Wednesday, February 29, 2012
The Arizona election really has me down. I am so sick of this game in which we pretend that Conservatives are interested in restoring freedom, when conservatives consistently vote for the stooges of big centralized economics and big government.
I've written to every "Tea Party" and "Libertarian" group I can find in Arizona to see if anyone was interested in hosting a meeting on "Health Freedom" or "Self-Funded Health Care" and have not gotten any firm response; so, I've decided to scrap the idea of a trip and concentrate on the important matter of survival.
What is killing our country is that politicians use freedom in their rhetoric, but systematically favor economic centralization in their actions. Conservatives and "Liberals" are both playing a game that undermines the liberties that the Founders sought to establish.
Dialectics is a game in which politicians take a false dichotomy and shrilly debate thesis/anti-thesis while consolidating power in their grips.
The false dichotomy of health care is: Who should own the group pool: Big business or big governmentment.
Neither. The individual should be the owner of their body and should be the one to own their health care resources.
Now, the restoration of liberty cannot come through dictates.
To restore liberty, there must be an open dialogue about freedom. People must be engaged in a conversation about themselves.
This "Medical Savings and Loan" project, from the start, has been a call to engage people in this dialogue.
Monologuing cannot solve the problem. I hate the monologues of Rush Limbaugh, Sean Hannity and Glenn Beck. These monologues are part of the problem.
Restoring freedom must come in the form of a dialogue. It cannot come from a single book, a single dictate, or even a product.
I know, I present my idea as a product: "The Medical Savings and Loan."
I chose this name because MSA was a term in widespread use before 2003, and I wanted to emphasize that the HSA included in the MMA Act of 2003 was inadequate to put us back on a path of restored health freedom.
The name is just a gimmick to start a conversation.
My goal for the last four years has been to find a group willing to discuss self-funded health care and to challenge the politicos by saying that the out of control spending in health care is a direct result of the use of group funding for individual consumption.
Oddly, neither the tax free savings account nor the interest free loans are fundamental to my real argument. The foundation of my argument is self-ownership and property rights.
Property means "say-so." Property rights means that you have say so over your health care and you have say-so over the resources you build to provide that care.
You cannot sell the risk associated with your body without losing the say-so over your body.
Group funding of individual consumption leads to corruption (the tragedy of the commons) even when the group is owned by a corporation.
My hope was that the name "Medical Savings and Loan" would be catchy enough to grab peoples attention and help start the conversation and that the name for the effort would change before going public with the conversation.
It is possible that I was wrong on that calculation.
Anyway, I have a program to start a conversation about self-funded health care. I am dead broke. I would either need to borrow money or find a way to generate an income stream to pay for my travel. I have a fundraising gig at the ready.
I would still hit the road if I could find a group willing to debate this concept, but there must be enough people in the group for my fundraiser to raise enough money to pay for the gas and a hotel.
It is devastating to think that in three years of letter writing, tweeting and actively engaging in this health care debate, I've been unable to achieve my goal of a dozen people in a room to discuss self-funded care as an alternative to
Monday, February 27, 2012
Before allowing people to buy insurance across state lines, conservatives should ask "why doesn't the market does not already allow this?"
The answer is actually simple:
Insurance is a legal product which is dependent on jurisdiction. In our union of states, the jurisdiction is the state.
Insurance works as follows: People put their health care dollars into a pool. To receive health care they file a law suit against the pool. That lawsuit is under the control of the state courts.
Yes, every single transaction in insurance based health care is a legal claim against a pool. That is why we use the term "claim." Processing of these is controlled by a court system.
Attempts to buy insurance across state lines confuses jurisdiction. Insurance in California might be higher than Arizona. That is because the courts in California load insurance with excess baggage. Attempts to sell insurance over state line is equivalent to selling local legal precedents over state lines.
Yes, big insurance companies love the idea of confused jurisdiction. Big insurance companies will be able to use confused jurisdiction to their advantage. But that is not good for the people who suddenly lose access to the pool their health depends upon and are left with no legal recourse.
Insurance is dependent on the court system. We've been sold an absurd product that makes every single transaction a legal claim. The fact that you can't buy insurance outside your jurisdiction is a symptom of this underlying absurdity.
I favor a different approach to health care. In the medical savings and loan, people build equity for use in their health care. Payments to your doctor are straight cash transactions. Because you are using cash transactions (instead of legal claims) you can use your money anywhere that cash is accepted.
Since the Medical Savings and Loan is just a collection of financial tools and not a legal product there is not the same state line issues involved in the program.
As an investor, I would have the right to invest my health savings anywhere I see fit. Foundations, giving grants from their own money, have a right to use the money as they see fit. It is possible that a foundation could have a contractual obligation to use money in a state. I could start a Utah Charity that demands all funds are used in the Beehive State. This is a contractual obligation added to the product. Such contractual obligations are not inherent in the product.
Insurance is a legal product and dependent on jurisdiction. We know this from the terminology. Every transaction is a legal claim. Since every transaction is a legal claim, people must be in the same jurisdiction as the insurance company.
Conservatives have clearly not thought through the foundations of health care. They yell "states' rights" in one sentence and demand insurance be sold across state lines in the next. This paradoxical thinking will not result in quality health care reform.
A quick note on the MS&L: In the Medical Savings and Loan, you will have access to a person called a Health Care Advocate. Ideally, the advocate will be an independent agent with whom you have multiple face-to-face meetings. While there will not need to be artificial restrictions on where you invest your money, the program is highly local. The financial tools in the plan could be used across state lines. The heart of the program is intensely local.
Saturday, February 25, 2012
I chose name name "Medical Savings and Loan" because I chose to supplement the Savings Accounts with a combination of loans and grants instead of high deductible insurace as was done the MMA Act of 2003.
This name brings up a conversation about the collapse of the Savings and Loan System.
The Savings and Loan collapse was a classic equity bubble caused by a fractional reserve lending made worse by Federal backed insurance.
The set up of the Savings and Loan failure was the creation of the FSLIC (Federal Savings and Loan Insurance Corporation) by the National Housing Act of 1934. In case you failed to notice, I highlighted the word "Insurance."
This program sought to spawn a housing boom through fractional lending from the Federal Reserve. It started a classic business cycle. The start of a business cycle is always good times and people loved their savings and loans that lent more than they took in.
The Savings and Loan were on the down side of the boom in the 1970s and the industry was in a state of crisis.
In the 1980s, the boneheads in charged decided to revive the beloved Savings and Loan by deregulating lending.
It is important to remember that the call for deregulation only comes when an industry is in a state of crisis. On the upside of a bubble people praise their regulations. Only the lunatics of the Austrian school of economics scream about regulations in up cycles ... and they are routinely dismissed as lunatics.
Anyway, the savings and loans were on the downside of the business cycle and the boneheads in charge decided to deregulate the lending while keeping the federally backed insurance in tact.
Rogues in the Savings and Loan industry were now free to make risky loans backed by the Federal Government. There was an immediate boom in the construction of houses no-one wanted followed by a bailout.
Fractional reserve lending always creates a business cycle. The social engineers who created the FSLIC thought they could take the edge off the business cycle with insurance. The federally backed insurance actually made things worse. When the market was in crisis on the downside of the cycle, politicos took the bone headed move of deregulating the fractional reserve lending with the insurance in tact making the end of the business cycle worse.
The Medical Savings and Loan does not use fractional reserve lending. Because of the high default rate in medical lending, people would avoid fractional reserve medical lending. The MS&L is a mechanism for unrolling an insurance pool into individual accounts. Although it has a name similar to the Savings and Loan, it is doing the exact opposite of the National Housing Act of 1934.
