A Health Care Prescription

We would all like to see our health care costs decline. According to the Kaiser Family Foundation, employer funded health plans have more than doubled in cost since 2000. Keith Hennessey does a good job of explaining how technology is driving the increase in health care costs in Part 3 of a series of posts on Third Party Payments for health care. Please feel free to read Part 1 and Part 2 as well. I recently heard another analogy to explain rising health care costs. Thirty years ago, if you tweaked your knee, you were given a cane. Cost? Maybe $10? Today there are many other options, from physical therapy to arthroscopic surgery to knee replacement. Cost? While not priceless, I would venture to guess that the cost is a bit more than the cane. And let's be honest about this, as I am sure that nearly anyone that has had a knee replacement will tell you, it is well worth the price.

Let me start by stating that I am inclined to support the Republican proposals for health care reform than I am the Democrats. We should give individuals the same tax breaks for purchasing health insurance as we currently give businesses,. If individuals owned their own policies, concerns about pre-existing conditions would become a thing or the past. We should remove any restrictions on purchasing insurance across state lines. States should no more determine what is covered by an insurance policy than should the federal government. and then there is tort reform We have forgotten that doctors are human. They make mistakes. There is a difference, however, between a mistake and negligence, and we, as a society, have forgotten this.

I have long been a big fan of purchasing insurance for catastrophic medical care, and paying for normal medical costs as they come. When you purchase homeowners insurance, does it cover painting? And if it did, don't you think that we would all repaint our homes much more often, increasing demand for house painters, and thus driving up the price? Homeowners insurance, like just about every other type of insurance policy sold, is a catastrophic policy. Health insurance is about the only insurance policy that we expect to cover day-to-day maintenance, similar to a warranty on the purchase of an automobile.

So, if this is indeed a better model for health insurance, how is it that we could properly incentivize it so that more people would choose this option?

One idea that I have had recently, is to give people a tax credit for a percentage of their out-of-pocket, non-premium/co-payment, medical expenses. What would happen if we said that people could get, say, 25% of their out-of-pocket medical expenses returned to them at tax time? One thing that they would be likely to realize is how small a portion of a normal office visit their insurance company pays. From experience, there was a time (not too long ago) when I was uninsured. When I needed to see the doctor, it cost $50 for the visit. Now that I am covered, I have to pay a $35 co-pay. (If you do the math, that isn't too far from my hypothetical 25%.)

The key to making something like this work, of course, is having some sort of health savings account. People need to make sure that they have the money put aside to pay for their day to day medical expenses themselves. The common, day-to-day medical expenses of most people are not overwhelming. What starts to get expensive are extended stays in the hospital, chronic care, and some of the newer drugs. When you go to the doctor and need an antibiotic, that doesn't cost much - I've paid for it myself, as mentioned previously, and it was $50 for the office visit, and another $20 to fill my prescription. It is important to remember that, if we were only too need the same sort of medical treatment that was available 25 years ago, it would cost about the same as it did 25 years ago, or maybe even a little less. If there was a simple solution, such as my suggestion of a tax-credit for a portion of your out-of-pocket medical expenses, that would move more people into this kind of model, I think this would be a move in the right direction.

I welcome any and all comments.