N-HSA: The New Health Savings Accounts
Some new ideas are ready to be debated. Here are the ones I favor for 2016.
One must be sympathetic with the original designers of modern conventional health insurance. They had few models to work with and no advance knowledge of how medical care would evolve in the following century. Most major scientific advances have driven disease costs away from working people. Consequently, retirees expanded in number. The result is employer-based insurance with a little remaining disease in the employees, but which still ends at the time of retirement. Consequently, Medicare developed in part as one way to tax workers to pay for retirees. Longevity continued to expand, but initial revenues became exhausted, and the government quietly resorted to deficit financing. As the balance of payments turned negative after 1965, we resorted to foreign borrowing. It is now revealed by Secretary Sibelius that 50% of Medicare funding is a subsidy, temporarily funded by borrowing (selling them U.S. bonds) from the Chinese government.
This situation cannot continue indefinitely, and it especially cannot be extended to other programs in the form of "single payer" programs. The Health Savings Account retains the spread-the-risk feature of insurance but more or less limits it to hospital inpatients, who are in no position to negotiate prices, by utilizing high-deductible insurance. In the outpatient area, the early adopters have demonstrated a 30% reduction in costs in the outpatient area, while prudent shopping is rewarded by returning the savings to the individual. It helps cost-saving to have a defined incentive, that any unused surplus may be used for retirement. This success prompts another warning: merging Medicare with other health programs would clash with merging Medicare with Social Security.
It seems certain to a doctor that the enormous resources being devoted to medical research will eliminate at least one of the half-dozen remaining expensive diseases within a decade or two. If we are lucky, the ongoing costs of this future cure will be less than the present cost of treating it. That's what happened when we woke up to the preventive value against heart attacks and strokes, of a little aspirin tablet. Even if early costs are high, patents soon run out, competitive products emerge, competition brings down the cost of that disease. Repeat that miracle five or six times in the next fifty years, and the whole cost issue changes. Instead of worrying about the cost of dying too soon, we will gradually worry more about the cost of living too long. Medicare will shrink, but Social Security will get more expensive. What could possibly make more sense than to merge Medicare with Social Security? And, what would be more unfortunate, than to merge Medicare with healthcare programs for other ages, thereby creating more or less direct competition for available funds and program control? Perhaps that could be avoided, but choices would be governmental rather than individual. And they would be wasteful, generating resistance to reducing one part of the program, rather than diverting any unused medical budget toward retirement benefits.
So it seems in the interest of retired people to soften their resistance to the development of programs to shift unused Medicare funds to retirement. That is, to close down Medicare as it becomes unneeded, allowing the individual subscriber to decide the balance between them, in his own particular case. Inevitably, that would provoke resistance, but it need not constitute the third rail of politics: touch it and you are dead.
Accordingly, we examine in this section of the book, just what might be involved in allowing voluntary, gradual, buy-outs of a Medicare program which surely cannot continue on its present course indefinitely. It's just one part, but an important part, of funding about half the cost of healthcare, other than Obamacare.