Friday, February 24, 2012
With insurance, you sign a contract and pay a premium which gives you a contractual right to health care for a set period.
I realize that the readers of this post understand the difference between a contractual right and a fundamental right. The enemies of freedom are skilled at blurring this distinction. They look at a market and see some people have "a right" to care and others do not and scream unfair!
The health care debate that led to ObamaCare was premised on the false claim that people who do not have a current contract with an insurance company do not have access to health care.
The Medical Savings and Loan is premised on the notion that health care is a responsibility. You own your body and you have a responsibility to save for the care of your body. The Health Care Advocate is a person who helps you understand and fulfill that responsibility.
The program has a lending program. If you borrow money to pay for care, you have a responsibility to repay the loan.
The MS&L issues supplements in the form of grants, but you do not have a right to the grants.
The grants work in the opposite direction. The program puts a large amount of money aside for grants. The grant agencies have a contractual duty to disperse the funds in a fair manner determined by negotiated formulas.
The clients in the program do not have a right to the money.
The grant organizations work much like an insurance company. The Medical Savings and Loan will study the risks associated with a group and use actuarial formulas to determine how much money should be set aside for a group.
The program will have the same amount of money and would distribute the money in much the same fashion as a catastrophic insurnance policy.
The program removes the contractual right inherent in insurance.
I started writing a long involved post about why grants are preferable in health insurance, but decided to cut the argument short to leave you to imagine why a grant organization with the same amount of money as an insurance company would achieve better results than an insurance company ruled by the courts and contractual rights.
To recap: The difference between Insurance and The Medical Savings and Loan is the difference between rights and responsibilities.
In insurance you pay a large premium in return for a contractual right to resources in a pool. With the Medical Savings and Loan, you keep most of the premium money in your savings account and have a responsibility to self-fund your care. Well funded grant agencies have large amounts of cash that they are obligated to distribute to people whose health care expenses fall outside their ability to pay.
The two systems provide the same dollar amount of care. One is uses a complex system of rights the other builds on individual responsibility. People taking responsibility achieve better results than those who game contractual rights.
Thursday, February 23, 2012
This brings up a very interesting question: If a company made this change, how would it affect current positions in insurance.
For example, a Claims Adjuster reviews and adjusts insurance claims. The Medical Savings and Loan uses direct payments from patient to doctor. The role of the claims adjuster will have to change.
People in the Medical Savings and Loan still need the expertise of claims adjuster. The adjuster will move from an authoritarian role to more of an advisor role.
Changing the focus from an insurance pool to individual accounts would change the duties of people working in insurance. I just created a Disqus thread on HCA.me to discuss this interesting transition.
Wednesday, February 22, 2012
Health care is the allocation of resources to the care of one's health. Resources include time, material and knowledge.
The pricing mechanism helps with the allocation of resources.
Third party-payer healthcare (insurance and socialism) break the pricing mechanism. This is bad because it adversely affects the allocation of resources in health care which adversely affects health.
To restore the pricing mechanism, reform must accomplish two things.
First, reform needs to get people to think of their current health issue in terms of their whole life. If spending a little effort today saves a big problem later; one should spend the little effort now.
The second, and really big trick, is to create a structure in which the patient sees the current negotiation as being the part of the bill that comes from their pocket.
The Medical Savings and Loan attempts to revive the ideal that people who can self-fund their care should self-fund their care. Most people can self-fund their care. Such people are expected to pay out of their savings. If their savings are short, they have easy access to loans that they are expected to repay.
People who understand that they are responsible for their entire health bill are likely to approach each health care expense as a negotiation.
When people have extraordinary expenses, my program actually does something sneaky. The program either writes off old loans or gives the patients a block grant for care.
If a person has had bad health experience, but has done a good job using resources, the Medical Savings and Loan will subsidize current care by either writing off old debts or giving a block grant. In this way, the patinet will be negotiating new expenses with their own money.
The ideal is that the money is always flowing from the patient to the doctor, and that the patient views the money for the current bill coming from their pocket.
There is an exception to every rule. The first exception to the rule comes in the case when a person is unconscious or otherwise incapable of negotiating prices in which case a third party must step in to negotiate prices.
Likewise, charitable care is an exception. In true charitable care, the charity is providing health care with its own resources. A charity seeks to accomplish as much good as possible with its resources.
Saturday, February 18, 2012
I developed the Medical Savings and Loan in the 1980s. At this time people used the term "Medical Savings Account."
Insurance was based by analyzing the experience of a group over a year. I wanted to create a product based on a full lifecycle analysis of an individual.
I wanted a system where people owned the first x% of their total health care experience. The value of x would be determined by looking at the distribution of medical expenses to income.
Let's say the analysis showed that 95% of people spent less than 18% of their income on health care. I would set the life time ratio of health care expenses at 18%. I would expect all the people living under that percent to self-fund care, and give charitable supplements to people living over that percent.
You could think of it as catastrophic insurance with a lifetime deductible instead of a yearly deductible.
As for Health Savings Accounts. These were created by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). This program gives tax deductions to a health savings account coupled with high deductible insurance.
I was critical of MMA for the following reasons:
MMA is still a traditional insurance product based on year-over year analysis of a group. I want a system a system based on a full lifecycle analysis of the individual.
The MMA creates perverse incentives that keep people from seeking preventative care. The program fails to provide a mechanism for cutting costs.
People with high deductible insurance develop a mindset where they skimp on care when they are below the deductible. They then splurge when they've passed the deductible.
People with high deductible insurance make decisions based on the cycle of their deductible and not on their health needs. Let's say a patient passed the deductible this year. The patient will try to buy a bunch of extra medical care, hoping that it will last through the next year during which the patient will not seek medical attention.
Health Care Providers are intensely aware of who is paying the bill. Care providers are apt to do things like undercharge when a patient is below the deductible and overcharge when the patient is over the deductible.
A health care system is broken when the first words out of the doctor's mouth are: "Let me look at your coverage" when it should be "let me look at your problem."
The high deductible insurance of the MMA has proven problematic for lower income workers living on the margin. You pay the premium but don't have any money left for basic care. When you do have a problem, paying the deductible means that they can't pay the next year's premium.
The MMA is horrible for people with chronic conditions. Let's say you had a condition that cost $5000 a year. A person with a chronic condition has to pay their full premium and full deductible EVERY YEAR!
The MMA does not start to address the problems of tort reform. Pretty much all of the cases involving litigation are above the deductible.
My Plan Is Different!!!
The Medical Savings and Loan is innovative in the following areas: The program is based on a full lifecycle analysis of the individual. People essentially have a lifetime deductible based on their lifetime income. All supplements are based on the percentage of one's health care lifetime expenses to their lifetime income.
The MS&L creates a new position called Health Care Advocate who directly helps people with their spending and savings from dollar one.
The difference between the MMA and MS&L can be seen in the way people react to preventative care.
If a person in the MS&L was shown that a preventative care $x would save them $y later, they would buy the preventive care (assuming $x < $y). A person in the MMA is likely to make the choice based on the deductible thinking they should put off the care until a year when they've reached the deductible and care is free.
Conclusion: The HSA in MMA is really just high deductible insurance. It suffers the flaws of high deductible insurance. The MMA is problematic for the cause of health freedom. People are turned off the concept of self-funded health care because they don't like high deductible insurance.
The dangers of self-medication is important to me because I favor self-funding of health care.
When people are left in isolation to self-medicate, they are apt to abuse the medication.
My advocacy of self-funded health care does not mean that I think people should live in isolation.
