Posted on 11/29/2003 6:04:58 AM PST by chiller
The historic Medicare and health savings account legislation that the House and Senate have passed, and which President Bush has promised to sign, is an extraordinarily important first step in the transformation of the American health and health care system that will save lives and money.
First and most significant, the legislation will add for the first time an overdue prescription drug benefit for seniors and do so at a reasonable price. Had pharmaceuticals been as fundamental to staying healthy in 1965 -- when Medicare was created -- as they are today, there is little doubt that they would have been included in the original legislation. Over the years, as the drug industry developed more and more life-saving and life-enhancing drugs, the absence of affordable drug coverage for seniors became a glaring shortcoming of Medicare.
For example, it was increasingly nonsensical that Medicare would pay billions for kidney dialysis but not pay the pennies per day for the preventive-care drugs that let many people keep their kidneys healthy. Similarly, it made little sense for Medicare to pay billions to cover open-heart surgery but not cover the couple of dollars a day for statin drugs so that people could avoid surgery in the first place.
In this respect, the drug benefit not only will help keep our seniors healthy, but it will also save money in many cases by preventing health crises that require costly interventions for seniors.
However, the impact of this legislation extends far beyond the drug benefit. Through its creation of health savings accounts, the measure will begin to address the crisis in health care that affects all Americans.
These portable accounts will allow individuals to deposit and grow money tax-free, and to withdraw that money tax-free to pay for qualified medical expenses, including health insurance premiums and deductibles, prescription drugs and long-term care services (including long-term care insurance). As such, HSAs, which are owned by individuals, are the first completely tax-free account in American history.
If you are a fiscal conservative who cares about balancing the federal budget, the new legislation may have no more important feature than the health savings accounts. The new account will begin to move us away from the current model in which insurance companies dominate the health care transaction. Instead, the HSA will enable transactions between doctor and patient in which the patient controls how dollars are spent.
With health costs accounting for nearly 14 percent of U.S. gross domestic product, the HSA represents the single most significant transformation that can be made in saving the country from skyrocketing health costs and steadily increasing calls for taxpayers to finance more and more of the health care system through higher taxes. Transformation of this nature is a practical need when so many Americans are without health insurance (including 9 percent of Georgians) and when those with (or supplying) insurance coverage have experienced double-digit premium increases for three years in a row.
High deductibles beneficial
A worker sets up an HSA by buying a health insurance policy with a relatively high deductible. The minimum deductible for an individual is $1,000; the maximum is $2,500. The minimum for a family is $2,000; the maximum is $5,050. The worker can set aside, tax-free, the full amount of his deductible each year and draw on that money to pay health-related expenses. Some may wonder why the deductible seems so high. The answer is that increasing the deductible to such levels sharply reduces the cost of insurance premiums for the worker or his employer.
Health savings accounts hold a tremendous advantage for younger workers by enabling this comparatively healthy group to accumulate substantial sums of money over a lifetime of work. And for seniors 55 and older, the new legislation allows them to catch up on HSA advantages by allowing this group to make extra contributions of up to $500 annually (increasing to $1,000 by 2009) to help them accumulate more rapidly tax-free health dollars for retirement.
The next balanced budgets will only be possible once there is a transformation of the health system, and part of the key to this transformation will be the existence of health savings accounts. Without the first dollar interest in the payment of health expenses, there is little incentive on the part of the patient/consumer to scrutinize a doctor's bill.
And without transparency in costs, as well as cost comparison information, it is even more difficult for individuals to assess the true value of a health service and either challenge the bill or decide to take their health business to a different provider who offers better value.
Promoting wise purchasing
Health savings accounts will encourage individuals to shop for health plans that best fit their needs and to make cost-conscious decisions about how they spend their own health dollars as opposed to a third party's money. Individuals who control their own health dollars will be wise purchasers of health services.
Transformation in health care is also a moral imperative when poor quality-control systems, scarce information about expected outcomes, unacceptable error rates and lack of consumer choice combine to threaten the safety of patients and limit the opportunities for individuals to find appropriate and affordable treatment. The new legislation begins to tackle these problems by correcting the current practice in which quality outcomes have no bearing on the reimbursement structure. A provision in the bill will give hospitals incentives to invest in information technology and report on quality outcomes, so people will be able to compare quality outcomes among hospitals.
