The Alternative to Health Care Reform

Following up on my previous post, I should make mention that I’m not against health care for everyone. I’m not. Everyone needs it – like food, shelter and clothing. In our capitalist society, you have to have poor people (otherwise, you cease to be a capitalist society) and poor people are still people, dang it.

However, my beef with the bill passed yesterday is that it’s just some middle-of-the-road, watered down bill that doesn’t appear to do anything for anyone except those really poor people – 1 in 4 Americans – who will get dumped onto Medicare. Sucks to be one of the other 3. Would have been nice to see some real help for the middle class – you know, that group that built the damn nation that most of us live in.

Mitch Daniels was the only Republican over the last few months that seemed to offer up at least an alternative plan. It’s proven to work, works great, everyone loves the plans he speaks of – called HSAs. I had one and was a big proponent when I was working for the State. Plus, you get to use your money, real money, plus money from the State, to use on other things like glasses or dental work. This is required reading for everyone.

In Indiana’s HSA, the state deposits $2,750 per year into an account controlled by the employee, out of which he pays all his health bills. Indiana covers the premium for the plan. The intent is that participants will become more cost-conscious and careful about overpayment or overutilization.

Unused funds in the account—to date some $30 million or about $2,000 per employee and growing fast—are the worker’s permanent property. For the very small number of employees (about 6% last year) who use their entire account balance, the state shares further health costs up to an out-of-pocket maximum of $8,000, after which the employee is completely protected.

The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.

State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. In the second straight year in which we’ve been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay. (Even if an employee had health issues and incurred the maximum out-of-pocket expenses, he would still be hundreds of dollars ahead.) HSA customers seem highly satisfied; only 3% have opted to switch back to the PPO.

The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.

Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18. They were admitted to hospitals less than half as frequently as their colleagues. Differences in health status between the groups account for part of this disparity, but consumer decision-making is, we’ve found, also a major factor.

Practical, sensible and founded in fact. That’s good policy.

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