It is quite the opposite. I favor self-funded care because I believe that a well designed system of self-funded care would bring people together in a mutually beneficial fashion.
The power of self-funded care is that such a system draws attention to the individual. Drawing attention to a person reduces his isolation. In contrast, group funding of care draws attention away from the individual as the policymakers concentrate on the collective.
If self funding is executed correctly, it would bring people together to address questions surrounding individual health and wellness.
The heart and soul of the Medical Savings and Loan is the Health Care Advocate. The advocate is a non-medical professional who is directly employed by clients and who helps people make financial plans and negotiate medical care.
The advocate position is largely clerical. The first job of the advocate is to help people keep records about medical savings and expenses. In doing so, the advocate helps people understand their health needs and medical decisions.
My hope is that this non-medical position will become a sounding board for people as they make the important medical and financial decisions that affect their well being.
I emphasize that the advocate as a non-medical position. I see a strong need for a non-medical position involved in helping people make decisions.
Medical professionals, by their profession, are interested in finding medical answers for the care of health. But human life is such that medicine is only a small part of well being.
Doctors, who were trained to provide agressive care in cases of ill health, do not make the best advocates ... especially for young healthy people.
Michael Jackson was a vibrant healthy singer in his prime. He had plenty of money and doctors on staff. The doctors surrounded the singer with the most potent medications on the market ... a decision which cost the life of singer.
Medical professionals, by defintion, are people who are seeking to take an active role in the delivery of medical aide. People are not in constant need of actual medical intervention.
Like most Americans, I am sad that no-one intervened in the sad stores of Michael Jackson and Whitney Houston.
I believe that, in a robust free health care market, there would be room for a non-medical position called Health Care Advocate.
The advocate is largely a clerical position. The advocate helps people maintain records, make financial plans and helps negotiate services.
This advocate is positioned to becoming a life coach who will help people take a proactive role in their lives.
Watching people destroy themselves with self-medication, I've become convinced that self-funded care cannot work without the creation of such a position.
Insurance agents and claims adjusters currently play this role. But since they work for the insurance company, they are not achieving their full potential as advocates.
I am trying to draw people into a discussion of the Medical Savings and Loan as an alternative to insurance. The real heart of this program is the position of Health Care Advocate. I registered the domain HCA.me.
Self-medication kills. Self-funding of care is not self-medication. Since attention in health care follows the money, self-funding of care would draw attention to the individual and should create additional points of intervention to prevent over use of medications as the advocates focus people on well being.
Friday, February 17, 2012
The first step in this effort is to create a legal entity to promote the idea. The entity could be a private corporation or a 501(c)3 nonprofit. People respond better to nonprofits.
The type of non-profit to start is debatable. The primary goal of the program is to explore and educate the public on self-funded health care.
In my design of the Medical Savings and Loan, there is a position called the Health Care Advocate. The advocate is a combination of an insurance agent, a claims adjuster and life coach. The advocate works directly with clients to set up a savings plan and helps plan and negotiate health care expese.
My inclination is to start the organization as a professional association for such advocates. I bought the domain HCA.me for this purpose.
I am open to any suggestions on the political organization of the entity. It is possible that people would want to set up more than one legal entity.
My goal is to get a dozen people who favor free market health care reform in a room. During the meeting we make the decisions about the structure and location of the legal entity.
I believe there is advantage to having a legal entity under Arizona Jurisdiction with some board members from Arizona. I believe that Arizona is the most likely state to take on ObamaCare. The state is home of the Goldwater Institute and the AAPS.
There is a big advantage to having people in multiple states involved in an organization. For example, there are lots of corporations headquartered in Delaware but physically exist in other states.
Pretty much all of the non-profits worth their salt have chapters in different states.
We need financial resources to start the ball rolling. I developed a fun fundraiser called JuggleBall. This is a relay race with numbered balls ... you don't have to know how to juggle. The fundraiser raises money buy selling stuff to the players.
Race for the Cure and March of Dimes are examples of successful wellness fundraisers.
A secret about nonprofits is that anyone can start a nonprofit. Starting a nonprofit looks great on a resume. If a nonprofit actually makes it off the ground then being a founding member of the group can be a big feather in one's cap.
The program will need people with the following skill sets: accounting, legal, actuarial and understanding of insurance. There is opportunity for people in Recreation and Leisure (they would organize the fundraiser). The effort would be interesting for people who would like to start a career as a Health Care Advocate (a glorified insurance agent).
It is actually a very interesting question: How would the roles of the workers in insurance change if we moved from group funding of health care to self-funding of health care.
One of the first jobs of the legal entity would be to publish a book called "The Medical Savings and Loan." A person who wants to edit or co-author an economic text on free market health care reform might consider getting in on the founding of the group.
I can see wonderful opportunities for anyone who loves the American experiment in self-governance who is willing to invest time in the cause of restoring health freedom.
The program will want to embark on an educational effort. A public speaker who would like to travel around talking about free market health care reform might find the effort interesting.
In the last month, I've had an offer of a living room in San Diego and a comment from a person who wants an excuse to visit California beaches. I had a gracious note from a tea party organizing in Vermont (I don't have the money to get that far).
An interesting itinerary would be to start in San Diego. We might go to Yuma to file the paperwork. I would then head to Phoenix to talk to the Goldwater Institute then down to Tucson to talk to AAPS.
In conclusion: Health care is a business problem, not a political one. I believe that there is a limited opportunity for the business community to step up and stop socialized medicine.
The effort would start by people getting together to create an organization to help people self fund health care. The Medical Savings and Loan is an actuarially sound mechanism for starting such an effort.
Getting the plan going would take people who are willing to stand up and start working on creating a free market alternative to insurance. The first step of the effort is to create a non-profit organization that defines the Medical Savings and Loan. After which the program will seek people to start businesses. Anyone interested in this effort can contact me.
Thursday, February 16, 2012
In the Medical Savings and Loan, insurance agents and claims adjusters transform from stooges for the big insurance companies to direct advocates for the care of the individual.
The advocates are the people who would be doing all of the work in a free market health paradigm. I am just absolutely stoked finding this domain.
Now, I just need to find a small group of people interested in free market health care reform.
People think that the government is behind the drive for hyper-regulation that is destroying the character of America when, in fact it is the insurance industry.
In order to create an accurate model for insuring a risk, the insurance agency needs to get rid of all of the little variances involved in with the risk. The insurance company must regulate prices and each step of the processes insurance.
There are some conservative thinkers who try to make a distinction between private and government regulation. Such conservatives would label the regulation forced on the market by the insurance industry as "good regulation" because it comes from a privately owned entity.
Conservatives who complain about government regulation while praising private regulation forced on the public by insurance companies are disingenuous. When you look at the hyper-regulated health care industry, it is impossible to distinguish which regulation comes from which source.
The very structure of insurance requires a cozy relation between regulator and insurer.
Insurance stands on a nexus of contracts and these contracts are interpretted by contract law.
Every transaction in insurance is called a "claim." When you attempt to collect on an insurance policy, you are in fact entering a legal claim against the insurer, this legal claim is overseen by a court.
If people would like to reduce the amount of regulation in health care, the first step to achieving this goal is to find an alternative mechanism for financing health care.
If you are interested in learning more, I am looking for a group to host a public meeting on The Medical Savings and Loan. If you would like to book a meeting on alternatives to insurance, please contact me, I live in Utah, but can travel.
Tuesday, February 14, 2012
I can't believe it.
I wasted a whole day yesterday writing a single email, which I did not mail. The email was to a request for information from a person in Vermont. I wanted to explain why it is so terribly important that I present the Medical Savings and Loan in face to face meetings with small crowds.
