HSA + HDHC Flunks the Test

When analyzing different health care policies, one must look at the way that the policy plays out with people with moderate to severe health conditions.

Insurance salesmen love to concentrate on single catastrophic events. For that matter, people have a deep fear of catastrophe; however, when I worked in insurance I quickly realized that the chronic conditions were both the most costly and hardest to handle.

It turns out that many catastrophic conditions lead to a chronic condition. In many cases the chronic condition resulting from a catastrophe costs more than the original catastrophe.

If you broke your back, the long term cost of dealing with a bad back is higher than the first surgery.

If you have an HSA+HDHC policy with a $3000 deductible and your chronic condition requires $5,000 each year; you are stuck having to pay out the full deductible each year plus the cost of the insurance.

When you have a chronic condition, you really aren't in a position to negotiate down the deductible. Once you have a chronic condition of a known cost, you are in a high risk pool. Trying to negotiate down your deductible is intellectually dishonest because the insurance company will have to pay a dollar for every dollar of reduced deductible.

So, the HSA+HDHC increases the cost that people with a moderate chronic condition must pay for health care because a person with a disease like diabetes simply must spend money on care every year.

An HSA+HDHC policy is regressive.

It is true that, if a low income worker has an HSA+HDHC policy and never has a moment of sickness in his life, the worker would make out better than with low deductible insurance. If a person has normal or higher than average medical expenses it does not work out so well.

Let's compare the experience of a person who makes $12,000 a year to a person making $120,000 a year. So, let's say the deductible was $3,000. The deductible is 2.5% of the income of the person making $120,000/year. The key feature of the HSA is the tax deduction. Our high income worker is smart to put the $3,100 in a "Health Savings Account" to get the maximum deduction.

As for the low income worker, $3k is 25% of his total yearly $12k paycheck. The tax deduction ain't worth bug squat because the marginal worker pays no taxes. The worker would be stupid to put money in a tax free health savings account.

Try living on $12K a year, the poor guy probably isn't going to be able to put any money aside to pay for the deductible and will be in a terrible crunch if health care problems occur. The working poor with high deductible insurance feel locked out of the system.

In our next thought experiment, imagine the bossman comes into the shop and says that, "to lower our health care expenses, we are going to raise your deductible from $300 to $3000, but to make it up to you we will give you all $500 that you can put in a Health Savings Account."

With this plan, the people in the shop who have health conditions will lose $2,700 in the deductible increase. A person with a chronic condition just lost $2,700 a year for life. Everyone else gets just a token pay increase that fails to cover the deductible.

The switch from a low deductible to high deductible leaves people feeling insecure and put upon with the people who have chronic health conditions complaining to the heavens.

The workers in the company will simply see the HSA+HDHC policy as a cheap attempt to cut costs in a manner that hurts the most vulnerable in the group.

I read the reviews of Health Savings Accounts coupled with high deductible insurance. People in the upper middle class praise the idea because they get a tax deduction. The working poor stress the deductible and see it having a negative effect on people with health conditions, and complain about the idea.

I suspect that if you analyzed HSA+HDHC policies over a large population base, you will find that the policy is regressive. This structure transfers wealth from the poor to the rich.

Please note, I am not a big fan of redistributing income. But the whole point of a Health Care policy is to transfer resources from the healthy to those in need. If a plan is not doing that, then it is best to get rid of the plan.

Simply tacking a Health Savings Account to high deductible insurance does not play out that well among the working poor.

I am a big fan of self-funded health care. If we want to use savings accounts, we need to form a health care system, from the ground up, around the savings accounts, which is what I did in the Medical Savings and Loan. This program removes insurance from the equation. Each person gets a pile of money in a savings account and access to a loan reserve. People with an unusually high ratio of health expenses to income will have access to grants.

The most important issue when judging a health policy is if the policy actually reduces costs.

Yes, it is true that low income workers with high deductible insurance will skip preventative and routine care. Skipping preventative care does not save all that much money. It just means people suffering from things they could have prevented.

The really big cost overruns in health care happen with the big expenses. High deductible insurance might encourage people to skimp on small items, but the abuse will continue on big items and might even grow.

Hospitals are notorious for creative billing. Imagine a patient with a $3,000 deductible who had an incident costing $3,333. Both the patient and doctor know that the patient was put upon to pay the $3k deductible. With that deductible paid, the inclination is to just load the bill with everything.

