Regardless of what the U.S. Supreme Court does to Obamacare, a few key facts remain about American health care. The bottom line is that individual consumer choice must increase and government's heavy hand decrease, in order to bolster vitality in the medical market.
Obamacare, labeled the "Patient Protection and Affordable Care Act," actually runs the opposite direction from empowering people and maximizing the beneficial forces of the market to serve them.
The Independent Payment Advisory Board, with its near-dictatorial power to impose Medicare cuts, the government bureaucracy wistfully named the Center for Medicare and Medicaid Innovation, and this administration's stab at defining medical loss ratio in regulations all attest to Obamacare's "Washington knows best" bias. Or consider the fact Obamacare expands Medicaid, pushing many in the middle class into this welfare program, and sets up a wealth redistribution "subsidy" scheme that puts everybody on the dole who earns less than 400 percent of the official poverty rate.
Even so, despite Obamacare's siren song of increased coverage and cost containment, most employers and individuals have seen their health costs continue to rise. That's contributed to a steady stream toward consumer-directed health plans, or CDHPs.
Businesses, which will face an employer mandate to provide worker health coverage or else pay a penalty in another couple of years, and individuals have increasingly opted for consumer-directed options such as high-deductible health insurance and health savings accounts. Other consumer-oriented products include flexible spending accounts and health reimbursement accounts.
Some 11.4 million Americans had CDHPs by January 2011, compared with 10 million a year earlier, America's Health Insurance Plans, or AHIP, reports. The UCLA Center for Health Policy Research has said five times the businesses now make consumer-directed health care an option as did so in 2005.
Consumer-directed health care is especially attractive to small businesses. Kaiser Family Foundation has found these options more prevalent at companies with fewer than 200 workers. About half of small businesses' employees have high-deductible coverage.
The key to consumer empowerment through CDHPs lies in consumers having cash saved up to take care of medical costs themselves, up to a point. That's where HSAs come in.
Consumers can be socking away savings in a HSA, and employers may contribute to their workers' HSA. This money is tax-free, up to $3,100 annual contributions for individuals and $6,250 for families, and belongs to the consumer. Out-of-pocket costs to consumers can't be higher than $6,050 for individuals and $12,100 for families in a year.
HSA funds are portable from job to job and there in retirement. Whatever amount saved and interest earned remains at the end of each year, it simply rolls over and remains available for future medical needs.
And that's what makes the CDHP model work best. Patients take care of the first dollars for routine medical needs, insurance kicks in if the annual deductible is reached and out-of-pocket costs are capped for patients. Still, even on those services paid out-of-pocket using the HSA, consumers get their insurer's negotiated rates.
Thus, employers save on their health budget by providing consumer-directed insurance carrying a high deductible and paying some into employee HSAs. Insurers save by avoiding costly administrative involvement for routine transactions the patient-consumer now takes care of himself.
And individual consumers pay lower insurance premiums while saving tax-advantaged dollars in a dedicated health savings account. They become involved consumers, more attentive to and responsible for what typically are more frequent medical needs — regular check-ups, prescriptions, emergencies that require an X-ray or stitches or a cast, but aren't usually life-threatening. This consumer behavior by attentive individuals combines those countless interactions to constrain the nation's health costs.
The short-sighted, red tape-ridden Obamacare approach just doesn't trust the marketplace. Nor does it trust Americans to make their own health care choices.
The health law forces high-deductible plans to cover preventive benefits. That mandate to provide routine, high-volume services runs counter to the CDHP model, where consumers would pick up services like wellness and vaccinations themselves.
Another example of Obamacare's anti-consumer, anti-market bias is regulations on the medical loss ratio. At least 80 percent (85 percent for big companies) of insurance premiums must go toward medical services and not administrative costs. Regular insurance expects to pay a lot of little claims, but CDHPs are designed for front-end cost-sharing by consumers. The MLR regulations don't take into account such fundamental differences and may be unworkable for CDHPs.
If the court does the country a favor and nixes the monstrous health law, legislation already exists that would make consumer-directed health care even more attractive to consumers and employers, as well as more flexible and useful as a tool in the health care market.
S. 1098 and H.R. 2010, sponsored by Sen. Orrin Hatch and Rep. Erik Paulsen, would enhance HSA contributions, HSA usage, and make these plans more viable. Perhaps most important, the bills would enable HSA owners to pay health insurance premiums using HSA dollars as well as apply these funds toward concierge medical practices.
Regardless how the court may rule, even Obamacare can't kill the consumer-directed health care market. HSA banks, HSA insurers, numerous kinds of services and benefits programs, as well as grassroots coalitions to promote consumer empowerment are thriving. Two of the coalitions, for instance, are the Healthcare Choice Coalition (with which I am involved) and the HSA Coalition.
In other words, consumer-directed health care isn't just a market. It's an all-American movement dedicated to empowering individuals. Not even Obamacare can overcome that!
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