of-pocket program. Especially since those who need it most are probably those with young children who are making less money to begin with. I think it's a good idea to make it more competitive, but I'm just not convinced that this is the way to do it.

Then again, I strongly feel that social security should be private - similar to what you are describing..... but that's a discussion for another time!

Tim said...

Woodine--
I think the school district I'm working for has high insurance rates partially because of the number of older people...not younger people. Yes, pregnancy and childbirth are expensive (and, sometimes terribly so). Insurance for older people just costs more. But older working people also tend to make more money (they've been working at the job longer) and so can better afford the costs. Under the current program, younger people who don't earn as much get stuck paying for the health care bills of the almost-elderly. Even when the company pays for health insurance, the money they use to pay for it comes out of our paychecks.

Tim said...

Both April and I have worked in health care, and we've seen a lot of wasteful stuff going on...I guess that's one of the things driving this "alternative to health insurance". $50 morning sickness pills are awfully expensive...but even if your health insurance pays for it, the money to pay for those is coming from somewhere. I think people are more careful with their money if it's their own.
Ever heard of the "law of the commons?" Very fascinating. Applicable all over the place. If you don't know it yet, look it up.

John Robinson said...

I've got an opinion piece that might be of interest to everyone; it's from a doctor from Oakdale California. He says:

"Laws and regulations covering doctors and hospitals plus all the other parts of our healthcare system now account for over half of all the words, sentences, and paragraphs in our entire body of law."

http://www.mises.org/story/1749

I think tort reform is certainly part of the problem, and if I go to the hospital to get procedure A and my doctor wants me to get procedure A but is legally required to also administer tests B, C, D, E, and G and scan F and H for J, 1. I'm going to burn through my health savings account a lot faster 2. The hospital has greatly increased its probability of screwing up and getting sued just by nature of doing lots more things.

The good thing about your plan Tim is that if I'm going to burn through five years of health savings for some stupid test I don't need, I'm going to tell the hospital to take a hike and then call my representative in congress and find out what the heck is going on. If my insurance completely covers the test I'm going to think things like "are they going to prick my finger?" not "is this worth $2000" and most likely I'm not calling anyone.

alison said...

Okay, I like it.

BUT...

There's a problem with "low-cost health insurance for high-cost medical issues." Mainly that either 1) people would try to not get the health insurance until they needed it which simply couldn't work, or 2) it wouldn't cover the expensive treatments if it's low-cost. Just a theory. But if there's some sort of low monthly premium, say $20? $50?, and it's only good for ridiculously expensive, life-saving procedures such as cancer treatments/surgeries or infant hospitalization for months on end (the only two I'm really familiar with), and I know that those are ridiculously expensive. If everyone I know was covered by inexpensive health insurance for high medical costs at $50 per month, it wouldn't come close to half of the accrued costs for these three people over the past year. ("Half of the accrued costs" is assuming John's legislation goes through to get rid of the legal protection on doctors.)

Otherwise, I think it's great...

Tim said...

How often in a person's life does he/she get cancer, give birth several months too early, etc.?
$50 X 12 X 80 is $48,000. My thinking is that most people don't end up needing expensive treatment...ever...but in any case, it's significantly cheaper than my monthly insurance bill.

Tim said...

Oh, and the insurance would be required. No one would be able to opt out, although there might be some aid for those too poor to afford it.
If you have a problem with mandatory insurance, how much do you spend a month on social security? And you know, in all probability, that that's never going to come back your way.

alison said...

Well, I haven't had cancer at all yet. But my brother (who's 24) has had cancer three times--his surgeries and treatments have cost in the 100's of thousands of dollars. My aunt died of cancer a couple years ago--it was her third bout, and the stay at the hospital was around $100,000 just for the last couple months she was alive. My cousin (25) has had cancer twice. Usually if cancer doesn't kill you the first time around it comes back again and again, at least in my personal experience.

Maybe it would work. Maybe it's just right now that so many people around me are having expensive health issues. But if everyone has one or two really expensive medical problems (averaging those with bouts of problems and those who never have any problems at all), the $48,000 per person doesn't cover it. Then what?

Tim said...

Alison,
It would be interesting to see how much of our insurance dollars goes to that kind of care.
I need to look into that.
Meanwhile, I know as a fact (from working in the medical field) that way too much goes into stuff we don't really need. April tells me also that doctors decide how much an easy lab test should cost...and so a simple test ends up running hundreds of dollars.
Lots of waste going on.

alison said...

I think it would be really interesting to find out the proportions, of where all the insurance money goes. I'm all for cutting back on what's unnecessary, even for paying for a lot "out of pocket."

If you find out how much of insurance goes to actual needs and how much goes to fluff, I think we'd all feel enlightened and perhaps righteous anger. :)

Arissa said...

Thanks for writing this.