Care Providers are keenly aware of whose paying the bill, and most clinics are not above playing games where they shift costs to deep pockets.

A system with an HSA and high deductible insurance fails the three most important tasks: The program does not cut costs. The program does not handle chronic conditions well and the program is unnecessarily regressive.

Hyperbolic Function

If you made big database that recorded people's total health expenses charted against total wealth (total lifetime income + inheritance), you are likely to see a hyperbolic equation.

In most cases, people's total health care expenses will range from 5% to 15% of their total wealth. There will be a small number of people whose health expenses way exceed their ability to pay.

A primary job of the Medical Savings and Loan is the chart the curve. The program has health care advocates whose function is to record people's income and expense. They will report this info to actuarial firms that will munch the data and report back to the advocates telling us what it reasonable expenses and what is extraordinary.

In contrast, insurance is totalitarian and evil. Insurance says that because some people have expenses they cannot pay, the kollective must take ALL of the health care resources of everyone in the nation and put those resources in a pool controlled by the ruling elite. To fund the health care of the small percentage of people who cannot do so on their own, insurance tells us that we must force all the people could self fund their care into subservience.

Now, the simple hyperbolic graph above is very simple. If a group was interested in pursuing the cause of liberty, the group would spend a great deal of time collecting data on health care and mapping out real equations.

It would be a really fun and fruitful investigation. If there is anyone on this planet who is interested in freedom, they could contact me.

The Company Store

Labor historians like to point to "The Company Store" as an example of institutionalized abuse of labor.

In this arrangement, workers would be paid in script that is only good at the company store. In some cases the company store would establish lines of credit for the worker.

The idea of a company store sounds wonderful at first. Imagine if all the people working for a company pooled together their resources, they should be able to buy more goods at a lower price.

In practice "The Company Store" provide to be rife with abuse. Since The Company Store had a captured market, they did not compete on price or value with the merchants on the open market.

In the worst cases, workers became indebted to the company store and were reduced to the status of indentured servant.

Employer based health care has revived the concept of The Company Store for health care.

Obama's PPACA is a program that mandates by law that you be forced to buy your health care from a Company Store like arrangement.

Democrats wave Mao's Little Red Book and promise a socialist paradise if we just nationalized The Company Store and had people indentured to the nation/state.

Arrrgggjhhhhhh!

Why are we repeating the failed model of The Company Store in health care?

If any one would like to talk alternatives, I am at the ready. Here is my Contact Form.

A Sad Conclusion

In the 1980s I realized that the problem in health care was the use of group funding of individual consumption. The solution is to restore the concept of individually funded health care.

An HSA + High Deductible Insurance is still an insurance policy. The HSA/HDHC model is mathematically problematic especially when you consider chronic conditions.

I created a logical structured called "The Medical Savings and Loan." This program holds that those who can self fund their care should. It creates a system with large savings accounts a loans to help people self fund care and creates a system of grants for those who need assistance.

The MS&L will have the same amount of money as an insurance company of similar size. Because all spending is direct fee for service care, I contend that people will get more care for the same price.

I believe that the research I did on this plan could help in the effort to repeal ObamaCare.

The weakest part of ObamaCare is the insurance mandates. The insurance mandate is premised on the assumption that group insurance is the only viable mechanism for funding health care.

The Medical Savings and Loan is built from the ground up around savings accounts. It is radically different from insurance.

I contend that, if there was a socially accepted alternative to insurance, that we would destroy the justification for ObamaCare, the health exchanges and much of the insanity surrounding insurance regulation.

My goal since 2008 has simply been to find people in the GOP willing to discuss the plan and to discuss how it could be used to help defeat PPACA.

In this time, I live in Salt Lake and have contacted ever GOP group I can find. I've been unable to get a single person from the Utah GOP to discuss the idea.

I spent every last penny I had traveling to Reno, Denver, Phoenix and Las Vegas to find someone willing to talk about alternatives to insurance and free market health care reform.

I will be willing to borrow money and travel if I could find a GOP group brave enough to discuss alternatives to insurance. If you have a group interested in free market health care concern and will comment to a meeting, please contact me. (I bite and growl, but not all that hard).

