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Former Foreward to Saving for a Rainy

George Ross Fisher, MD


January, 2015

three intended as part of a larger volume about the Affordable Care Act of 2010, commonly called Obamacare. However, that episode is vexed with unexpected developments, so I set the longer version aside lest it gets longer. This slimmer one concentrates on what I would offer in place of the ACA, or at least parts of it. I fully expect any criticism of an American President's plan to be greeted with, "OK, wise guy, what would you suggest that's better? " So, here it is.

It's the Health Savings Account, in two forms, single-year and multi-year. The 1981 single-year version works pretty well, but the passage of time suggests a dozen or more tweaks, which are explained individually. The original version has often demonstrated a 30% cost reduction among several million early-adopters. So perhaps if we polish a few rough spots, the 30% savings will spread even further. Whether it spreads any faster will depend on national politics.

Meanwhile, in searching for more ways to cut cost, I discovered less expensive variations of Health Savings Accounts can be developed on a lifetime model. Lifetime insurance makes it possible to eliminate costs like covering gall bladder removal in people whose gall bladder has already been removed. That's the idea which started me down this path. Even more important, however, it soon provided a framework for combining several advances like whole-life insurance, passive investing, direct-pay insurance and eventually, even some Constitutional reconsiderations. Adding complexity worries me because although some people will quit trying to understand complexity, and just adopt it because it works, other people will reject it, just because it sounds confusing. As it gets more complicated, it also must get more paternalistic; opinions differ on whether it is an advantage. There are enough Americans who won't accept anything unless they understand every word of it so their carefulness will keep it slowed down. Even that has its advantage: a careful approach upsets fewer apple carts.

No doubt the two versions of Health Savings Accounts could be described in fewer pages. But greater density can hinder comprehension, seldom helps it for fast readers. Furthermore, presenting an alternative without a critique would leave the reader uncertain whether I believe the Affordable Care Reform presently goes too far, or not far enough. (In fact, both things are true, because it seems so likely both government and business employers will abandon the patient in pursuit of other agendas.) At the same time, the Affordable Care Act seems politically unsustainable. It costs too much. It needs more balance between benevolence and fiscal prudence, and it certainly needs more restraint to both sides protesting the other will ruin us. Of course, we must do what we can for the poor. But we also need to stop promising more than we can deliver. In the very long run, it won't be politicians, it will be scientists who seriously reduce the cost of disease for everyone, by eliminating diseases. Until that happy day arrives, we need to maintain a lowered tension of aspirations. When government and business operate as partners, that's nice, but somehow it doesn't sound like a level playing field for the rest of us. But having business and government at odds with each other would fit anybody's description of unsustainable.

The Affordable Care Act contains at least two innovative ideas which I certainly endorse. The idea of direct payment of insurance from client to the insurance company (replacing employers as absentee brokers), is good since it reduces the temptation for financial intermediaries to abuse the role of umpires. Rent-seeking is the technical term for this, I believe. Most office and outpatient claims could easily be paid by a bank credit card, streamlining the slow and expensive claims processing approach. Sadly, we may never know the full benefits of direct payment, because public dismay at the fumbling introduction of computerized insurance exchanges could poison direct-pay indefinitely. And secondly, to go on with my diplomatic message, the ACA use of a "cap" on out-of-pocket payment seems like a simple, clever way to avoid adding another costly layer of reinsurance. The system already requires three levels of insurance (basic, supplementary, and major medical) to pay simple claims completely; it doesn't need more layers, it needs fewer. These two features, translated as -- more business efficiency, and less mission-creep -- could easily be allied with Health Savings Accounts, which in the past brought financial pragmatism to several million Americans, voluntarily. Remember, this country responds poorly to almost anything containing the word "mandatory".

However, two points of agreement are not enough innovation to balance the remaining unevenness. I regret how the Affordable Care Act continues to push the square peg of "service benefits" into the round hole of casualty insurance. That sort of incompatible mixture befuddled things for a century, and I look for little good to come of it. Except for helpless hospital inpatients with a tube in their nose, service benefits generate rent-seeking, because service benefits blur the boundaries and create loopholes. Later on, we describe the confusion and exploitation created by service benefits (renamed Diagnosis-Related Groups) as a method of reimbursement. If sharpened and refocused, they could ease the problem of negotiating prices with people too sick to cope with finances. But the wide implementation of that inpatient approach without vigilant pilot testing has resulted in chaos in outpatient pricing. Even dropping DRG and returning to the old system would now pose a daunting risk, for one main reason. The DRG system has made hospital outpatient prices -- totally meaningless, and bewildering to patients who encounter two widely different prices for the same thing in the same institution. As a goal, the techniques of service benefits should be revised for inpatients, but eliminated for outpatients, who are generally alert for bargains. Two systems of payments perhaps, but reaching roughly the same price. As it happens, this uproar is not the fault of Obamacare, nor is its remedy inherent in Health Savings Accounts. But neither system of reimbursement can function without understanding what hospitals are all about.

The Health Savings Account is a mixture of two approaches which more accurately reflect the natural expectations of consumers. It's a mixture of cash payments with insurance coverage. It can be viewed as cash with insurance standing behind it, or it can be viewed as insurance with cash to fill in its gaps. It's definitely a step away from One Size Fits All. That may make a problem for Congress to decide which committee has jurisdiction, but in practice, it is more useful to address the larger issue, which is making the customer happy. The tendency should be resisted to specify by law that one system is to be used for inpatients, and the other for outpatients, for example. That's the way it mainly works out of course, but there are plenty of exceptions. My friends in administrative positions will have to forgive me for saying no one really likes uniformity -- except administrators. What has evolved is failing to appreciate the difference between a marginally better choice for everybody, and a clearly better choice for a majority. We have democracy all right, but there are many cases where multiple choice is more suitable than the majority rule. Admittedly, individually owned accounts create technical difficulty for cross-subsidy of expensive items, and I thoroughly understand the nation's attachment to pooled insurance as a way to subsidize the poor and helpless. But other patients have special problems, too. An unwarranted affection for simplification leads to this kind of outcome.

Perhaps we do start to wander off the topic, which is saving money for healthcare. In a larger sense, it is only a small part of another larger problem, which is how to fix an engine, while the motor is still running. Neither one of the larger topics, however, is the main mission of this book, so let's restate what it is.

Regardless of chapter markings, there are only two topics: regular Health Savings Accounts, as they exist today. And Lifetime Health Savings Accounts, as I hope they will evolve, tomorrow.

George Ross Fisher, MD


January, 2015

Originally published: Thursday, January 15, 2015; most-recently modified: Friday, May 17, 2019