I spent the bulk of my 32 years at Prudential managing their Health Insurance and HMO products. Donald Trump is correct in one regard – health insurance is complicated. However, politicians are making everything worse because they are making proposed laws based on little, if any, actual knowledge of the product. This same lack of knowledge affects political pundits also.
This morning, Bret Stephens, previously with the Jerusalem Post and WSJ wrote an opinion piece that the solution to our healthcare mess is to encourage more participation, and larger Health Savings Accounts (HSA). The example he gave was to comparison shop for urinalysis tests before getting one. His logic is if the cost of the test come out of one’s own HSA funds, comparison shopping might save a couple of bucks.
What everyone in the health insurance business knows is 20% of the people account for 80% of the claims. That is where the big money is and the reason for the escalating health care costs. These people have serious health care issues that cannot be solved by comparison shopping. A lot of current politicians forget that in the 1980’s and early 1990’s health insurance costs, mainly Group Insurance, were rising much faster than they are under Obamacare. Employers who were paying the majority of the cost of employee health insurance were screaming for solutions. That gave rise to insurance companies developing HMO’s which had a major positive effect on health costs. However, the restrictions inherent in HMO’s led many employees to reject using HMO’s.
To give you some idea of the possible saving the Group Model HMO we built in Florida saved about 40% of the cost of regular health insurance. We bought a hospital, we bought the office building across the street and hired doctors, specialists and nurses by the dozens. We also set up a 24 hour 800 hotline staffed by nurses with doctors on call to instruct patients on those 2:00 am crisis that always seem to occur. I honestly believe we provided better healthcare to the members than they ever could get on their own. However, Americans with their emphasis on freedom and exceptionalism are not ready for a wide spread implementation of HMO’s.
So what to do? I believe the only rational solution is a national single payer system like other first world countries. Here are some statistics on health care costs per capita/year in 1995 and 2014 (source – World Bank
1995 2014 % increase
England ………………….$1364 $3935 288%
France……………………$2735 $4959 181%
Japan……………………..$2845 $3703 130%
Germany…………………$3129 $5411 173%
Canada …………………..$1831 $5292 289%
United States…………….$3788 $9403 248%
The average per capita costs of the 5 countries listed above is $4600/year, excluding the U.S. The U.S currently spends $3.2 trillion in healthcare each year. If we were able to achieve even 150% of the average per capita costs of other countries we could save American consumers and governments over $800 billion annually, Just think how that money could be better spent.
I’ve spent a lot of words outlining the issues but nothing on solutions. Obamacare was supposed to be an initial move toward single payer but is far too complex and awkward. America is not ready to implement a true single payer, Medicare for all plan. Nor are they ready for a massive HMO plan. But they will be ready for catastrophic health plan that covers everyone in the United States with a $100,000 annual deductible. This would cost the American taxpayers about $4 billion/year. People could buy regular health insurance to cover the first $100,000 in health expenses. Insurance carriers would gladly provide this insurance as their risk for the multi-million dollar claims is non-existent. This is a better lead in to a true single payer plan. Over time, the $100,000 deductible could be reduced to $50,000, then $10,000 then $1,000 without causing an upheaval in the health care market. Medicare and Medicaid would be included. Insurance carriers would continue to pay the health care claims but will bill the government for the excess of claims exceeding $100,000/year.
Now TMV’ers pick holes in my plan.
After a long career as a Senior Executive with Prudential, jdledell took early retirement to teach piano with his wife of 48 years, Cinder. The two of them established Castle LeDell Music in their home and have 130 weekly students spread out over 7 days a week. In spite of teaching being literally a full-time job, jdledell finds the time to consume vast quantities of Internet commentary and to communicate with his children and other relatives scattered around the globe. While jdledell got polio when he was two years old and now uses a wheelchair full-time, it doesn’t keep him from leading a rich and fulfilling life in Basking Ridge, NJ.
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