Having spent well over $5000 and 4 years of time, I've only been able to get person to talk to me, and I didn't get any follow through from that conversation.

In every other case, I was put to the door the moment people realized that I want to see self funded care established as an alternative to insurance.

The fact that I get put to the door every time I mention that I want a system that establishes self-funded care as an alternative to insurance has led me to conclude that the GOP is not interested in talking about self-funded alternatives to insurance.

I have followed the healthcare issue since the 1980s. The GOP has a long history of passing half-baked solutions to fix insurance. 

The fact that I have never found a member of the GOP willing to discuss alternatives to insurance and that the GOP keeps passing government programs trying to fix the obvious flaws of insurance has led me to conclude that the GOP is in the pockets of insurance.

(Tax deductions for Health Savings Accounts in conjunction with high deductible insurance is not an alternative to insurance. The HSA+HDHC of the MMA is a fundamentally flawed program that only supports the upper middle class and extremely wealthy. 

The Fundamental Flaw

This post is in response to a tweet.

The problem in health care is the use of group funding of individual consumption.

For example, the issues of portability and pre-existing conditions were created by group funding of individual consumption. Portability is created by group funding of care. Moving between groups disrupts care.

The "pre-existing conditions" problem is also a result of group funded care because groups want to avoid taking on people with a negative risk profile.

If we restored the concept of self funded care, there would be no portability problem. People would save money for their care and can take the money from job to job.

The pre-existing condition becomes the simply realization that some people simply lack the resources to pay for their care and need assistance.

The tort reform issue changes as well.

Group funding of individual consumption creates an artificial conflict between the individual and group. It also creates a third party with deep pockets that is at the ready to be sued.

If we restored the concept of self-funded care, we would remove the artificial conflict and we would return to a health system of direct contracts between doctor and patient.

This does not eliminate lawsuits, but it realigns the whole tort industry to the needs of the patient while removing the deep pockets which invite tort abuse.

The problem is group funding of individual consumption. The solution is to restore the concept of self funded care.

The GOP is in love with insurance companies. Insurance companies concentrates wealth and creates a deep pocketed ruling class willing to give money to GOP lawmakers.

Because the GOP is in the pockets of big insurance and big medicine, they are completely unwilling to discuss the concept of self funded care.

Insurance and Medicare

Group insurance views people as fragmented beings

Standard employer based insurance pays for your health for the fragment of your life when you are employed, however, it is problematic for the fragment of your life when you are retired.

Because employer based health care covers only the fragment of your life when you are working, the program is completely dependent on being able to shove people off onto the public doles when they retire.

Without Medicare to catch people on retirement, workers would rise up in rebellion against the insurance companies and demand change.

Because insurance is dependent on government, it is impossible to talk serious entitlement reform without first discussing the creation of a self-funded alternative to insurance.


A system in which employers take care of health when people work and people magically develop the ability to save and look after their health on retirement is ludicrous.

Unlike insurance, the Medical Savings and Loan sees each person as a whole being. The program sees humans as creatures who build wealth in times of health for use in times of need. From dollar one, the goal of the Medical Savings and Loan is to assure that people build health resources for retirement. The program can co-exist with Medicar, but is not dependent on Medicare.

Any attempt to discuss entitlement reform without first replacing employer based insurance is a waste of time because such efforts would abandon people in times of need.

If you belong to a group interested in entitlement reform, I would be more than happy to contribute a discussion of free market health care reform. Please contact me.

Skimming The Pool

There are two ways to make money: One can make money by producing, or by skimming.

It is the nature of business that a producer can only get a portion of what they produce. Imagine that I created a product that believed you could resell for $1000. Well, you wouldn't pay me a thousand dollars for that product because you want to make a profit. Considering the time, effort and risk involved in reselling, your top bid for the product might be only $500.

Producers can only get a portion of what they produce. It is the nature of production that producers produce wealth for themselves and the people around them.

Skimming is a different game. The skimmer doesn't produce. The skimmer take from society.

Insurance, and government, are creations of the skimming mentality.

An insurance company starts off in a good fashion. It hires actuaries to analyze the risk associated with a group or activity. To make money, the insurance company falls into a skimming mode. Salesmen use disinformation to exploit fears and convince customers that they need to "pool their resources" to cover the big scary risks.

