How Should Americans' Health Care be Paid For?

[dgoldenz]

An example of a product which has merit (but does not exist) is combine health insurance and life insurance (as an option) for some consumers.

For example if I need $500,000 in term coverage, why not add a health insurance rider to the policy and charge me more for the coverage? Meaning give me 500k of term coverage and 7k of annual health costs (covered) for a larger premium, and carry this for a specific term (meaning I have locked in my costs and coverage for a term of 10-20 years).

Similar to permanent (whole life) insurance, offer a plan with $1 M in coverage. For every dollar of health coverage I need it reduces the death benefit dollar for dollar.

Both options allow someone to lock in their costs for a period of time (term of 20 years or for whole life). And the premiums paid can be added to sub account (similar to an HSA) which can grow bigger than the policy value.

Most importantly this means more companies will compete for health insurance dollars, so the costs to consumers should decrease.

No insurance company would offer a guaranteed health insurance rate for 10, 20, 30 years because there is no way to know what medical costs will be in the future and how legislation will change. The premiums would also be so ridiculously expensive that nobody would buy it. Combining more than one type of insurance into a single product is always a bad idea. If you want health insurance, buy health insurance. If you want life insurance, buy life insurance. If you want disability, buy that. If you want LTC, buy that. Combining them doesn't make them cheaper, it just makes the benefits for the "add-ons" suck because otherwise the price would be too high.

 

[RonBoyd]

Most importantly this means more companies will compete for health insurance dollars, so the costs to consumers should decrease.

All these new companies would, no doubt, help the Unemployment picture. However, I don't see the Consumer's costs decreasing to make payroll... not to mention all the other duplication of costs.

 

[nvestysly]

OOPS! I Missed this Post

...government "framework"?

There is no simple answer and we'll not solve the matter here but I generally think less federal government involvement is better. The framework I imagine allows individuals to "shop around" to purchase the type and level of insurance coverage they want. The framework allows individuals to decide if they want end of life care or simply want to take their chances. If you want long-term cancer coverage (or other extended extended illness coverage) you pay a higher premium. I suspect many people would want chronic illness care. But if you want minimal coverage and want to take your chances so be it. We all do this with car insurance, liability insurance, house insurance, etc. Why is health care insurance that much different?

A significant reason health care insurance is different is because we've made it so. The federal government got deeply involved in the WWII period when employers began adding health care as an employee option to make certain jobs look appealing. The federal government gave preferred tax status to employer health care costs. It just spiralled out of control from there as this and that tax advantage was put in the code. My idea of framework is to unwind all the convoluted health care and health care insurance schemes and bring it back to basics. The government, preferable the state government, would oversee health care and health care insurance. The framework would be decided by elected officials and it may vary by state. States with a good framework would have more people participating. States with poorly defined, poor customer service plans would suffer the consequences.

Ultimately, the premiums would be based on large pools of people buying various types of insurance coverage for various situations. There is not a one size fits all answer. Back to the car example.... there are minimum amounts of coverage required in each state - I typically buy more coverage than the minimum. But that's just me.

Give me the same opportunity with health care and health care insurance. Take it away from employers, take it away from the federal government. Pay for it like anything else. With your own money.

So that leaves the "less fortunate" - where do they stand? That's another story in itself and must be addressed. I suspect it will not be difficult to address the "less fortunate" issue when we first address the basic problem.

 

[jIMOh]

No insurance company would offer a guaranteed health insurance rate for 10, 20, 30 years because there is no way to know what medical costs will be in the future and how legislation will change. The premiums would also be so ridiculously expensive that nobody would buy it. Combining more than one type of insurance into a single product is always a bad idea. If you want health insurance, buy health insurance. If you want life insurance, buy life insurance. If you want disability, buy that. If you want LTC, buy that. Combining them doesn't make them cheaper, it just makes the benefits for the "add-ons" suck because otherwise the price would be too high.

All these new companies would, no doubt, help the Unemployment picture. However, I don't see the Consumer's costs decreasing to make payroll... not to mention all the other duplication of costs.

I love how people see problems which "prevent" something from happening. The problems you present are both valid, but very very fixable.


The idea of locking in costs for 5-10-15 years is in best interest of consumer. Sure it might cost more money for a 10 year fixed premium, but because its linked to a higher life insurance payout (for example) it's in the insurance company's best interest to keep me alive. In current health insurance system it's better if I die from the standpoint of what I cost the insurance company.