The answer is that my plan is only one page long.
Do you remember how PPACA is thousands of pages long and nearly impossible to understand?
The Medical Savings and Loan is the opposite. The plan is one page long and very easy to understand. The plan starts with one very simple statement:
"Those who can self-fund their care should."
So my goal is to make a mechanism that will help use determine who can self-fund their care and to give them the tools to accomplish this task. This involves looking at data. We might find that 95% of people spend less than 15% of their lifetime income on health care. Those people should self-fund their care.
After we define the positive space (those who can self-fund their care), then we look at the negative space (those who need additional assistance). So here is the plan:
The Medical Savings and Loan
I developed the Medical Savings and Loan by reverse engineering a group insurance policy. It has the same amount of money as a comparable insurance pool.
The program uses a combination of savings accounts and interest free loans to help people self fund their care.
It creates a new position called a Health Care Advocate which replaces in the insurance agent and claims adjuster. The advocate educates people about expected expenses and helps people set up a structured savings plan to cover these expenses. The advocate will help people keep records and negotiate prices with health care providers.
If a person has health expenses that fall outside the norm, the advocate will seek grants on their client's behalf.
The program has a well funded system of grants. The amount of money in the grant system was determined by the same actuarial process used in insurance. There will be billions at the ready for grants.
That's It, Folks
The plan itself is not long. I can make it shorter by removing the comparison to insurance. The fact that I created the plan by reverse engineering is an interesting aside. Once it is up and running, it is self sustainable.
I include the reference to insurance to emphasize that the plan has the same amount of money as comparable insurance plans. People keep assuming that it does not. Also, I want to explain that the position of advocate is not that new. Insurance agents and claims adjusters become advocates when one changes the focus of the system from a centralized pool to individual accounts.
Why I Need Face to Face Meetings
The plan is short, but it has big implications. When I blog about the implications, people seem to get lost in the complexity of the implications and miss the basic simplicity of the argument.
I have a meeting designed in which I present the plan. I then look at the plan from multiple perspectives to show how the program helps individuals optimize their resources. I show how the plan helps public policy makers optimize their resources. I show how the health care advocates make money by directly helping clients.
I show how the Medical Savings and Loan reduces the gap between rich and poor by making the poor richer.
In truth the program really is a short presentation followed by a moderated discussion. The discussion can take many directions.
One direction is to compare self-funded care with group funded care (socialism, insurance, etc.). I have a number of devices that argue that group-funding of individual consumption automatically leads to conflicts, inequities and inefficiencies.
Others would like to talk about ways to implement the concept. This is a fun discussion. There are numerous was to implement the plan. My favorite device is to implement it through a network of distributed businesses. There would be financial institutions holding the grants and loans and a network of independent health care advocates.
Political-types like to talk about public policy. The challenge here is that the Medical Savings and Loan is not a government program. What I do is show that the MS&L exposes itself to public policy in a more elegant manner than insurance. The program separates the people who can self fund their care from those who cannot. It also provides a great deal of money to be given in the form of grants.
The actual Medical Savings and Loan plan is very simple. It takes fifteen minutes to describe but it leads to a large number of interesting discussions.
I've invested decades into following these discussion from every conceivable direction.
It is a presentation work great as a workshop at a Tea Party or Campaign for Liberty meeting.
I have the misfortune of living in Utah. Utah was established as a theocratic commune. Harry Reid, Mitt Romney, Jon Huntsman and the LDS leadership that control the state favor socialized health exchanges to free market reform, which means I have to travel. I've completely exhausted my personal resources traveling to Reno, Las Vegas and Phoenix trying to find a venue.
I created a fundraiser program to pay for travel, but I need people to help me along the way. I have enough room on my credit card to buy gas to get to Arizona or Denver. I would happily go all the way to Vermont or the east coast but I would need to find stops along the way to run the fundraiser and fill up my tank.
(It is a really fun fundraiser. I would split any funds I raised with whatever group helped me along the way.) I will also give boat loads of links and publicity to any group that is willing to host a meeting on free market health care reform.
I hope this article made it clear why I need to have face to face meetings. It is a simple plan with big implications. Such plans require face to face communication.
Monday, February 13, 2012
The community supplemented people's savings with charity.
When I was in college, I attended a lecture by a Marxist professor. He imparted on me an idea that sounded absurd at the time: He told the class that the very first step to transforming a free society to a communist society was to self people on the concept of insurance. (by insurance, I mean group funding of individual consumption).
He then presented a number of scenarios. In every scenario, as soon as a people accepted a third party into health care, the society was doomed to become a socialist nation within two to three generations.
I ended up working in the insurance industry as a computer programmer. All the data I saw verified exactly what my Marxist professor said. Pooled insurance transfers massives amounts of wealth from the middle class to the upper class. When the middle class is reduced to dependency on the insurance company, they end up calling for socialization of the insurance company.
In Das Kapital, Marx taught his followers to use the tools of their enemies to destroy their enemies. Please read your history. Marx was the father of capitalism. Marx's goal in writing Das Kapital was to create a version of the free market that would collapse into capitalism.
I do not share my professor's hatred of America. I love the founders and the American experiment in self-governance.
So, I turned his thesis upside-down. If the very first step to imposing socialism was to sell insurance; then the very first step to restoring freedom is to re-introduce the concept of self-financed health care.
So, I dedicated myself to creating a mathematically solid mechanism for unrolling an insurance pool into individual accounts in a manner that would restore the concept of self-funded care.
The Medical Savings and Loan is an actuarially solid mechanism for self-funding health care.
It has the same amount of money as insurance. It transfers resources from the healthy to the sick, just like insurance. Unlike insurance, the policyholders retain direct control of their principle (this reverses the transfer of wealth strengthening the middle class). People will negotiate prices directly with providers, restoring the pricing mechanism in health care.
The mathematics of the system is clever. I've designed a complex system to unroll a group pool into individual accounts with minimal disruption.
The cleverness of the math aside. The real goal of this program is to re-introduce the concept of self funded care.
Our freedom is hanging by a thread. I believe strongly that if a dedicated group began an organized dialogue about self-funded care, that we could America back on the track of freedom.
The cost of engaging in a conversation is minimal. Apparently, the extreme hard part of this endeavor is finding a dozen people who want to preserve American freedom.
It is likely that some of the people engaging in the conversation will make money by having engaged in the conversation.
The Tea Party is filled with people who want to save their freedom. I keep hoping that some tea party group will want to fund
My Marxist professor was right about insurance. As long as a people expect a third party to provide care, we are doomed to a slow and painful progression to socialism.
The path for restoring freedom would start by re-introducing the concept of self-funded health care.
My dream for the last four years has been simply to get a dozen people in a room to talk about self financed health care. If the group likes the idea, then the group would form an association to promote the concept of self-funded care.
Arizona would be the ideal place to house such an association. So, I am still interested in traveling to Arizona. Someone could contact me. I have a fun presentation and a fun fundraiser to get the money for the trip. The program would be a fun part of a tea party rally or part of the Campaign for Liberty.
In conclusion, if insurance is the first step toward socialism; then the first step to freedom is to re-introduce the concept of freedom. The first step is scary, but I can assure that any brave soul who can get a dozen patriots in a room to talk about health freedom will have a fun time taking the step.
Sunday, February 12, 2012
I will repeat the post.
I see that the Arizona Primary is next in line. I am in Utah, but would be thrilled to travel to Arizona to give a persentation on The Medical Savings and Loan to any group seeking to advance health freedom (overturning ObamaCare).