The insurance makes its billions by skimming off the pool.

The Medical Savings and Loan starts with the same analysis of risk. The goal of the program is to establish a culture of risk management. So, the first job is to educate people about their risk. Rather than taking a large amount of money from clients to cover risk, the program creates a network of Health Care Advocates who educate people about their risk and gives people direction in saving money to cover their risks.

The advocates will work on a fee for service basis and, like traditional producers, their livelihood will depend on their ability to create value for their clients.

By realigning the health care sector so that there are fewer groups skimming profits off of health care would create a health care sector that produced greater wealth all around while reducing waste.

In the culture war, the left plays the game of gaining favor by stoking wealth envy. The reactionary right gains power by defending the wealthy.

A better approach is to recognize that there's more than there are different paths to making money. A producer makes money by creating wealth. The act of production naturally spreads wealth. Skimmers make money by leaching off the system.

A wise society seeks to aid the producers while thwarting the skimmers. Such a society would balk at things like pooled insurance which creates a massive parasite culture and favor alternatives like the Medical Savings and Loan which aligns health care so that each element of the program works on a fee for service basis and is rewarded for the ability to create value.

Challenge Declined

It appears that Paul Mero of Sutherland blocked me. I take that to mean my challenge to debate free market health care was declined. The dismissal tweet was:

"With all due respect, what's telling is that I haven't heard of you in the last 25 years."

I find it telling that in 25 years of attending every pro-free market group that I can find in Utah, that I've been unable to find any that are brave enough to discuss free market reform. The picture below shows the sum total of Utahans along the Wasatch Front who showed up for the "Stand Up For Religious Freedom Rally in Salt Lake." This well publicized national rally drew massive crowds around the nation.

There is close to two million people along the Wasatch Front. Most of the people in that tiny crowd are cameramen and politicians come to grandstand before the cameras.



The LDS Church drums the theme that they are a persecuted religion. The LDS vote as a block and dominate politics when they get a foothold, and fail miserably to support the religious freedom of others.

The fact that the LDS Church did not send people out to support Religious Freedom and the fact that Sutherland simply brushes aside attempts to talk actual free market reform is telling.

It tells me that the Republican Establishment (at least in Utah) is unwilling to engage in efforts to defend religious freedom nor is it willing to engage in actions to restore free market in health care.

I have to admit. I am upset at the way Utah is. It shouldn't be this way. We do not have to be a mean and oppressive people.

That said. I do need to apologize for the rude tone of my challenge to Sutherland.

I actually chose to use the rude tone as a strategy.

As you see, I've openly supported Sutherland Institute since it was founded in 1995. I've made multiple attempts to contact the group. Sutherland has a tendency to shove people aside.

Personally, I've never expected anything from Sutherland.

My message is that the problem in health care is the use of group funding for individual consumption (insurance) and that solution is to restore the concept of self-funded care.

This message is a direct attack on insurance, which is the primary funder of many free market think tanks. This message is a existential threat to groups that get money from insurance.

I am fully aware that groups funded by insurance need to avoid discussions of alternatives to insurance to keep their funding. That is why I am so careful in trying to contact groups. I do not want to alienate the group's funding.

However, it is also ridiculous that I cannot find any group in Utah willing to discuss the the theme: "The problem in health care is group funding of individual consumption."

Such a debate directly strikes at the foundations of ObamaCare (and of RomneyCare). It could make a difference in efforts to restore the free market.

If there was an politically accepted viable mechanism for self-funding health care, the proponents of freedom could destroy the intellectual foundations of socialized medicine. (A HSA plus high deductible insurance is not alternative to insurance).

The idea of a rudely stated challenge came to me while reading Mero Moment posts on Sutherland. Mr. Mero often says rude things about his enemies. So, I thought a challenge matching Sutherland's rational style might work.

It actually worked to create the first acknowledgement that I am a living human being. It did not result in a debate on the merits of the "Health Compact" v. "The Medical Savings and Loan." (The medical savings and loan is the name I've given to my approach to free market health care reform.)

I am still stuck with the problem. I am in an intellectual hole called Utah. In order to discuss this important issue, my only hope is to find a group that is willing to debate the issue.

