MICHAEL ARNOLD GLUECK AND ROBERT J. CIHAK
As 2007 begins there is some good news for consumers who want a say and choice in their own healthcare.
While in California the Legislature and interest groups wrangle with Gov. Arnold Schwarzenegger over his courageous but misguided universal healthcare plan, there is a positive nationwide trend: Health maintenance organizations are dying a slow painful death (their just due), while consumer-directed health plans and health saving accounts are becoming healthier and flourishing.
According to a recent Mercer survey of 3,000 employers, consumer-directed health plans tripled in 2006.
Compared with a managed care plan such as an HMO, they reduce the annual cost per employee by about $1,000.
Early Cases
While small businesses were first to take an interest, larger businesses are beginning to sign up, too.
The Houston Independent School District has offered two consumer-directed options for the past three years, with excellent results. The annual health benefit cost per employee rose by only $270 rather than the expected $1,500, from $5,500 to $5,770, according to the Houston Chronicle.
A provision rushed through Congress just before the last adjournment makes the funding of health savings accounts much more practical.
Employers will be allowed to roll over balances from a health reimbursement account or flexible spending account into the health savings account of employees who are switching.
The allowable savings account contribution has been raised and will be indexed to inflation.
Previously, it was limited to the amount of the deductible but in 2007 can be up to $2,850 for singles or $5,650 for a family.
Democrats Oppose
Democrats generally opposed the provision, which was pushed through by outgoing House Ways and Means Committee Chairman Bill Thomas, a California Republican. When economist John Goodman, founder of the National Center on Policy Analysis, began pushing for the idea of tax-favored medical savings accounts 16 years ago, only about five congressmen would listen to him.
Goodman thought that nothing but market forces could tame rising medical costs.
A recent Rand study showed employers report saving 10% on health benefits costs, and plan participants appeared to trim spending between 2% and 15%.
Some worry that people are skimping on necessary as well as unnecessary care.
But Goodman says: “Someone is going to have to choose between healthcare and other uses of money. If you want someone else to make those choices for you, you can join an HMO. But if you want to make those choices for yourself, these accounts give you the financial ability to make them.”
HMO Backlash?
While health savings accounts are growing, customers are bailing out of HMOs in record numbers.
Patients complain about restricted choice. And the promised cost savings have not occurred.
The average HMO premium cost per person paid out by major companies is projected to jump to $8,151 in 2007, a 64% increase from $4,979 in 2002, according to the Chicago Tribune.
An Association of American Physicians News of the Day release last March noted there had been a seven-fold increase in individuals covered by health savings account-type insurance from November 2004 to December 2005, according to the American Health Insurance Providers.
As these writers have often railed against managed care since the 1980s, we do take some satisfaction in seeing its proper demise. As we said then, “There is no way a healthcare corporation can provide more care, better care, at a lower cost while the patient wants all the latest expensive technology (but prefers not to pay for) while the corporation and stockholders want a greater return on their investment.”
This was not economic rocket science then nor now.
Flawed Model
HMOs and managed care were doomed to fail. When “for-profit” corporations offer potentially unlimited services for a flat fee (plus the usual co-pays) they reach a point where the only way they can make money is to withhold care.
Managed care, in our opinion, was and is a cruel experiment on America’s patients that provided Wall Street opportunists and non-medically-trained corporate presidents and officers with immoral obscene profits while the sick, elderly, disabled and mentally ill suffered.
Ironically corporate run managed care has survived just long enough for its lethal genes to rise up and destroy itself. We should never again allow such a deadly experiment with patients as guinea pigs.
Newport Beach’s Glueck comments on medical-legal issues and is a visiting fellow in Economics and Citizenship at the International Trade Education Foundation of the Washington International Trade Council. Cihak is a senior fellow and board member of the Discovery Institute and a past president of the Association of American Physicians and Surgeons.
