NEW PAPYRUS: December 2009

by Marcel F. Williams

America has the best hospitals, physicians, nurses, and medical technicians in the world! Unfortunately, the US also has the worst health insurance system of any first world country on the planet! And the extremely expensive and inherently inflationary public and private health insurance systems that exist in America today is a frighteningly dangerous and continuously growing cancer upon the US economy!

The State of the American Health Insurance System

In 2007, the U.S. spent more than $2.26 trillion on health care, or $7,439 per person, up from $6714 in 2006-- even though nearly 50 million Americans have no health insurance at all! Despite the fact that Americans spend more per capita on health care than any other nation on Earth, the UN World Health Organization (WHO) ranks the US below most other first world nations when it comes to the rate of infant mortality and the longevity of its citizens. Amongst 14 major first world economies, the US ranks 1st in infant mortality with 7 infant deaths per 1000 live births and ranks last in average life expectancy for its citizens.

Himmelstein, an associate professor at Harvard and doctor at Cambridge Hospital determined that 31 cents out of every dollar spent on health care in America is for administrative cost. So out of the $2.26 trillion spent on health care in the US in 2007, approximately $700 billion a year is spent on administrative cost. In Canada, administrative cost account for only 17 cents per dollar. So its obvious that our complex health insurance system in the US is costing Americans several hundreds of billions of dollars annually in administrative waste.

It is estimated that private health insurance and other worker benefits add $1,000 to $1,500 to the cost of manufacturing a car in America, while it only adds approximately $150 per car in Japan. GM, however, claims health care costs added between $1,500 and $2,000 to the cost of every automobile it manufactures. The Business Roundtable, which represents the largest U.S. corporations, released a study showing that for every $100 spent in the United States on health care, a group of five of our leading economic competitors (Canada, Japan, Germany, the United Kingdom and France) spend only 63 cents! Furthermore, it has been estimated that illness and medical bills contributed to 62% of all bankruptcies in the US in 2007!

Most single payer advocates view Medicare as a public health insurance model that the whole nation should emulate. However, Medicare cost were over $477 billion in 2009 while covering only 45 million people, that's over $10,000 in cost per individual-- higher than the already extremely high per capita cost for health care expenditures in the US in general. Of course, the elderly usually have significantly higher health care expenditures than the younger segments of a society. But Medicare cost have almost always risen faster than the rate of inflation since its inception-- and is expected to be insolvent by the year 2017. So no matter how much some people love the US Medicare system, its continuously escalating and unsustainable cost could cause the system to collapse in less than a decade.

Medical Savings Accounts have been proposed by some advocates to be a means for significantly reducing health care expenditures. It is argued that such a system eliminates excessive administrative cost and makes consumers more price conscious when it comes to medical services. Medical savings accounts are also a major component of the Singapore health care system. And medical savings accounts have been introduced into some provinces in China who intends to expand them into other provincial areas in China. The nation of Singapore spends more than six times less per capita than Americans do for health care yet they have a lower infant mortality and a longevity for its citizens higher than in the US and most other nations.

However, medical savings accounts (Medisave) are only one component of the Singapore health care system which also consist of catastrophic national health insurance, subsidies for public hospitals, and required out of pocket cost for consumers, and some government . Thus it has been argued that the Singapore system would be rather difficult to replicate in other countries. But what Singapore does tell us that it is possible to dramatically reduce health care expenditures with the proper subsidies and incentives. And if the US had a health care system as efficient as the one in Singapore, America could reduce its private and public health care expenditures by a whopping $1.9 trillion annually!

But could America ever develop a health care system as efficient as some other nations with annual health care expenditures less than $3000 per capita such as Japan, Italy, New Zealand, Israel, or Singapore?

I think it is possible that we could dramatically reduce health care cost in the US if we utilized some of the basic components of the Singapore system: medical savings accounts, subsidized out of pocket cost, and a viable not for profit health care system to compete against the profit based system. And I believe that the best way to do this is with a simple health insurance-- medical savings debit card/credit card system!

Federal Deposits to a National Health Insurance Debit Card System

The US Federal government spent more than $808 billion in 2007 on health care (medicare, medicaid, Federal workers, VA hospitals, etc.). States spent another $143 billion in expenditures for Medicaid. So that's $951 billion in annual Federal and State government expenditures on health care in the year 2007. But if the Federal government deposited $100 a month ($1200 per year) into medical savings debit card accounts for every American citizen (man, woman, and child), that would cost the Federal government only $355 billion a year in health care expenditures.

This would instantly provide $1200 in annual health care funds for all American citizens to be used for any doctor, dentist, hospital, clinic, or doctor authorized prescription drug anywhere in America or within any country authorized by the HHS (Health and Human Services). If you include the children of permanent residents then Federal health care savings deposits would rise to $359 billion annually.