What I hope to find is a group that is willing to both host the meeting and who will allow me to run a "recreational fundraiser" in conjunction with the meeting. The fundraiser is akin to Relay for Life, but with a little more excitement. Here is my Contact Form.

The Challenge is Still on the Table

Sutherland Institute is pushing the argument that Libertarians are simpletons who should be dismissed.

The Republican Establishment has been actively silencing the free market side of the party since Goldwater. The result of this tactic is that we are in an unending cycle in which the government grows and personal freedom diminishes.

I wish I could find a group willing to discuss free market health care reform. Sadly, I am stuck in a backwater pit of a state run by dullards like Paul Mero.

Guess What? Conservatives will not restore America by being closed minded buffoons who refuse to talk about ways to restore the market in health care. Conservatives are as much of the problem as are the left wing progressives.

I am repeating my challenge to Sutherland to actually discuss free market health care reform. The challenge will go unheeded because, as they mentioned, Sutherland automatically dismisses any substantive talk of free market reform.

The Sutherland Institute is a group of hypocrites who take money claiming to support free market principles, then use their political clout to support government programs that support their political benefactors at the cost of our freedom.

Case in point, their plan for health care reform involves creating a new government institution called a "Health Compact" to regulate health care. A state compact is a governing device one step removed from the voting public used to carry out interstate projects.

The Health Compact would battle PPACA in political war for control over health care resources.

Their plan is idiotic. Creating dueling government bureaucracies will not stop the encroachment of government because the dueling bureaucracies will be seeking political influence to battle its hated political enemy. It is like saying we will light our own house on fire to save it from being consumed by the wildfire.

The Medical Savings and Loan, on the other hand, gives people direct control of their health care resources. The mantra of the program is "Those who can self fund their care should." It creates a structure that educates clients on anticipated health expenses and empowers people with the tools to build resources to cover those expenses.

In the status quo, the ruling class (insurance and government) takes over a half million dollars from each person to provide care which they do so inefficiently.

The Medical Savings and Loan lets people keep their money. It creates structures to help people understand and finance their care. For people with really big problems, the program creates a well funded system of grants. (The MS&L holds aside billions of dollars for people who can't afford for their medical care. It is not stingy.)

The Sutherland Approach to health care starts by creating more government, and considers people as an after thought.

For background sake I should note: The Sutherland Institute is part of the State Policy Network. Sutherland takes money with the claim that they support free market economics, personal responsibility, yada-yada.

I would love to call them out and have them debate real free market reform for change.

Last week I tossed down a gauntlet and challenged them to a debate.

My timing was terrible. They received the challenge just before the Fourth of July weekend. I doubt anyone noticed the challenge because of the holiday.

The one problem I have is that I've never been able to find a single venue to discuss free market reform. I developed the program in the 1980s. I've explained it to empty chairs, empty tables, empty hotel rooms, to closed doors and numerous trees, rocks and cacti.

FWIW Cacti really like my plan. The spiky succulents say it is exactly what they do: Cacti soak up the occasional rain to have on hand in the long months of dry weather.

Because conservatives automatically slam the door on any original thinking, I've never found a place to give my presentation to humans.

I mention this because it is impossible to debate an idea without presenting the idea first.

A debate about the Medical Savings and Loan would have to begin with a presentation of the idea.

That introduction would take at least twenty minutes! I really can't do it in less time than that.

A proper debate would have to give me twenty minutes to present the Medical Savings and Loan. Sutherland would be allotted the same time to explain how creating a brand new layer of government bureaucracy will decrease government bureaucracy.

Only after killing an hour on introductions could we get to the heart of the matter of discussing why creating an alternative to insurance would help in the battle against mandated insurance.

(HINT, Obamacare and insurance mandates all hinge on the assumption that insurance is the only possible way to fund health care. Presenting an alternative to insurance destroys the justification for ObamaCare).

Gulp, to do justice to this debate, the event would have to take two to three hours! Leaving me feel like my challenge is asking too much.

I actually would do better if I found a group of libertarians seeking a way to keep up the fight for freedom.

Anyway, last, I tossed the gauntlet down and challenged Sutherland to a debate about real free market health care reform against their Health Compact (which is just a thinly veiled power grab).

A debate would give me a chance to introduce the concept to a group ... which is what I've been wanting for the last four years.