The natural order of the 21st century economy is continually to have more choices, of greater quality, at lower costs. It is what 70 million baby boomers have come to expect in most areas of their lives, with the health and health care system a glaring aberration.
While a completely transformed health system will take more time and require a great number of additional steps, President Bush, House Speaker Dennis Hastert (R-Ill.) and Senate Majority Leader Bill Frist (R-Tenn.) have delivered on the all-important first step.
Seniors will receive long-overdue prescription drug assistance and all Americans will receive the opportunity to take control of their own health care spending so that they can provide better health for themselves and contribute to the better health of the economy.
Former House Speaker Newt Gingrich is the founder of the Center for Health Transformation (healthtransformation.net) and the author of "Saving Lives & Saving Money."
ditto. newt explains this thing well.
the bill encourages shopping and thus competition.
the bill pays for drugs that help avoid expensive surgery.
the savings accounts are powerful private solutions. government would grow more easily if the "old system" got any worse.
LOL!
The proponents of this bill didn't emphasize that it would help balance the federal budget.
Gingrich (and all other supporters of this bill) still fail to adequately demonstrate the need for this entitlement. That is, how many seniors are currently unable to obtain the medication they need? Supporters of this bill simply assert that there are many people without access to medications who will now have it, and further assert that as a result other medical expenses will be avoided. I question whether this group of people actually exist, considering the existence of indigent patient programs, charities, doctors' samples, etc.
Even if I assume that assertion is accurate, will this medication avoid further medical costs (due to surgeries, hospital stays, etc.) or temporarily defer them? I've seen no evidence to demonstrate that patients with access to prescription drugs ultimately spend less on other medical procedures, and I suspect that isn't the case. The other procedures will still be necessary, albeit a few years later than would otherwise ne the case.
One other thought: I'm glad to see Gingrich avoided the false claim that this bill intoduces privatization into Medicare. The bill only allows for a limited trial, in metro areas, and in 2010. Based upon the results of these trials, privatization may or may not occur. Personally, I find it highly unlikely that it will occur, and point to the history of entitlement programs to bolster my case. These programs simply do not go away, and always end up requiring a larger amount of taxpayer dollars than expected.
A few questions...How many people fall into this category? How many of those "happy with the present system" will have no choice once their ex-employer ceases coverage?
But then, we'll probably see the cancellation of many company sponsored health plans.
The government has allocated $70 billion in tax incentives to avoid just that, but the reality is that no one can accurately predict the response of businesses. We can only be assured that, regardless of the choice made, the taxpayer will foot the bill.
Is that good or bad?
Well, it's certainly bad for those who will now receive worse coverage. It's bad for the taxpayers, who will now be forced to subsidize companies via tax incentives (if they choose to continue coverage) or their ex-employees via Medicare (if coverage is dropped).
It really isn't a corporation's business to provide health care.
It isn't? I'd be interested in hearing why not. Corporations have set up pool coverages in order to attract talent. In the case of retirees, many corporations have promised future payment, in the form of benefits, in lieu of current salary. The fact of the matter is, it's neither your busines nor the government's to decide what a private company's "business" is. You do it through statements like the one above; the government does it through direct and indirect - and in many cases unintended - incentives.
I'm worried too about the potential pitfalls and costs, but I definitely like many aspects of it.
Which ones? HSAs are the only one I can find, so I'd be interested in hearing your take on the rest. And I've been looking hard - I read the bill and probably have read most interpretations of it.
And I have higher hopes for the privatizations test being expanded later. This is a major program that will likely be around for decades, just as Medicare has been.
So, you have higher hopes for privatization, yet you acknowledge that Medicare will exist for decades? Haven't you contradicted yourself with that statement?
W and Newt are clearly on target; the old system doesn't work.
That certainly isn't in dispute. What's interesting is that folks have turned that into an argument to increase the program by 40%. It's broken, so let's throw more money at it?
I'd love to know how...as you said it's now law. The entitlement money will flow, and there's little anyone can do about it. In 10 years, when the results of the limited competition become available, I suppose we can pressure Congress to adopt a privatized outlook.
Little consolation now, though...
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