Saturday, June 20, 2009

Healthcare Relief Without Universal Health

From the Desk of Joe Rollins

I have not been closely following the public debate regarding the new health insurance program proposed by President Obama. Quite frankly, health insurance matters tend to make my eyes glaze over from boredom. I assume that since there is such an emphasis on the issue, there must be some sort of kerfuffle between the parties, but in all honesty I do not know where the problem lies. So, to try to inform myself, I’ve done some investigating into the topic.

On Tuesday, the Congressional Budget Office (CBO) made an interesting announcement. Based upon their analysis, Senator Ted Kennedy’s proposed Healthcare Reform Bill would cost roughly $1 trillion over the next 10 years to insure only 16 million additional people. It does not take a rocket scientist to figure out that this figure constitutes $6,250 per participant, per year. Interestingly, that annual premium is 30% higher than we currently pay for group medical insurance. That’s essentially what is paid for private coverage in America today, so I’m a little baffled why a government sponsored plan has been reported to cost significantly less than what you can buy in the private market today.

I have been involved with many businesses through the years that have fought with the concept of providing private insurance to employees. For example, a few years ago I had a private security company offer group medical insurance to their employees. This company was your basic “rent-a-security-guard” service geared towards private businesses. The employees dressed in uniform to look official but were not members of the police department and were not authorized to carry guns.

Due to the cost of the insurance, the employer agreed to subsidize 25% of the cost while the employee paid the other 75%. A summary was sent to all employees asking about their willingness to participate in such a program. Not a single employee agreed to participate in the program.

The company issued a follow-up inquiry to the employees, asking them why they did not want to participate in such a generous offer by the employer, and their answers were fairly indicative of the mindset in many communities. They indicated that they didn’t feel like they should pay anything for group medical insurance. Furthermore, many of them stated that if they needed medical care, they would simply visit a facility where services would be rendered to them for free. This group of employees was basically young and healthy; they didn’t have much need for medical care, and so it was not that important to them. If they ever needed medical care, they knew it was available to them at no cost – which is significantly less expensive than them paying for something that they may or may not ever need.

I have not read the entire proposal on the medical insurance reform, but what I have read reflects one basic problem. As I understand it, the government will provide a medical insurance company which will be artificially subsidized by the government’s money (i.e., your tax dollars). For example, a company will be established by the government which will compete with the private insurance companies to provide medical care. This company will offer premiums at less than the current rates under the theory that competition will force all of the other non-government companies to provide insurance at the same or at lower costs than the government mandated plan. As the President said, “Make the health care market more competitive and keep insurance companies honest.”

It’s hard to believe that anyone thinks the U.S. government needs to be in direct competition with private industry. I’ve written many times in previous posts that the Federal government only does one thing well – they can provide security and defense, but virtually everything else they do is done worse than the private sector. I cannot even fathom the bureaucratic mess that a government-sponsored health insurance plan would become.

Given that the plan would clearly be subsidized by taxpayers and be politicized by an uninformed and uneducated Congress, it would compete unfairly with the millions of Americans currently employed in the private sector providing group medical insurance. The poor track record of the other countries that have tried socialized medicine should be evidence enough. You don’t need to look any further than how economically inefficient and poorly run the U.S. Medicaid system is operating. Enough said!

I understand there are 1,500 insurance providers in the United States offering group medical coverage. This group medical coverage is very competitive between the various medical insurance providers. The fallacy of the government’s plan is that if they are able to offer premiums that are less than those offered by private insurers, it will only be a matter of time before employees transfer to the government’s low cost provider. Over time, the vast Americans insured will be on the government plan under the subsidized premiums and not in private insurance. How could premiums not be lower, subsidized by your tax dollars? If you would like to project how well that plan will be, just visit the Department of Motor Vehicles (DMV) and try to change the license plate on your car.

One of the reasons I’ve never been terribly concerned about the uninsured Americans is because healthcare is widely available to everyone at little or no cost, as I illustrated with the security guard company mentioned above. Anyone can walk into a facility needing medical care without being refused. That is the law – they have to provide medical care. In fact, taxpayers provide free medical care not only to U.S. citizens, but also to anyone – whether in the U.S. legally or not – who enters a healthcare facility. The cost of this care is provided through our property taxes and other forms of city, county and state taxing authorities. In some cases, the money comes from the Federal government in programs such as Medicare. Basically, a large portion of our local taxation provides for medical care for the uninsured.