With just my voice calling out Sutherland, the challenge will be ignored. Perhaps if others call Sutherland out on their hypocrisy, they might be shamed into responding.

Declaring Independence from Insurance

Last century, insurance companies sold our parents on the lie that if we gave up just a little bit of freedom, they would provide security.

That's a laugh. Every year the insurance companies take more while the people are left with less.

During the Obama Administration, the insurance industry managed to pass a bill making their poisonous product mandatory.

Republicans are as bad as Obama. If Romney is elected, his administration will repeal Federal constraints on insurance companies, but leave the mandates enforced at the state level through corrupt entities like the Health Exchange in the Health Compact.

A people cannot sell some of their freedom for security. Fools that follow this path soon lose both.

The site Read The Declaration, by Hillsdale College, beseeches Americans to read  the Declaration of Independence, which I just did. (NOTE: I put a copy of the Declaration on Community Color).

Since the Insurance Mandate is the biggest topic of the political season, as I read the declaration, my brain kept coming back to this encroachment on liberty.

The patriots of 1776 sought to declare independence from the monarchy. The patriots of 2012 need to reject both the Republican and Democratic path to serfdom and declare independence from Insurance Companies.

I have a wonderful presentation called "The Medical Savings and Loan." In this program, I assert that the problem in health care is the use of group funding for individual consumption. The presentation starts by creating a mechanism to restore self-funded care. With this model in hand, a group can examine in detail why  group funding leads to worse results than individual funding.

The presentation has been begging an audience for the last four years.

I live in Utah and will travel to groups wanting to talk free market health care reform (provided I can figure out a way to pay for the trip).

Being stuck in Utah, I've decided to take a stab at challenging the Sutherland Institute in a debate about their support of the oppressive Health Compact which seeks to socialize health care through state run health exchanges.

But it is July 4th. Today is a day to celebrate independence with the local community (and to set the hill side on fire with illegal fireworks ... despite the local ban on fireworks.)

Please, read the declaration ... but read it with a thoughts of enemies of freedom today. (HINT, in all likelihood, the entrenched and corrupt leaders of the parties are a greater threat to liberty than your partisan foes.)

The Challenge

Conservative politicos play a game in which they spout free market rhetoric at rallies to gain support and get a seat at the table.

Once at the table, they simply join in on the feeding frenzy and rip apart our freedoms and grub for their little piece of power pie.

The game is simple: You can't sell people's freedom until you establish a claim on that freedom. Before you can legitimately sell people into servitude, you must hoodwink them into thinking you are their champion.

We can see this game in action with The Sutherland Institute support of a thing called the Health Compact.

The Health Compact is a massive expansion of state involvement in health care justified by claims that it is opposed to PPACA.

Both the Health Compact and PPACA are products of the same bankrupt line of thinking that starts with the false claim that insurance is the only possible way t fund health care and that the state must force people into corrupt insurance companies.

I've read both PPACA and the Health Compact. They both expand state control. They both socialize medicine with health exchanges and diminish individual influence in they care. The only difference is the group of rogues holding the ring of power.

Groups like Sutherland Institute make me sick.

So, I decided to throw down a gauntlet and challenge Sutherland to a discussion of free market reform. Specifically, the challenge is to discuss "The Medical Savings and Loan" which is a self funded approach to health care reform.

I've written the Sutherland Institute multiple times through the years asking them to explore real health care reform. Every solicitation has fallen on deaf ears.

Maybe if there is a public challenge, they might feel shamed into discussing real reform.

The preceding post has the first draft of the challenge. I will write other institutes in State Policy Network.

BTW, this presentation on the Medical Savings and Loan is an unique challenge to PPACA. The program claims that the problem in health care is our use of group funding for individual consumption. In the presentation, I create a model for self funded care, then argue that it does a better job funding care than insurance.

I would be happy to travel and give this presentation to any group interested in real free market health care reform. Sadly, I had another really bad quarter. So, I am kind of stuck in Utah. I would be happy to travel, but I would need a guaranteed audience and an opportunity to run a fund raiser to pay for the trip. (contact form)

It would be easier if I could find a group in Utah brave enough to discuss real free market reform. Anyway, if you are as frustrated with conservatives as am I, you might want to yell at Sutherland. If enough people yell, they might respond to a challenge. David Buer's contact information is at the top of this article.