Depositing $300 additional per month into the medical savings accounts of the 40 million American senior citizens in the US, 65 years and older, would give seniors $4800 per year ($400 per month) in medical savings account deposits from the Federal government, increasing Federal health care expenditures by $144 billion, raising Federal health expenditures to $503 billion a year.

But I'd also deposit an extra $200 per month into the medical savings accounts of the nearly $3 million active and reserve US military personal (the folks that volunteer to risk their lives to defend our country). This would add an additional $7 billion to the budget. Add $50 deposits per month into the medical savings accounts of a soldier's spouse and two children, and that would add another $5.4 billion. I'd also add another $100 per month ($1200 per year) for the 24 million veterans in the US ($29 billion).So in total, this would increase annual Federal health expenditures to approximately $544 billion a year.

If you add another $100 per month ($1200 per year) for nearly 2 million civilian Federal employees plus $50 each month for three family members that would add almost $6 billion more. That now comes to $550 billion in annual Federal health care expenditures.

An additional $100 per month ($1200/yr) for the $40 million disabled Americans, would add another $48 billion. That brings us up to a grand total of $598 billion in annual Federal health care expenditures! These Federal deposits would serve as the-- base funding-- for a Federal debit card medical savings account system that would cover all American citizens plus the children of all permanent residents. Senior citizens, soldiers, veterans, disabled citizens and Federal workers would be the primary beneficiaries of these Federal deposits into such a medical savings account debit card system.

Yet these Federal health care expenditures would be far lower than the current $808 billion spent annually by the Federal government, saving the Federal government $210 billion annually in health related expenditures. The US national debt currently stands at approximately $12 trillion. Democrats argue that their version of health insurance reform could reduce the national debt by $780 billion over the next 20 years. Under this medical savings debit card plan, over $210 billion could be saved in just one year, over $4.2 trillion over a 20 year period in deficit reduction!

But this does not include the $143 billion in State contributions to the Medicaid fund. Since Medicaid recipients would now be largely funded by Federal medical savings account debit card deposits, Medicaid expenditures by the States could be eliminated. That would mean over $143 billion a year in annual savings to the States currently struggling with budget deficits!

Employer Deposits to a National Health Insurance Debit Card System

But, again, Federal contributions to medical savings debit card accounts would only be the base level of contributions. The average employer based health care premiums cost $4,386 per individual per year. $3,504 of that cost is payed by the employer while $882 of that cost is payed by the employee. The average employer based health care premium for a family of four averaged $12,700 in 2008. Employers paid $9300 of that cost while the employee paid $3400 out of their wages.

Under the Federal Medical Savings Debit card plan that I envision, employers would have the option of depositing monthly funds into an employee and family member's Federal medical savings accounts-- instead of providing private health insurance to its employees. For full time employees, for instance, an employer who decided not to provide private health insurance to its employees would be required by the Federal government to deposit $100 per month ($1200/yr) into the medical savings debit card accounts for each employee. On average, that would be a 66% reduction in health insurance cost for the employer per employee with no cost to the employee which would also save the average employee about $882 per year!

Additionally, the Federal government would require employers to deposits $50 per month ($600/yr) into the Medical Savings debit card Accounts of up to three family members of the employee (spouse, children, or legal wards). So for a family of four, the cost to the employer would be $3000 per year-- a whopping $6300 a year reduction in annual health care cost per employee!

For part time workers, I would only require employers, who refused to provide employees with private insurance, to deposit $50 per month ($600) per year into the Medical savings debit card accounts of their employees. But the Federal government would not require employers to deposit any funds into the accounts of family members of part time employees.

There are approximately 140 million civilian employees in the US. So we're talking about perhaps $800 billion in annual savings to private industry and $476 billion in annual savings for American families. That's over $1.2 trillion in total savings per year in health care savings for the American economy! Such business and worker savings would serve as a titanic annual stimulus to the US economy that would increase the purchasing power of the average employee while reducing the cost of products and services provided by private US businesses both domestically and around the world. A $1.2 trillion annual stimulus should also create tens of millions of new jobs while also significantly increasing tax revenues for Federal, State, and local governments which should help to increase government revenues while helping to lower government deficits even more!

But what if you're not a US citizen but a permanent resident?

Well as earlier noted, the children of permanent residents would still receive monthly Federal deposits of $100 per month ($1200 annually) in to their Child Care medical debit card accounts. However, no Federal funds would be put into the accounts of non- US citizen adults, under this plan, unless these legal permanent residents are in the US military or work for the Federal government. However, non-citizen adult permanent residents in the US could still receive deposits into their Guest Care medical Debit Card accounts from private employers ($100 per month/$1200 per year full time) and from the employer of their spouse ($50 per month/$600 per year) under this system.