It is OK for something to cost a lot of money. This might also help control costs by both consumer, providers and the insurance companies. Plus with plans like this, the need for Cobra goes away, so any funding for programs like that disappears, and the burden that puts on tax payers when economy contracts is non existent (next time).

As for combining policies, it is one cash pool fighting for my insurance dollars, and those policies have a conflict of interest. It is in health insurance best interest if I die fast, where is it in life insurance company's best interest if I die after policy expires.

In addition, I want insurance to protect me from going bankrupt. I have a finite amount of dollars to spend, so LTC, life insurance and health insurance are all doing the same thing- making sure my family does not go broke if something bad happens. It makes sense to combine them if the consumer wants the higher premiums and flexible payout options. There already riders on LIFE insurance policies which allow people to tap into them before they die if they become disabled. This is just an extension of that.



Imagine a world where HSAs went away, and if you paid $400/mo for the HDHP and another $400/mo for the HSA and another $100/mo for term policies on each spouse and another $100/mo for long term care.

There is no way all those policies will be needed (at same time), so why not put $1000/mo into one big pool, then allocate money as needed (7k covers annual worst case medical if its HDHP, the rest is building a cash value for life insurance or long term care). If I tap into health insurance enough, it might lower my LTC payout or require higher premiums to keep same benefit.

In general the difference between LTC and health insurance is what? In reality LTC IS health insurance (because LTC provides health care), and a person might need to carry both, yet the person with an LTC policy is duplicating coverage (IMO). Combining saves the insurance companies money and is what is best for consumer.

 

[dgoldenz]

I love how people see problems which "prevent" something from happening. The problems you present are both valid, but very very fixable.

I think you don't have a very strong grip on how insurance pricing works and are ignoring what people are willing to pay for what they get. If only people who could qualify for health insurance through underwriting could get life insurance or LTC, there'd be a lot less people with life insurance and LTC. You can't make it guaranteed issue because then you'd also be making life and LTC guaranteed issue, which would be a disaster.

People struggle to pay $300-400/month for health insurance for their families now, most don't buy enough life insurance, and very, very few buy LTC. A group health policy for a family averages over $1000/month by itself today, where will that be in 15 years? You really think people will drop $3-5k/month for the combination of all 3 guaranteed for 10, 20, 30 years? The pricing for different types of insurance is very different, hence the reason they are sold as separate products.

What happens when the insurance companies misprice one of those products and the company goes down the tubes because they can't pay claims? If such a product worked, it would already exist. The demand for such a product would be somewhere between slim and none, even if it were offered.

 

[dex]

We already spend ~2x the amount as the UK (among other countries) per capita on healthcare.

The comparison of costs for the USA with Europe has been discussed before and the inconsistencies of the comparisons have been pointed out - there are a whole host of them if you take the time to think about it.

For example:
- UK has rationing - lowers costs
- Automobile ownership an automobile mileage per driver - increased accidents and increased costs
- Growth of the USA into suburbia increasing capital outlays - Europe little growth
- Liability costs
- USA higher illegal immigration relies on emergency care services

 

[Independent]

There is no simple answer and we'll not solve the matter here but I generally think less federal government involvement is better. The framework I imagine allows individuals to "shop around" to purchase the type and level of insurance coverage they want. ...

The first problem is that many people develop health issues that prevent them from "shopping around". I was wondering how you planned to deal with that. Saying "let the states deal with it" doesn't do anything for me, I'm a voter in a state and I don't see what my state would do.

I'm fine with removing the tax preferences for both group health insurance and for medical expenses. But I don't think that "solves" the problems with health care or health insurance.

 

[M Paquette]

I chose individual responsibility. If I choose to go it alone, so be it. At no time are you responsible for my bills or bad choices, but I am not responsible for yours.

This reminds me of the motorcyclists who elect to exercise individual responsibility and ride without helmets. We call them 'free range organ donors.'

 

[jIMOh]

I think you don't have a very strong grip on how insurance pricing works and are ignoring what people are willing to pay for what they get. If only people who could qualify for health insurance through underwriting could get life insurance or LTC, there'd be a lot less people with life insurance and LTC. You can't make it guaranteed issue because then you'd also be making life and LTC guaranteed issue, which would be a disaster.

People struggle to pay $300-400/month for health insurance for their families now, most don't buy enough life insurance, and very, very few buy LTC. A group health policy for a family averages over $1000/month by itself today, where will that be in 15 years? You really think people will drop $3-5k/month for the combination of all 3 guaranteed for 10, 20, 30 years? The pricing for different types of insurance is very different, hence the reason they are sold as separate products.