I have a super fun fundraiser for the program. It is an activity based fundraiser that promotes a discussion of the free market.
I bought the domian Arizona Color (dot) US to help promote the event. I will use it to help promote your organization and any business endeavors you are involved with.
Both the presentation and fundraiser are pro-liberty and for free market health care reform. It would do great at a rally for Gingrich, Santorum or Paul (not in that order). It probably wouldn't work for establishment candidates who are not sympathetic to health freedom.
The event will talk about health freedom but will not endorse a candidate.
I am happy to make this presentation in any town in Arizona. I'd love to visit Prescott, Lake Havasu, Bisbee, Yuma as well as the overpopulated capital. I would really like to schedule more than one event in more than one county.
If anyone wants to have a presentation (or even an extra display booth) at a rally in Arizona in the upcoming weeks, please contact me.
Friday, February 10, 2012
The big issue of the moment is that PPACA mandates that insurance includes contraceptive (including the morning after pill which prevents implantation after fertilization.) The Catholic Church holds that fertilization is conception.
The term "abortion" means to stop a process that has started.
Theologians who see fertilization as conception would not call a pill that stops pregnancy after conception as a contraception. The would see a pill that aborts a pregnancy as something else.
PPACA mandates that Catholic organizations buy employees pills that they believe to be abortificants.
In the Medical Savings and Loan, people are self-financing their health care.
People wanting to buy the morning after pill would be doing some with their own money. This removes the issue of an church organization being directly forced to pay for a medicition that the church finds morally objectionable.
Whether or not this change would stop the debate is a different question.
The Medical Savings and Loan would change the political debate but not the moral debate raging around the issue of birth control.
The most interesting questions about family planning will come in the area of the Health Care Advocate.
In the Medical Savings and Loan, people are expected to self-fund their care and have access to health care advocates.
The first job of an advocate is to help people understand their health care expenses. Having children dramatically increases expenses.
The advocates will be drawn into heated discussions about when to start a family.
IMHO, this process of confronting people with all of the costs of having children will help them make better choices about when to have children.
On the dark side. The advocates are likely to have opinions about issues related to birth.
I would anticipate a large number of heated discussion about contraception, abortion, family planning and related matters between the advocates and others.
I suspect that there will be all sorts of political battles fought over what the advocates say and when they say it. I suspect that pundits on both the left and right will seek ways to compel the advocates to profess certain views.
The fact that people will be paying for contraception with their own money will change the issue but won't make a hotly contested political issue go away.
Personally, I think these important discussions are best handled at the personal level without government influence.
I also believe that confronting people with the cost of raising children well before they have children is a good thing as it will help parents be better prepared for the future.
The contraception issue should not be part of presidential politics. The fact that it is shows that PPACA is over the top.
Imagine that we took the total amount spent on health care each year and divided it by the population. To my surprise, I discovered that this figure is exactly $10,000.00. Who'd-a-thunk?
The insurance and health exchange paradigm says that we should charge this amount to each American, and put it into a big pool from which we can all withdraw. The Right says the big pool should be owned by big insurance companies. The left says the big pool should be owned the the state.
The proponents of insurance says that, if the average cost of health care is $10,000.00, then it is only fair that we charge everybody $10,000.00.
If the Federal Reserve holds inflation at zero, then average health care expenses over a life time will be $400,000.-- per person over a 40 year working career.
But what about the poor sought who makes under $16,000? You take $10,000 from the working poor and they are pretty much left with nothing. The person making $8.000 a year is left in $2,000 in debt, where is he going to get this money?
With this demand that each person pays the same dollar amount, the insurance paradigm throws all sorts of people onto the welfare role.
I worked in the insurance industry for many years. What I discovered was that the rich and politically powerful spend more on health care than the poor and disenfranchised.
The insurance pools I examined all showed that insiders with connections to the pool always got more and better care than those on the outside.
What insurance does for the rich is it places an upper cap on the amount that they have to spend for their health care.
The current design of pooled insurance has the effect of transferring massive amounts of wealth from the working class to the upper class.
In contrast, the Medical Savings and Loan looks at each person as whole entity. It compares (individual by indivual) health expenses to total income. The program tells people they are expected to self fund their care. If a person cannot, it makes grants available.
It removes the upper cap on health expenses for the rich. It gives the working poor direct control of the first chunk of their personal assets and starts any subsidies at a lower level.
If you compare traditional insurance with the Medical Savings and Loan, you discover the effect of insurance is to transfer wealth from the poor to the rich.
The Health Exchanges ObamaCare and passed by the Utah Legislatures are nothing but a pathetic attempt by the ruling elite to protect the insurance industry from the ill social effects of the product they created.
Needless to say, I favor scrapping the Health Exchanges and starting a dialogue about alternatives to insurance. I have a wonderful presentation on the Medical Savings and Loan. If your group would like to spend an engaging evening talking about health reform, please Contact Me.
Thursday, February 9, 2012
In my thought experiment, I discovered that Americans spent exactly 10% of their income on health care. Go figure?
The Medical Savings and Loan looks at the lifetime earnings of people and compares it to lifetime health care expenses. This figure will average out somewhere near the magic figure I stated above … 10%.
Because a small number of people have a really high health bill compared to average income, most people would be below the average. The mean will be below the average.
We are likely to find that the first three quartiles of the population under another magic number (say 12%).
The Medical Savings and Loan would have actually actuaries look at the data. After much deliberation, they will boldly proclaim that everyone under a given magic number (say 15%) of their income should self fund their care.
The actuaries will also calculate how much money is needed to provide for the care of the people with extraordinary care. This data will be used to calculate how much money needs to be held aside in grants.
Do you see what the actuaries are doing? They are calculating the amount that people can reasonably be expected to pay. They identify the number of people who have health care costs that they cannot be expected to pay. They will calculate the total short fall.
This short fall is the amount of money that we need set aside for grants.
The short fall will be significantly less than our total health care bill. The short fall is likely to be something like 5% of the total.
Anyway, our team of actuaries works for a solid three months with no breaks studying the data. To everyone's amazement, they discover that the short fall is exactly $500.00 per person.
The salesman for the Medical Savings and Loan would go to a company with exactly 20,000 employees and suggest that they replace their insurance package with one where they give their employees the bulk of their current premium and hold aside say $600 per employee in their grant program (over funding the shortfall). This company would be setting aside $12,000,000 in grants each year. If other companies follow suit, there will be billions available for grants.
The Medical Savings and Loan will tell the employees that they are now responsible for their health care expenses up to the first 15% of their income. In my simple example, A person with an expected lifetime income of $2M would be responsible for the first $300,000 of his care.
The money that was going into insurance is now going into a savings account held by the employee. This would be a massive pay increase for most workers.
The money would go into an account that could only be used for health expenses.
The policyholders would get assigned a health care advocate. The advocate is a financial adviser, but don't tell anyone. The advocate has a computer simulation that shows people their projected health care expenses. The advocate will help people with their structured savings program (which they've been compelled to join by their employer).
The advocate will help policyholders with recordkeeping and help negotiate with health care providers. The policy holders will pay cash for services.
If a person has inadequate funds for preventative or emergency care, the advocate will have the ability secure a loan.
People are expected to repay loans.
If a person has medical expenses that fall outside of their ability to pay, the advocate will then apply for the grants. (You remember the billions of dollars that we held back for grants a short bit ago. The advisers will apply for grants from that over-funded treasure chest.)
The Medical Savings and Loan is a essentially an insurance policy with a lifetime deductible based on a percentage of one's income. The program allows people who can self fund their care accomplish this goal. By helping people self-fund their care, the Medical Savings and Loan identifies those who cannot accomplish this goal.