But what if you're self employed?

Under this system, all adult US citizens and permanent residents would have the right to deposit $50, $100, $150, or $200 per month into their Federal medical savings debit card accounts by allowing the Federal government to automatically withdraw money from their private checking or savings account each month with the consumer having the option of-- terminating-- these automatic Federal withdraws at any time! Adult citizens and permanent residents would also have the right to of have automatic deposits of $50, $100, $150, or $200 deposited into the Medical Savings debit card Accounts of their spouse, children, or legal wards. So, potentially, up to $4800 in additional funds could be added to your Medical Savings Account or to a family member's account per year for a legally married individual.

Health Care Credit Card System

But what if you have serious medical problems and your health care expenditures eventually deplete and even exceed the savings that you accumulated in your medical savings account?

Under such a scenario, you'd now be taking more out of the system than you're putting in! However, when you are in debt to the system, your health care card would no longer function as a debit card but would instantly function as a health care-- credit card! Since you would be borrowing from the deposits of other depositors in order to pay your medical bills, the Federal government would charge you a temporary premium of $50 per month ($600/yr), if your total debt to the fund is under $5000, until your debt to the system is payed off. Since you would still be receiving monthly deposits into your account from the Federal government and from your private employer, your medical card would function as a heavily subsidized health care credit card. If your debt to the system exceeds $5000, then your temporary premium would go up to $100 per month! Both monetary denominations would still be much lower than the premiums you would pay for private health insurance.

Such temporary premiums for excess expenditures for this debit card/credit card system would be an-- essential incentive-- for health care consumers to be cost conscious and to seek out the best medical care, dental care and prescriptions drugs at the most reasonable prices.

The importance of seeking out the best health care at the most reasonable price is is clearly illustrated below:

In the State of Maryland, for example, the delivery of a baby can cost $3893 at Washington County Hospital but cost you $7676 at Johns Hopkins. In Southern California, a C-section delivery can cost $11,000 at Hoag Memorial Hospital while the same procedure can cost $31,000 at UC Irvine. A MRI of the neck cost $2003 at Camden Clark Memorial in West Virginia while the same procedure cost $3709 at Raleigh General. A hysterectomy cost $8116 at Mountains Community Hospital in California while the same procedure cost a whopping $82,612 at Olympia Medical Center in LA-- a 1000% difference in cost! A coronary artery bypass cost $58,564 at Beverly Hospital in California while the same procedure cost $318,000 at Doctor's Medical Center in Modesto, California. So we're talking about 50 to 1000 percent differences in cost for similar procedures in the same local areas of the country! Such extreme variations in prices of medical procedures are insane-- if not criminal!

But unlike a premium based system, Medical Savings Accounts with the penalty of out of pocket premiums if expenditures exceed savings, would finally make consumers fully conscious of the real cost of medical care and medical procedures, allowing them use their medical debit/credit cards at any hospital or clinic anywhere in the country in order to seek out the best medical care at the most reasonable cost. Such as system might also favor and revitalize not for profit hospitals who are disproportionately burdened with the uninsured, since they tend to charge significantly less than profit based hospitals and clinics. This would also put pressure of profit based hospitals to lower their prices.

Additionally, a central online data base derived from Federal medical account payments to doctors, hospitals, and clinics (without revealing the identity of the individuals who were charged) should help to assist consumers in seeing how much doctors, hospitals, and clinics all over the country are charging for test and procedures. Many States are already requiring hospitals to post the cost for medical procedures. So this should also help the consumer to dramatically lower medical cost in all areas of the country!

If your total debt to the fund is over $10,000, then you will still have to pay $100 monthly plus 3% of your annual income. The extra 3% would be payed as part of your annual income tax. Such an income tax fee would be essential in order to keep wealthy individuals from exploiting the system. A poor person making only $20,000 a year would only have to pay an additional $600 per year in additional taxes under such a scenario while a wealthy person pulling in a million dollars a year would have to pay an additional $30,000 a year in additional taxes. This would be a strong incentive for the wealthy not to attempt exploit the system with excessive medical expenditures. Of course, any attempt by individuals to defraud the medical debit/credit card system could result in significant fines and jail time!

Since parents or guardians would be responsible for managing the medical savings accounts of their children or wards, parents or guardians would be charged only $25 per month if the child's debt to the system is under $5000, $50 per month if over $5000, and $50 per month plus a 1% of a parent's or guardian's income tax if the child's medical debt is over $10,000. Temporary premiums related to the medical debt of children would continue to be charged to the parent or guardian even after the child has reached adulthood and acquired an Adult Care card until these debts are payed completely payed off. So the real owner of a Child Care card would be the adult parent or guardian of the child. However, any accumulated savings in a child's medical savings account would be transferred to son or daughter's Adult Care Debit Card once they've reached 18 years of age.

