Now that the Supreme Court has ruled that, given some tweaks and general rewriting of the intentions of the law, the Affordable Care Act is constitutional, it will be up to Mitt Romney and the Republicans to convince people that they have something better. The traditional Republican party, of which Mitt Romney is an alumnus, has generally been concerned with the welfare of the upper class, and therefore would be perfectly happy with an expansion of government provided that it directed money into the coffers of their wealthier compatriots. Indeed, during the end of the Bush Presidency we saw that it was perfectly acceptable to give billions of dollars in Government dollars to private companies – banks – and that free enterprise was fine when people were making money, but not when it was correcting for poor investment choices by the CEOs at the largest banks.
The Republican party of old, however, is being replaced little-by-little by Tea Party candidates. These individuals are really more champions of the middle class (and motivated individuals in the lower class). They don’t want to continue to have the government expand and take control of more services, but they also don’t want corporate welfare and more regulations that protect billionaires and established companies by making it more difficult to start a business. They just want to get the government out-of-the-way so that they can take control of their own lives and live the American Dream of growing wealthy through their ideas and toil.
Left alone, it is likely that the Affordable Care Act will make things far worse than they are currently because it just exacerbates the problems that currently exist with the structure of the healthcare system and adds some new ones. Healthcare in the United States is very good when compared to many other countries. The issue is that costs continue to increase because:
1)We have a buffet style where you pay a fixed amount and can take all you want. This leads to more use (I’m paying for it anyway) and the use of more expensive services (I need to load up on lobster tail – it’s the same price as chicken).
2) Doctors order a lot of unnecessary tests due to fear of lawsuits and do things in an inefficient manner because of the structure fo the insurance repayment systems.
3) People don’t save money for medical care when they are young and healthy. In general there is a sense that you should not need to pay for healthcare. (Look at all the seniors who have lived their whole lives without taking a dime from anyone who look for ways to shelter their assets so they can get government-paid nursing home care and not need to pay for final hospital bills.)
The Healthcare Law does nothing to address these issues. In fact, by taking the money and then calling the provision of medical care “benefits” the system further removing the individual from the cost of healthcare. As with all Government services, this creaes even more of a sense of entitlement. To see this, imagine the outcry if people were told they were not able to use the roads? Because it is provided by the Goverment, people feel entitled to use them almost as an unalianable right, even without really feeling a connection to the cost of their upkeep. (Anyone really know how much you pay personally for the roads? Does a person who only rides a bike and therefore doesn’t contribute to the highway maintenance funds at all feel any less entitled to use the roads than a person with a Hummer who buys a lot of gasoline and thereby pays a lot in road taxes?)
Disconnecting people from the cost of their healthcare will lead to more demands for care without any concern for the cost. I can get this wart removed for $10 at a clinic or get it removed for $500 at this doctor’s office but there is no wait at the doctor’s office? Let’s go to the doctor’s office – I’m not paying anyway.
One must remember that the Government has no money – we end up paying for everything. It is just a question of whether you wish to take care of the payment and provision yourself or you would like the Government to collect your money and do that for you. Choosing the latter method gives up personal control. When was the last time you received a call asking whether we should bomb Libya or install a red light camera? Anyone? The decision is out of your hands, and often you need to jump through hoops to get the services for which you are paying.
If the Government were shown to be good at providing services, it would make sense to let them take control. After all, it’s nice to not need to worry about healthcare. You would just go in when you’re sick into a glistening clean office with comfortable waiting rooms – not that you’d ever need to wait – and be cared for by excellent doctors with great bedside manners. Right? No need to worry about the cost. The trouble is that nothing the government manages is like this even though they collect enough to pay for great services.
Think of the DMV or the post office. There are long lines, there are a lot of forms and confusing regulations, and (while there are certain individuals who are driven by a personal sense of responsibility and do great jobs) there is no incentive to provide better service. No employee is going to lose their job if the wait time is long or people are unhappy with the service. They have no where else to go and even if they do stop coming it just means less work to do. They aren’t like a commercial enterprise where if people don’t use the business people get laid off and the business closes down. Lunch breaks happen on schedule even if the line is out the door – people can just wait if they want a drivers license or a building permit. Approvals for paperwork can wait until tomorrow, and unless everything is filled out correctly, it won’t get processed. “Come back when you are ready and I’ll get to it when I can, maybe next week.” Sound familiar? Is this what you want when your child has a 104 degree fever and is coughing up blood?
So what would a Tea Party healthcare proposal look like? Well, given the drive for personal responsibility, I believe it would take advantage of demographics and look something like this:
1. Everyone is required to put a portion of their income into private Health Savings Accounts, or HSAs (yes, I know that a responsible person should not need to be forced to do something, but as a realist I know there are a lot of people who won’t save if they aren’t required to do so). This account could be used for medical expenses but expenses should be low from ages 20-50 or so, so the balance of this account should grow with time. This would allow people to start saving up money when they are young so that they will be able to pay cash for things when they are older. Over a working lifetime, unless the unlikely expensive illness or persistent medical condition occurs, this account would grow to a few million dollars by retirement.
2. Everyone is also required to buy a major medical policy unless they can show that they have enough money to be self-insured. This policy would pay for everything after a large deductible. Because most people won’t have large expenses in a given year, and because everyone would be buying these policies, the cost of this policy should be fairly low (a lot less than current health insurance). The deductible could be tied to the amount in the health savings account (for example, you could have a $5000 deductible when you have $0-$20,000 in the HSA, a $10,000 deductible when you have $20,000-$40,000 in the HSA, and a $20,000 deductible when you have $40,000-$80,000 in the HSA and so on. If you have $1,000,000 or more in the HSA you would be considered self-insured and not need to have the major medical policy unless you just wanted to have it. Because the premiums would go down as the deductible went up, there would be an incentive to not use your HSA unless you really needed to. This would encourage saving. The HSAs could also be left to heirs once a person dies – another incentive for saving.
3. For those who are just really unfortunate – for example those who get MS at 16 – and therefore do not have time to save before they start needing a lot of medical care, a fund would be set up. Ideally charities, doctors, hospitals, and individuals would take care of a lot of this need because this would be a lot more efficient and because they would be more likely to find people trying to take advantage of the system, but some government support might be needed. A small tax could be enacted where the Government would pay for these individuals, perhaps funding their HSAs as needed.
In summary, this plan would have every able person helping to take care of their personal medical needs, virtually eliminate bankruptcies due to medical expenses since major medical would be covered, ensure that everyone had access to quality care, drive down costs by making individuals more involved in watching the cost of their healthcare, and provide individuals with control over the care they receive. What does the Affordable Care Act do?
Please contact me via email@example.com or leave a comment.
Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI
Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.