Ben Carson’s Health Proposal Look Good: But He Needs to Fill in the Details
Presidential candidate, Dr. Ben Carson, has provided a few more details about his health policy proposal. He backed away from calling for an end the Medicare and Medicaid programs. (Many Republicans fear talks about ending Medicare is a political non-starter among seniors.) Carson would apparently swap the open-ended tax exclusion Americans get from employer-sponsored health coverage for some type of tax credit. Although not specified, the tax credit would likely come in the form of a deposit to a Health Savings Account (HSA). There would presumably also be an element of personal responsibility where Americans set aside more for their health care needs. Putting workers themselves in control of these funds would cause them to conserve the funds more prudently than they do when employers pretend employee benefits are a free gift.
The few details we already know about Ben Carson’s health proposal are consistent with a recent NCPA report, Reforming Medicare with Personal Accounts, Incentives and Better Plan Design. Carson has said that, although he wouldn’t end the 1960s era social program for the poor and elderly, when people saw how well HSAs worked Americans would voluntarily give up Medicare and Medicaid – an explanation that undoubtedly suffers from poor translation because reporters often don’t understand the details of conservative health policy.
With appropriate reform, a slight increase in payroll taxes could fund a Medicare health spending account seniors themselves control — an idea known as prefunding. Putting seniors in charge of the funds in their account would make them more prudent consumers of health care because any unused funds would roll-over and accumulate for future health care expenses.
One way to prefund a portion of Medicare expenditures is to set up a Medicare Health Savings Account for each worker. Working-age adults — and their employers — could jointly contribute four percent of payroll into an account that accumulates and grows at market rates. Upon reaching Medicare eligibility at age 65, the accumulated funds would be converted into an annuity that provides an annual payment into each senior’s Medicare HSA. Upon reaching Medicare eligibility, seniors would also be covered by a high-deductible plan with potentially little-to-no cost sharing above a $5,000 annual deductible. Wasteful programs like Medigap – which even President Obama has admitted boost spending unnecessarily – would be history. Seniors could pick among private plans, but all plans would have a $5,000 deductible and would encourage the use of consumer tools to control spending.
(More information is available at: Reforming Medicare to Better Manage Seniors’ Health Care.)
The beauty of putting patients in charge of handling more of their health care dollars is how it stimulates market-friendly behavior on the part of providers. The reason providers don’t provide prices or compete on price is because so few of their customers have an incentive to ask about price. That is the essential problem in health care today.
There are numerous examples of how consumers control spending when provided with choices based on cost. The Rand Health Insurance Experiment found patients can reduce spending about 30 percent when they face significant cost-sharing. Experiments with HSAs and health reimbursement arrangements (HRAs) illustrate cost savings when workers have appropriate incentives. The California Public Employees’ Retirement System (CalPERS) experimented with ways to make enrollees price sensitive on the cost of expensive procedures, like joint replacement and cataract removal. These experiments were highly successful. Members not only checked the prices of the facilities they used; providers lowered their prices to retain business.
These are just a few examples of what would occur when patients exercise more control over their health care dollars and the options for designing a plan to get us there. As demonstrated time and time again (also here) by NCPA research, Carson’s plan would get Americans used to asking about prices long before they reach Medicare eligibility, making it even easier once they reach Medicare age.
Carson’s HSA plan would be OK as long as HSA dollars could be spent overseas, in Mexico, Cuba, Brazil, Argentina, Costa Rica, India, Thailand, and the Czech Republic, where medical costs are MUCH lower.
I’d be fine with that. Private Medicare plans could set a reference price for certain procedures both here and abroad. Surgeries performed at high-cost facilities would involve significant cost-sharing. Going to a participating hospital that agreed to accept the reference price may involve only standard cost-sharing (say, 20%). Going abroad may require no cost-sharing. Medicare could recognize JCI-accredited hospitals. Or maybe just accept only a handful of facilities. I’d leave it up to the plan to decide.
If a senior went to a hospital-based physician that charged higher fees than non-hospital physicians, seniors would pay the difference. If would be hard at first, but would soon become competitive. Having a waiting office full of mad seniors (and their adult offspring) would soon be sufficient to prod greater price transparency.
Current HSA law does not restrict where funds are spent. I’m glad you are OK with that Devon.
to be fair, Herrick, like Goodman, is an ideologue 1st, and a policy authority a distant 2nd. You can’t expect them to keep up-to-date on little things like what’s going on in the real world….
In our paper, we’re talking about a special Medicare HSA-type program, where seniors get an annual annuity payment into an account to use for medical costs below a $5,000 deductible. The annuity payment could be deposited into a standard HSA. Although consumers are free to spend their HSA dollars in, say, Costa Rica, that does not mean my health plan would credit it towards my deductible. I assumed Jimbino was referring to an more seamless arrangement where some foreign providers are “in-network”. But, I don’t necessarily believe patients will have to go to Costa Rica or India. If they merely were given an incentive to go to a hospital across town that offered their health plan a better deal, that could prompt some price competition. CalPERS experiment in California is a great example. I just cannot understand why more health plans don’t copy it.
Tax Free MSAs are already in Medicare. In Wisconsin the current deductible is $4,000 not $5,000 like you suggest. Plus the Medicare couple gets $3,410 tax free from the Medicare program with no need to purchase Medigap, a huge savings.
Hopefully in the debate tonight some more informed candidate will tell Ben Carson and Trump that Medicare has aleady gone tax free. Fat chance that anybody running for President would be that smart on healthcare policy when nobody at the NCPA seems to know and MSAs were born here, remember?
The rates for 2016 Open Enrollment are out and $6,850 deductibles are the norm. IOWA rural community has now a new price leader in United Healthcare. I’m sure none of the candidates are that informed either.
Here in Tampa Bay we are now down to just 4 competitors and there is no PPO this year in Florida. YUP, herding Americans onto HMOs like cattle.
Very interesting! Who sells a Medicare MSA-type plan in Wisconsin?
Devon, I’m sorry I didn’t see that you asked this question about Medicare MSAs. I stopped looking for that 1st example of a WI Medicare MSA plan when I found this one. The Medicare couple gets $4,000 a year TAX FREE then they have a $5,000 deductible. Now they can blow off spending $500 a month on a Medigap insurance plan because the MSA plan pays 100%!!
The company name is NetWork Health at 866-393-7668
Here are the counties:
https://networkhealthmedicare.com/service-area/index.php
See, once there is one player in the TAX FREEDOM business then others pop up to go into competition which keeps prices low for old people.