An interesting article was featured in yesterday’s Investor’s Business Daily that set out some interesting statistics. In fact, now that I have a better understanding of the numbers, it appears to me more than ever that such a healthcare plan is not needed. President Obama says there are 46 million uninsured people in America in need of health insurance. Unfortunately, a large portion of these people are not U.S. citizens, and in many cases they are in this country illegally.

The Census Bureau provided the following statistics regarding the 46 million uninsured:

Total uninsured people in the United States46.0 million
Less non-U.S. citizens (many here illegally)(9.7 million)
Less household annual incomes greater than $50,000(10.0 million)
Less household annual incomes greater than $75,000(7.0 million)

Of the total uninsured, roughly 40% are age 18 to 34, and they are in basic good health. They have, apparently, elected to put their dollars elsewhere in the economy rather than in buying medical coverage. It is presumed that those with annual incomes greater than $50,000 do not buy medical insurance because they do not feel they need it or they are self-insured. They clearly could afford coverage, but elect not to purchase it.

As such, it is an exaggeration to indicate that there are 46 million people in the United States who do not have medical insurance. I would argue that none of the 46 million go without medical care. As for the non-U.S. citizens getting medical care on the U.S.’s dime, that is very simple: If an illegal alien enters a healthcare center, we provide medical care to get them healthy enough to deport them back to the country from which they came.

I’ve always wondered why there is such outrage about medical insurance anyway. If there are truly only 13 million uninsured American citizens in the country, that means that approximately 300 million are either covered under a private medical plan or one of the governmental health plans. Since 70% of the people covered under private health plans have premiums that are subsidized by their employers and virtually all of those who are retired are subsidized by the government, there are few who complain about the cost.

Additionally, based on my experience of preparing income tax returns for health professionals, I can assure you that practitioners in medical delivery are not getting rich. I’m not talking about specialists or those in cosmetic medicine, but general practitioners. Due to governmental restrictions, these people are making less money today than they made 10 years ago.

The true issue with healthcare delivery is not with people under the age of 65. The real risk to the American way of life is healthcare under Medicare. None of the issues contained in the proposed bill do anything to alleviate that potential liability to all Americans.

It’s simple to resolve this issue without a great debate. Since we are providing medical care anyway, why doesn’t the Federal government simply grant every qualified person who cannot afford to pay for medical insurance a voucher for group medical insurance? It could not be spent on anything other than group medical care. This would be provided by the private sector with no governmental interference. Since the states, cities and counties would no longer be providing indigent care, it would greatly benefit the economic well-being of these cities and towns that are severely financially stressed.

There would also be an easy way to pay for this program. Of the current Americans covered under medical insurance, 70% of their insurance is paid for by employers. I dare say the vast majority of these insurance programs have premiums that are paid with pre-tax dollars under some sort of cafeteria plan. It is one of the few items in the Internal Revenue Code where the employer that pays the premiums are fully tax deductible and the employee that receives the benefits are fully tax exempt. An easy way to pay for this entire program would be to not allow cafeteria treatment for these employees.

I recognize that this would be a tax increase for some employees, but it would be a relatively minor amount. It’s important to remember that 50% of the population in the U.S. pays no income taxes whatsoever. If, in fact, a significant portion of these are then taxed on the premiums paid for by employers, the cost would be relatively low. The wealthy would find the tax on these premiums to be only a minor inconvenience and trivial to their financial situation. I doubt there would be any major objections to taxing premiums if the issue could be solved.

None of the issues above address the inherent problems with medical delivery today, including technology, prescription, etc. However, it does immediately solve the issue of insuring everyone who qualifies for medical coverage. In addition, the major benefit is that we do not create another entitlement program run by the government to be funded with future tax dollars.

My suggestion would be health insurance fully funded by the private sector, with 1,500 insurance providers competing amongst themselves. The government could immediately begin dealing with the issues of the medical delivery which is very much needed, but would never be in the business of providing coverage, which would unquestionably be a drain on Americans forever.

As always, the above are my opinions – I could be wrong.