What happens when the insurance companies misprice one of those products and the company goes down the tubes because they can't pay claims? If such a product worked, it would already exist. The demand for such a product would be somewhere between slim and none, even if it were offered.

The products don't exist because they are not sold by same people or underwritten by same people.

I agree pre existing conditions price some people's policies higher. The problem with insurance is people might not pay for it until after they need it. The goal of programs like I suggested would be to get more young people to pay into system, which is part of reasoning Obama used for passage of his plan (I don't agree with it entirely, but if that logic is going to be used, why not offer more).

If people are struggling with paying $400/mo for insurance, that is a different problem than what the policy covers. If we want to view health insurance as a "right", then the solution is not the system we have now, and I see more economies of scale with my idea than I do with most other ideas.

Any solution which has the government controlling supply or demand is bad or worse than mine (IMO). I am looking to make sure supply of affordable policies is available on private market- combining them (LTC and health insurance) for example is not required, but should be an option for the consumer to decide yes or no.

 

[dex]

The first problem is that many people develop health issues that prevent them from "shopping around". I was wondering how you planned to deal with that. Saying "let the states deal with it" doesn't do anything for me, I'm a voter in a state and I don't see what my state would do.

The competition lowers the costs before the people need them - think gas prices. Yes, a very few people might run out of gas and have to pay the price posted at the closest gas station. But, the majority of people who get gas before running out keeps the price down - even at that close gas station.

 

[RonBoyd]

But, the majority of people who get gas before running out keeps the price down - even at that close gas station.

I don't know what that means. How do I keep the price of gas down?

 

[Independent]

The competition lowers the costs before the people need them - think gas prices. Yes, a very few people might run out of gas and have to pay the price posted at the closest gas station. But, the majority of people who get gas before running out keeps the price down - even at that close gas station.

You've completely lost me on the attempted analogy.

To try to make the analogy work you'd have to imagine a world where the seller's costs of gasoline is much higher for some people than for others - where "much" could mean a year's supply is $100,000. That's not even perfect, but I don't see how "competition" solves that.

 

[jIMOh]

You've completely lost me on the attempted analogy.

To try to make the analogy work you'd have to imagine a world where the seller's costs of gasoline is much higher for some people than for others - where "much" could mean a year's supply is $100,000. That's not even perfect, but I don't see how "competition" solves that.

if 90% of people can shop for an MRI, the cost of an MRI will go down.

The 10% of people which get into a car accident and get an MRI at hospital benefit from the 90% of people which can shop for the same service.


If only 1 gas station exists, it might have slightly higher prices. If too many people drive further away to get gas, that 1 gas station either loses money, or has to lower prices.

The hundreds of people which drove to other (further away) gas stations lowered the cost for those people which could only use that one gas station (because of location).

 

[FinanceDude]

I think one very easy thing to do would be to allow consumers to buy their insurance from any company and in any STATE they want. If Wisconsin BC/BS wants $1300 a month, and I can get the same coverage from Aetna in Idaho for $950 a month, I should be allowed to make that choice. There IS regional pricing inherent in health care prices..........

 

[dgoldenz]

I think one very easy thing to do would be to allow consumers to buy their insurance from any company and in any STATE they want. If Wisconsin BC/BS wants $1300 a month, and I can get the same coverage from Aetna in Idaho for $950 a month, I should be allowed to make that choice. There IS regional pricing inherent in health care prices..........

This is a talking point a lot of people use, but it won't work. The only way it works is if every single state's department of insurance has uniform laws and regulations.

 

[M Paquette]

This is a talking point a lot of people use, but it won't work. The only way it works is if every single state's department of insurance has uniform laws and regulations.

Or all the insurers congregate in a state with the most [-]malleable[/-] favorable regulations. Could be very profitable for some state legislature members...

If interstate sales were allowed, I predict a race for the bottom between a few states to become the regulatory 'home state' for insurers.

 

[dex]

I don't know what that means. How do I keep the price of gas down?

This

if 90% of people can shop for an MRI, the cost of an MRI will go down.

The 10% of people which get into a car accident and get an MRI at hospital benefit from the 90% of people which can shop for the same service.

If only 1 gas station exists, it might have slightly higher prices. If too many people drive further away to get gas, that 1 gas station either loses money, or has to lower prices.