The program sets aside billions upon billions of dollars to help the people who cannot self their care.
(BTW, the numbers that look like they were made-up, were made up. Every single step of a real program would be driven by real numbers. If I had $10,000 to bet, I would take any bet that the average amount people spend on their health care is not exactly 10% of their income. The actual model I would use in the above program is far more complex than the one in this post that begins with the word "thought experiment.")
Creating a structure that helps people self-fund health care reduces the public policy discussion to only the portion of care that cannot be self-funded.
The poll asks the question: "Which is a better goal?" The possible answers are "Repealing ObamaCare" and "Restoring Health Freedom."
This rhetorical question is aimed at liberty minded folks. I thought about (then decided not to) give a snarky third response for people who wanted socialized medicine, but I've grown weary of snarkiness.
The poll should be in the upper right hand side of this page:
Feel free to leave a comment.
Wednesday, February 8, 2012
During the health care debate, I decided to create a more abstract version of the program for conversations sake.
My goal was to argue that our health care problems are the result of using group funding for individual consumption.
This third model is a massively distributed system.
In this model, I eliminated the insurance company altogether.
The savings accounts are in a bank (or credit union) of the policyholder's choice. The loans come from a loan reserve held by a financial services company. The health care advocates are all small businesses that contract directly with the policyholder and the grants are administered by foundations.
I find that this massively distributed system is a lot easier to talk about as it allows me to talk about each element of the plan separately.
My goal is to contrast group-funded health care with self-funded health care.
By removing the insurance company completely, I can use the term "insurance company" as a synonym for "group funded care" and Medical Savings and Loan as a synonym for "self-funded care."
There are currently some advantages to this approach.
The weakest point of PPACA is the insurance mandates.
The left has invested a great deal of effort vilifying insurance companies. It may be possible to hijack that rhetoric and tell people: "Yeah, the insurance company (group funded care) underserves the working class. We should adopt the Medical Savings and Loan (self-funded care) which lets the worker keep his health care resources."
Personally, I have no malice to insurance companies. They are filled with good people who are trying to make the world a better place.
I dislike the product sold by insurance companies. I believe that our attempt to use group funding for individual consumption is prone to abuse and leads to unintended consequences and inequities.
I have to make another confession: I prefer small business to big business. A massively distributed network suits my taste better than a centralized network. This preference does not mean I would be opposed to an insurance company that developed a product as I had described earlier.
This post completes my article on different configurations of the Medical Savings and Loan. The basic concept behind this plan is to use a combination of savings accounts and loans to help people who can self fund their care do so.
The Savings and Loan should be the primary means for health care funding. This program will identify those people who cannot self-fund their care. For these people we would develop a well funded grants program.
My writing on this subject appears obtuse and contradictory at times because I see multiple ways to implement the basic concept of the Medical Savings and Loan.
I originally created the Medical Savings and Loan as a product line to be offered by an insurance company.
I chose this route because I wanted a controlled experiment.
I put forward the proposition that: "People, if given greater control of their finances and given good information about buying medical care, would do a better job spending their health care dollars than people in a controlled group pool."
Creating the MS&L as a product line would allow the insurance company direct control over all the variables.
I have always accepted the possibility that I am wrong. If the policyholders proved completely incapable of managing their resources, one could roll back the experiment with less damage done.
This idea of creating a test case is similar to methodologies used in science.
The health care debate of the 111th Congress began with the assumption that the working poor must be forced into buying insurance. The debate ended with an extremely corrupt bill that mandated that people buy insurance and imposed a totalitarian health care exchange on the people.
I was outraged.
So, I decided to revive the Medical Savings and Loan as a political issue.
I had two different ways to implement the program. It could be implemented as a product line as an insurance company or it could be implemented as a charitable effort.
My belief at the time was that if I could just get a group to start talking about alternative mechanisms for financing health care that we could stop this trainwreck that has come to be known as ObamaCare.
In a true conversation, there is give and take.
People meet in a room. They put ideas on the table. People engaged in real conversation (Affirmative Rationality) concede points and listen to others.
My goal since 2008 has simply been to get a group of people in a room to discuss alternatives to financing health.
Yes, I developed fully working business models for running the Medical Savings and Loan. But I was not put on this planet to dictate to others.
The only way to beat ObamaCare is for people to act. A group can sit around the table talking and come up with a ton of talking points with which to attack ObamaCare. At the end of the day the war against socialism can only be won if patriots act.
I do not want to engage in a conversation that is not geared toward action. But I sincerely believe that a small group of people could have a significant impact if they discussed the Medical Savings and Loan.
Since 2008, I've been stuck in a rut with a single minded goal: I want to get a group of patriots intereste in free market health care reform to sit around a table and talk about alternative mechanisms for funding health care.
My goal is to get a dozen people sitting around a table to talk about health care.
I hate with a passion the way that the Obama adminstration forced PPACA down our throats with no real debate. If I ever realize this idea of people sitting in a room talking, I will not repeat the horror of ObamaCare. I have no intention to dictate or force ideas on people. I want real discussion.
I realized that I did have one big problem. My primary model for the Medical Savings and Loan was as a product line offered by an insurance company. I decided to create a new model for the program which I will detail in the next post.
I had temporary access to state actuarial data. I explored this data asking the question: which group would fare the best with a transition from insurance to the Medical Savings and Loan. To my surprise, it was the working poor.
What I discovered was that the working poor were paid health premiums but were being short changed on the care received. After paying a health premium, the working poor had no money for paying the deductible. Even worse, when trouble happened, they couldn't pay the next year's premium.
The working poor pay all sorts of money into insurance and get thrown onto the welfare roles when they need care.
I concluded that the working poor would be better off skipping insurance and putting their health care dollars into a structured savings plan.
Realizing that the working poor were drastically underserved by insurance, I developed a second version of the Medical Savings and Loan for the working poor.
In this plan, a charitable foundation would offer interest free health loans to people with unmet needs.
If a person accepted the loan, the foundation would assign a case worker and slam him into a structured savings program.
The charity isn't expecting to get the money back. They would benefit by getting some money back. Let's say a charity lent out a million dollar and got half of what they paid back for new loans. If they repeated this process, they would be able to buy $2 million in care.
The Medical Savings and Loan as a charity has the effect of helping the working poor optimize their personal resources and it helps the charity optimize the impact of its giving.
The program would also decrease the number of working poor who fall into the welfare roles.
There could be some immediate positive impact in developing a social policy around the Medical Savings and Loan.
For example, The Medical Savings and Loan could reduce the insanity of people showing up at expensive emergency rooms for primary care. If the working poor had the choice of getting slammed with an expensive loan at the emergency room or getting slammed with a smaller loan at a charitable clinic, most would head toward the lower cost clinic.
The Medical Savings and Loan as a charity is different from the Medical Savings and Loan as an insurance line.
Through the years, I've developed different configurations of the same concept to address different health care challenges.
When people ask me for specifics of the Medical Savings and Loan, I actually have to respond that I've large number of different configurations of the program to address different needs.
The idea that the Medical Savings and Loan can be configured as a charitable organization is very much in my mind.
I've de-emphasized it because I want to concentrate on the concept of self-funded care.
I contend that our health care debate is backwards because we start from the wrong place. The health care debate should start with a discussion of the needs of people who are able to self-fund their care, then it should move into a discussion of what to do with the people who can't.
When we start the debate at the end and work back to the beginning, we end up with a backward health care system.