Failure to pay monthly premiums if your health care expenditures exceed your savings will result in a suspension of Federal deposits into your account, a cancellation of your card, and possible liens on your paycheck and property. For adult permanent residents with Guest Care Debit cards and permanent residents with children or wards with Child Care Debit cards who fail to pay monthly premiums due to expenditures exceeding health care savings, liens on their paycheck and property could also possibly result in being deportated from the US and permanently banned from reentering the US. And, again, any fraud or abuse of a Guest Care Debit card either by a doctor or patient could result in felony prosecutions .

A typical employed individual might have $2400 to $3000 deposited into their medical savings account every year. Most working individuals are not $2500 to $3000 sick every year and probably not even $300 a year sick. So most of the time, consumers will be probably be adding at least $2000 or more to their medical savings accounts every year. That's $10,000 over a 5 year period. So by the time you reach the age of retirement, you may may already have over $100,000 in your medical savings account to deal with the more frequent medical problems of old age. Plus, once you receive your Senior Care card, you'll be receiving three times the rate of monthly deposits into your medical savings account from the Federal government.

Obviously, some individuals will have such high medical expenditures that they will never completely pay off their debt to the system before they die. However, in theory, many more individuals would probably die without exhausting their Federal deposits which could then be deposited into the general fund in order to keep it solvent.

What if a debit card holder wants to use their card for cosmetic surgery or even an abortion?
If Congress bands the use of Federal deposits into your medical savings account for abortions or cosmetic surgery, consumers would still be allowed to use the portion of their medical savings deposits that were contributed by non-Federal government sources (employers, wife's employers, parents or guardians) for cosmetic surgery or abortions.

So, in theory, you should be able to take your health care debit card/credit card to any doctor, dentist, hospital, or clinic in the US or to any health care facilities outside of the US (medical tourism) certified by the HHS (Health and Human Services) or purchase doctor authorized prescription drugs at pharmacies anywhere in the world.

The advantage of a Federal government and private employer funded medical savings account is that it would cover all adult American citizens whether you are employed or unemployed and the children of American citizens and permanent residents. A premium based public option, on the other hand, is funded by your employer-- only if you are currently employed! So if you're unemployed, you would have to pay the monthly premiums to the Federal government (out of your own pocket) in order to keep the health insurance for yourself and for your children-- at a time when you currently have no current income or are only receiving unemployment checks! Also, the Federal government might make it illegal to use Federal health insurance for an abortion or for cosmetic surgery. However, under a medical savings account plan, non Federal deposits into your account from private employers or yourself could be utilized to fund such procedures.

But what if everyone in the US were simply covered under the current Medicare system? Well, as earlier noted, the Medicare program spends approximately $477 billion annually to cover seniors 65 years or older, some disabled people under the age of 65, and people of various ages with permanent kidney failure treated with dialysis or a transplant. If you prorate those cost to cover a population of 308 million people in the US, that comes out to be a Federal health care expenditure of approximately $3.2 trillion annually! Obviously, this number is significantly skewed by the higher medical care cost of seniors, the disabled, and the seriously ill that is currently covered by the Medicare system. But even if you generously cut this prorated expenditure in half ($1.8 trillion), it would still be at least a trillion dollars more than the Federal government currently spends on health care. But in the medical savings account system presented here, the Federal government only spends approximately $550 billion annually which actually significantly reduces Federal health care expenditures!

As a health care debit card, such a Federal medical savings account system would make medical care and prescription drugs free (no out of pocket expenditures) for most reasonably healthy Americans who prudently shop for their health care services. And as a subsidized health care credit card, such a system would also make health care-- affordable-- for those Americans who are not so healthy, seriously ill, or not so prudent with their health care expenditures! Such a system would greatly enhance an individual's freedom and financial ability to see a doctor or doctors at any hospital or clinic anywhere in the country. So this would finally put pressure on doctors, hospitals, and clinics to provide the best medical care at the lowest or most reasonable cost. And such a system could finally give consumer's the peace of mind that they no longer have to be worried about the possibility of being bankrupted or denied health care because of high health related cost or expenditures.

But equally as important, this system would substantially reduce Federal and State health care expenditures-- helping to significantly reduce Federal and State deficits. Additionally, such a system would also dramatically reduce employer based health care expenditures for both the employers and the employees. So as US citizens and patriots we might also find solace in the fact that such an efficient health insurance system won't bankrupt our Federal and State governments while also creating millions of jobs by making domestically produced US products and services a lot less expensive!

New Papyrus

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