The hundreds of people which drove to other (further away) gas stations lowered the cost for those people which could only use that one gas station (because of location).

 

[dex]

You've completely lost me on the attempted analogy.

To try to make the analogy work you'd have to imagine a world where the seller's costs of gasoline is much higher for some people than for others - where "much" could mean a year's supply is $100,000. That's not even perfect, but I don't see how "competition" solves that.

This.

if 90% of people can shop for an MRI, the cost of an MRI will go down.

The 10% of people which get into a car accident and get an MRI at hospital benefit from the 90% of people which can shop for the same service.


If only 1 gas station exists, it might have slightly higher prices. If too many people drive further away to get gas, that 1 gas station either loses money, or has to lower prices.

The hundreds of people which drove to other (further away) gas stations lowered the cost for those people which could only use that one gas station (because of location).

 

[dgoldenz]

Or all the insurers congregate in a state with the most [-]malleable[/-] favorable regulations. Could be very profitable for some state legislature members...

If interstate sales were allowed, I predict a race for the bottom between a few states to become the regulatory 'home state' for insurers.

Not if the states where people reside require specific rules, regulations, and benefits for anyone who lives there regardless of where they buy they policy from...

 

[chinaco]

...

Without giving people some skin in the game (a big chunk, not just $10 co-pays) for their own costs, costs will continue to rise. It's always easy to spend somebody else's money. Third party payments for basic health services is the #1 thing driving healthcare costs in my opinion.

I agree with the skin in the game approach. There should be some personal motivation to conserve (i.e., not waste)

I think the co-pay was more about shifting some of the cost burden than affecting behavior.

 

[dgoldenz]

I agree with the skin in the game approach. There should be some personal motivation to conserve (i.e., not waste)

I think the co-pay was more about shifting some of the cost burden than affecting behavior.

Co-pays are a great deal....for the insurance company.

 

[Independent]

if 90% of people can shop for an MRI, the cost of an MRI will go down.

The 10% of people which get into a car accident and get an MRI at hospital benefit from the 90% of people which can shop for the same service.


If only 1 gas station exists, it might have slightly higher prices. If too many people drive further away to get gas, that 1 gas station either loses money, or has to lower prices.

The hundreds of people which drove to other (further away) gas stations lowered the cost for those people which could only use that one gas station (because of location).

This makes sense, but ...

I can see that the original context got lost in the responses. The original post by nvestysly was:

The framework I imagine allows individuals to "shop around" to purchase the type and level of insurance coverage they want.

I was saying that people can't "shop around" [for insurance] after they've developed health problems.

 

[BigNick]

USA higher illegal immigration relies on emergency care services

As an explanation of why costs are high, that seems to be circular reasoning. In the UK, illegal immigrants - however many there are, I have no way to know if it's a smaller or larger % than the US - get treated free by the national system like anybody else. So they are all, in effect, using the ER.

For me, the biggest reason why health care is so expensive in the US is that the government hasn't woken up to the powerful purchasing position it is in. Prescription meds, for example, are way cheaper in France than the US, because the French national insurance system goes to the manufacturers and tells them how much it's prepared to pay. (Anyone coming to Europe on vacation should bring their prescriptions and stock up.) Yet the US government spends about the same, IIRC, as a proportion of GDP on health care (via Medicare, Medicaid, insurance for military and other federal personnel, etc) as the French government does (with the rest of the US spending being private). To portray Obama's plan as "a government takeover of health care" is wrong in many ways, one of which is that the US government is already up to its neck in health care costs.

 

[dex]

I was saying that people can't "shop around" [for insurance] after they've developed health problems.

Why do they have to shop around at that point?

 

[youbet]

For me, the biggest reason why health care is so expensive in the US is that the government hasn't woken up to the powerful purchasing position it is in. Prescription meds, for example, are way cheaper in France than the US, because the French national insurance system goes to the manufacturers and tells them how much it's prepared to pay.

I've seen several interesting articles regarding the issue of US citizens paying what the market will bear while citizens of countries where prices are regulated pay less. The last one I came across was about Canada and why they pay less for US patented drugs than US citizens do.

I agree with you. This is an area where the US gov't should step in with export taxes and/or restrictions which force others to pay more and US citizens to pay less. Or, if we're willing to have less funding available for drug research, everyone pay less.

It's a difficult subject for the US since we're plagued with do-gooders who think US patented drugs should be available to outsiders for whatever price they can either afford to pay or, more likely, want to pay.