If I can ever find a place where I can give my presentation, I will talk about creating a system to help people self finance their care for an hour. Then I will talk about how the program helps people who are not able to self finance their care.
Tuesday, February 7, 2012
Currently insurance works as follows: Actuaries analyze the risk of a group. Underwriters speculate on the cost of the risk and decide how much they need to charge to cover that risk. The insurance company then bills this premium to all the members of the group.
The insurance company now has a single large pool. When members of the plan need care, they place a legal claim against that pool.
In the product line version of the Medical Savings and Loan, the insurance company simply starts doing the accounting of medical expenses and premiums as if policyholders were putting their own money on the line.
To create the full experience of self funded care, I eliminated the deductible and co-payments and changed the titles of insurance agents and claims adjusters to "Health Care Advocates." Policyholders would have access to a web site that would show their health care experience presented as if they were directly paying for care.
This program would include a projection of future health care expenses, to encourage policyholders in financial planning. People would occasionally have meetings with the advocates to discuss financial planning.
In standard insurance, the insurance company analyzes the experience of a group over a year. This new program still looks at the experience of a group over a year, but it also analyzes the full life experience of each policyholder.
The savings accounts, of course, would be real. Policyholders would build equity in their accounts. This equity would be affected by health care decisions.
The goal of the program is to re-establish the concept of self-funded health care. Each quarter, you would get a policy statement showing your past health expenses, your projected health expenses and how much you have saved in your account. If your savings are insufficient for your projected expenses, your employer would be advised to increase the amount you deposit in your account.
Policyholders would be given greater latitude in negotiating health care with providers directed by the advice and consent of the advocates.
The loans are a bit gimmicky. Policyholders will have access to health loans to assure they have adequate buying power to pay for unexpected expenses (or preventative care).
The loans take two tracks: If a policyholder has normal health expenses, he would be expected to pay back the loans.
If a person has an abnormally high ratio of medical expenses to income, the accounts will go into review. If the review determines that the policyholder is doing a good job holding down costs, the review board is likely to write off the loans. If the person has difficulty managing care, the policyholder would be moved into a managed care.
The Medical Savings and Loan as a policy line is for companies that want to maintain a relationship with an insurance company, but want a product that gives their employees greater control over their expenses.
The new product line will tell employees that, if their life time ratio of medical expenses to income is below a given amount, they are expected to self fund their care from their savings account. The program would take a slightly larger chunk of one's paycheck than a standard insurance policy, but this extra money will build up in the employee's savings account.
The goal of the program is to help people build sufficience savings to cover their expected expenses. Young/healthy employees will periodical meet with the advocates to discuss their savings plans and project future expenses.
The loans are a gimmick to assure that policyholders have adequate buying power for their health care needs at any given moment.
If an employee has insufficient funds for a medical expense, they will get a loan. This will likely trigger an increase in the amount they pay into their savings account each month.
The program will compare the ratio of medical expenses to income. If a person has unusually high expenses, the policyholder will either see their loans written off or they will get put into a managed care program.
Policyholders will see this new product line as insurance with a catastrophic deductible based on their lifetime income.
This product line has policyholders building a substantial amount of equity in their savings accounts. People who can self fund their care are expected to self-fund their care.
The Medical Savings and Loan as a policy line preserves the insurance company intact.
Policyholders with low health experience now completely own their risk. To these people, the insurance company is now just a financial service provider.
The insurance company will continue to underwrite the catastrophic health expenses of a pool and will underwrite the loans.
The insurance company will charge employers a premium to cover the cost of catastrophic care, re-insurance, the cost of the loans, actuarial expense, legal expenses and infrastructure expenses.
The insurance company is still huge.
This program would have the same amount of money as standard insurance. The policyholders would be taking a more active role in their health care. Most will be self funding their care which will restore the pricing mechanism in health care.
I originally designed the Medical Savings and Loan as a policy line to be offered by an insurance company. It would be ideal for small companies that wants to give people greater direct control over health care expenses.
I later developed a massively distributed model that breaks down all of the functions of the insurance company into small independently owned businesses.
Sunday, February 5, 2012
Insurance is like a spectator sport where your health care decisions are in play in some distant board room by people who you are unlikely to meet.
I've contemplated hitting the road to see if I can drum up interest in the Medical Savings and Loan.
I spent all my money last year chasing down leads. To hit the road I need a fundraiser.
There is a large number of health related fundraisers in play. The Susan Komen Race for the Cure springs to mind. The arthritis foundation has a program called Let's Move Together. The March of Dimes has evolved into the March for Babies.
These fundraising sports do a great deal of good.
To fund my trip, I will revive a sports fundraiser I developed several years ago called juggleball (read more).
Juggleball can best be described as a "participatory social network sports."
In this game you start with numbered balls. You play a game where you exchange the balls. At the end of the game you walk away with a different set of numbered balls.
If juggleball catches on, the balls will start traveling around between games. The juggleball.com site will use a mapping program to display where the balls end up. This is why I call it a social networking sport.
Juggleball is an ideal fundraiser for the Medical Savings and Loan because both ideas are about people playing an active role in their health and well being.
In the next couple of weeks, I will push heavily to build up interest in both Juggleball and the Medical Savings and Loan. My hope is to get funds to travel between Salt Lake and San Diego via Arizona. Anyone interested in hosting either a meeting about the Medical Savings and Loan or in Juggleball can contact me.
On the subject of fundraising: Here is my list of Valentines Affiliates.
Saturday, February 4, 2012
Insurance examines the experience of a group over a year. The Medical Savings and Loan analyzes the health and income experience of an individual over a life time.
Insurance might look at a group of 100,000 people and calculate the number of births, deaths, injuries and diseases for a year. An actuary calculates the expected costs of the risk. A speculator will then promise to cover the risk for a premium that is ten percent or so higher than the expected risk.
The Medical Savings and Loan looks at each person as a whole entity, kids are assumed to be part of the experience of parents until they come of legal age.
The model looks at each person's lifetime earnings and compares it to lifetime expenses. Imagine a program that creates a medical expense table for each person. It has the column age, earnings and expenses for every year from coming of age to retirement (or beyond).
When making the graph, one must include the premium employers pay for insurance. The graph below shows the income and health experience of a fictitious person. The columns are Income, Insurance, and Health Expenses
I made up data for a person who graduates and works though a series of jobs with a few good income years and employment gaps. He has two and a half kids along with a few health incidences. He retires at 65, then has a heart attack and dies at age 68.
A Sample Lifetime Health Experience
I made the table quickly. I assumed the policyholder's insurance averaged around $6,000 a year, which is low. My made up medical expenses were also low. The chart does not include compensation for inflation.
In the Medical Savings and Loan you would take the life time medical experience of a large number of people. Aggregate the data to create a general model of the expected lifetime income and expenses of policyholders. You would use this information to help people create a structured savings plan for their health care. This second table shows data for 12 fictitious people.
|Experience of 12 Fictitious People|
In the structured savings program, you would take some of the money from the income column and the middle column and put that into the savings account. You would hold some of the money from the middle column aside to make a loan reserve and you would take a large chunk of the money from the middle column and hold it aside for grants.
So, let's you had a group of 10,000 average Americans interested in switching from insurance to the Medical Savings and Loan. This group is likely to have a total lifetime income of some $14B. They might pay something like $2.5B in insurance premiums and have an expected health care bill of $2.2B.
In the Medical Savings and Loan, you might do something like hold back half of the money in the insurance column for grants and loans. You would put the rest of it in the savings account.
To make sure the savings accounts are over-funded, I would move some of the money from the income column into the savings accounts.
It is likely that people in the Medical Savings and Loan would make better use of their money than do with insurance. The contend that the program would increase the health, wealth and wellbeing of participants.
I've been reluctant to publish a formula for the Medical Savings and Loan because there are many different ways to implement the program. You can also examine the program from different perspectives.
This post examines the program from the perspective of the insurance deductible. Be sure to read the conclusion.
The goal of the Medical Savings and Loan was to create a structure in which people were directly responsible for the bulk of their lifetime medical expenses. Insurance would only kick in if a person had extraordinary lifetime expenses.
Standard insurance attempts to control costs using yearly deductibles and co-payments. If your policy had a thousand dollar deductible, you would be expected to pay the first $1000 of expenses each year. With the co-payment, you have to pay twenty bucks or so each time you visit a doctor.
These devices create perverse incentives without achieving any health benefits. For example, if your deductible was $1000, you might put off visiting a doctor for a year because you are under the deductible. The co-payment is a bad idea because it induces people to try to combine two medical visits into one.
The deductible does not cut costs. Once a person hits the deductible, they behave like a kid locked in a candy store for the night and eat everything in sight.
In the HSA model, people have a high yearly deductible (say $5000). The company would give people a thousand dollars or so extra to put into a savings account.
The large gap between savings and the high deductible magnifies the perverse incentives. When people cross the magic deductible line, they dramatically increase consumption.
The high yearly deductibles are extremely problematic for people with chronic conditions. By definition, a person with a chronic condition has high expenses every year. If your chronic back problem means you spend $4000 a year on therapy you will be left paying all of it under the standard HSA model.
A Cumulative Deductible
My idea for improving the HSA Model was to create a system with a very large cumulative deductible that spanned multiple years.
Imagine that you had $2K a year deposited into an account each year, and you had a $30K deductible over a 10 year period. In the ten years period, you would get $20K deposited into an account, but wouldn't get any money from your insurance company until you had over $30K.
You now have a system where a large number of people could self fund their care. This would help restore the doctor/patient relation and help restore the pricing mechanism in health care.
A Life Time Deductible
If you look at the lifetime health care expenses, you will find the expenses are distributed in some variation of a bell curve. I do not know the exact numbers. However it is likely we would find something like the average American has $200,000 in lifetime medical expenses and that 75% of people have less than $300,000.
One can extend the concept of a cumulative deductible to a full human life. In this case, we would want to create an insurance product with a lifetime deductible of $300,000 (with a corresponding amount going into the savings accounts).
An Income Based Deductible
One thing I discovered while working in insurance is that rich people spend more money on their health than poor people.
I see nothing wrong with a world where the rich CEO goes to the best doctors and working stiffs, such as myself, seek care in working class clinics.
I see a big problem, however, when these people are in the same insurance pool.
Since executives are prone to seek out expensive care, they have a much higher claims experience than the poor.
Continuing the discussion of deductibles, I've concluded that the deductible should be based on a person's disposable income, and not some fixed dollar amount.
A person who makes $500,000 a year should have a higher deductible than a minimum wage clerk making $16,000 a year. Even a thousand dollar deductible puts health care out of reach of the working poor.
But annual income varies. As a contractor, I find my income varies wildly between the years.
The ideal system would compare lifetime income to life time health expenses.
If you made a graph of lifetime income to lifetime health expenses, you would find most people are spending something like 15% of their income on health expenses. Let's say 90% of people spend less than 20% of their income on health care.
Looking at a model that compared lifetime expenses to lifetime income, one might conclude that the ideal system would have a lifetime deductible of 20% of income. Such a system would have most people negotiating care with their doctors and would restore the pricing mechanism.
If your lifetime income was $1,000,000; your lifetime deductible should be around $200,000. If it was $2,000,000, it should be around $500,000. If you made $10,000,000 you should foot the bill for the first two million dollars of your health care expenses.
In this article I discussed healthcare from the perspective of the deductible. I started by realizing that a yearly deductible creates perverse incentives which induce people to put off care when they are below the deductible and over-consume when they cross the deductible.
Creating a cumulative deduction reduces the problem.
If you create a cumulative deduction, why not go all they way and create a system that compares one's full lifetime income to lifetime expenses?
A system that looked at people as whole entities would likely have a lifetime deductible of $200,000 to $300,000 per person. The rich would have lifetime deductibles in the millions.
In such a system, the bulk of health care would come in the form of direct contracts between doctors and patients. In this case, healthcare policy becomes a matter of developing a system to help people negotiate and maintain records related to their care.
The Medical Savings and Loan is a system for funding healthcare that has an extremely high lifetime deductible that is based on one's lifetime income. The average American might be expected to pay the first $300,000 in care. In this system, most people would self fund their care. As such, the focus of the program is the mechanism for self-funding care and not the system to supplement the care.
In a world where people are used to discussing healthcare in terms of deductibles and co-payments, I would tell people that the MS&L is a system with a lifetime deductible based on one's lifetime earnings. The average American would be expected to pay the first $300,000 in care. The rich would need to pay the first million or so in care. The program uses a system of savings accounts and loans to help accomplish this goal. Of course, once people are in the Medical Savings and Loan, there will be little actual talk about deductibles and co-payments. People will be more involved in a conversation about making the most of the resources they have available for their care.
Friday, February 3, 2012
There are many popular health related fundraisers. This list includes March for Babies (originally March of Dimes), The Komen Race for a Cure, Relay for Life (by the American Lung Association, Lets Move Together (by the Arthritis Foundation).
The fundraiser I would like to use is a game I invented back in college called JuggleBall.
JuggleBall is a social networking sport. Think of a cross between Twitter and Relay for Life.
In this game people get numbered balls. They play game that involves juggle relays. They leave the game with different numbered balls.
The score keeper records the balls people enter and leave with. The score keeper enters the locations and balls that traded hand on a computer.
These balls bouncing around will create a social network that can easily be mapped on a computer.
FWIW, I invented this thing well before FourSquare.
The sport itself is a discussion about the free market (which I will get into later).
If I do a trip to Arizona and San Diego.
My ideal itinerary would involve coming into a town, playing a game of JuggleBall at noon. The game would raise funds to pay for gas and a motel room. I would then give a free presentation on The Medical Savings and Loan. I would play a second game of juggleball the next day and move on to the next town.
If you live between Utah and would like to get in on the ground floor or a social networking sport, you can contact me.
Thursday, February 2, 2012
My goal, starting in 2008, was simply to have a conference on the merits of self-funded health care. The conference would put forward the argument that our health care woes result from our use of group funding for individual consumption. The conference would feature the Medical Savings and Loan as a logical model for self-funded health care.
My goal is 10 libertarian leaning people in a room discussing free market health care reform.
I lived in Salt Lake City, which is a notably closed and oppressive community. The LDS Church has its heart set on socialized medicine. Every prominent LDS politician supports variations of PPACA.
- Senate Majority Leader Harry Reid was the primary sponsor of PPACA.
- Mitt Romney imposed similar legislation in Massachusetts,
- Huntsman and Hebert passed a version of the Health Exchanges in Utah, while actively suppressing discussions of alternatives.
Last year, I traveled to Phoenix, Reno, Las Vegas and Denver, but found it difficult to make contacts while sitting in a hotel room.
I've been tempted to make a second stab at driving down to Arizona at the end of February.
If there was a half dozen people who felt passionately about defending liberty and willing to spend a day discussing the concept of self funded health care, the meeting would be worth my time. (Any town in Arizona would do).
It would be nice to have a living room available for a meeting. If not, I found a really nice spot under a bridge over the Salt River where a half dozen people could meet. Here is my contact form.