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Musings of a Philadelphia Physician who has served the community for six decades

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SECTION SIX: Condensed Summaries

HSA Proposals Summarized

This book evolved while it was being written. It had to, because the implementation and judicial status of the Affordable Care Act kept changing. It primarily summarizes five proposed alternatives to that Act, all of them resting on variations of the Health Savings Account idea. They emerge in varying stages of readiness, but three are just about complete: (1) Classical HSAs, (2) The "grandparent" method of funding dependent children's health with compound interest, (3) The five-part proposal of the last chapter which begins with catastrophic coverage as basic, adds both-ends-of- life coverage to shift costs, and funds much of itself with compound interest. Two of the five proposals are expanded for discussion, but while cheaper, seemingly require too much transition time for present purposes (whole-life health insurance, and gradual Medicare buy-outs).

That summarizes the variants of Health Savings Accounts. The rest of the many proposals now summarized, either clear the way for the HSA variants, or else aim to correct some of the flaws in employer-based insurance. Not all of them are small and technical; the revision of the role of employers would involve a major change in the tax laws. And restructuring the DRG payment system would greatly revise the balance of power within hospitals. Inclusion of proposals on this list should not be taken to endorse a public sector approach over a private sector one. Nevertheless, many regulations do potentially stand in the way, so the way must be cleared. They are offered piecemeal because of different congressional committee jurisdictions. There has long been a question whether health insurance should be considered a health matter or an insurance matter, and the question is complicated by the Tenth Amendment making it appear the Federal Government is excluded from either activity. Special bond issues, might further complicate jurisdiction.

The proposals generally omit mention of their purposes, most of which are self-evident. However, each is accompanied by a citation number within the body of the book, where a fuller argument can usually be found.

PROPOSALS FOR CLASSICAL HEALTH SAVINGS ACCOUNTS:

Proposal 8A: Health Savings Account Age Limits Should be Extended, from the Cradle to the Grave. The effect would be to create a continuous account, which could still grow over long periods of apparent inactivity.

One alternative option is to buy an American total stock index fund, order reinvested dividends, take delivery, and keep the certificate in a safe deposit box until needed decades later. (2718)

Proposal 1A:At present, Health Savings Accounts are limited to age 21-66. Provision should be made for inheritance of surplus to the accounts of newborn children and specified others, sufficient to cover their healthcare up to age 21, within a HSA of their own. (3320)

Proposal 2A: At present, contributions to Health Savings accounts are limited to $3300 per year, age 21 to 66. This should be changed to aggregate lifetime amounts, at least until latecomers have made adequate transition to the program. (3320) (2718)

Proposal 10A: Instead of the present annual limit of contributions to Health Savings Accounts of $3300 per year, Congress should permit a lifetime limit of $132,000 or more, with annual deposit limits adjustable to bring accounts at their present age, up to what they would have been if $3300 annually had been deposited since age 21.(2718)

Proposal 13A: Health Savings accounts should include more convenient options to be individual rather than family-oriented, and therefore should include an option to extend from the cradle to the grave, rather than age 21-66, as at present, and consider options for partial, gradual, Medicare buy-out, and transfers within families between accounts.(2606)

Proposal 3A: The annual limit of deposits to HSA should be increased by a COLA based on medical costs, rather than on the general cost of living. (3368)

Proposal 11A: Congress should reserve decisions to itself for changing the lifetime contribution level with technical amendments, and review final rules or appeals from contract terms which seem to threaten imminent, major. adjustments to the general public lifestyle. (2718)

TAX-EXEMPT CATASTROPHIC COVERAGE

Proposal 6A: Congress should permit the individual's HSA-associated Catastrophic health insurance premiums to be paid, tax-exempt, by Health Savings Accounts, as long as present tax exemption for employer-based insurance is unmodified. This would make HSAs fully tax-exempt. (2687)

SUBSIDIES FOR POOR PEOPLE, NOT TO PROGRAMS FOR POOR PEOPLE

Proposal 7A:That health care subsidies be assigned to patients who need them, rather than attached specifically to one or another health program intermediary that serves them. (2687)

REVISED DIAGNOSIS RELATED GROUPS

Proposal 15A: As long as Medicare imposes DRG, tax-exempt hospitals should accept the DRG method of payment for inpatients from any Insurer, although the age-adjusted rates might be negotiable based on a percentage surcharge to Medicare rates. The DRG should be gradually restructured, using a reduced SNOMED code instead of enlarged ICDA code, and intended to be used as a search engine on hospital computers rather than printed look-up books. Also to be considered for those who are too sick for arms-length negotiation of hospital costs, are uniform reimbursements among insurance carriers and individuals, and between inpatients and outpatients, including emergency rooms, as well as a major expansion of specificity in DRGs. There is no medical advantage to limiting the number of diagnosis groups, and if there is an accounting advantage, a larger set is more easily translated into a smaller one -- than the reverse. (2606)

COORDINATION WITH AFFORDABLE CARE ACT

Proposal 20A: The political parties would agree that both Catastrophic Health Insurance and Health Savings Accounts, singly or jointly, become specifically allowable options under the Affordable Care Act without age or occupational limits, and that all other interfering language in the Act or its regulations be removed. An appeal mechanism should be provided, not merely from judgments, but from regulations themselves. In particular, uniform tax deductibility is conferred by permitting health insurance and/or Catastrophic back-up coverage to be purchased by, or through, Health Savings Accounts. (3221)

COMPROMISE REMOVAL OF EMPLOYER-BASED TAX EXEMPTION

Proposal 4B: That a scheduled reduction of both the tax exemption of employer-based health insurance and the corporate income tax be prepared along the following lines: That in consultation with the Federal Reserve, the corporate income tax rate be reduced until it matches the average blended individual tax rate. And the tax exemption for employer-based health insurance be reduced in a step-wise fashion, until it disappears. The process shall take no longer than three (3) tax years, keep the two reductions in balance, and be reviewed by the Federal Reserve, and an appropriate committee of both House and Senate. (3106)

HEALTH SAVINGS ACCOUNT MONITORING AND RESEARCH AGENCY

Proposal 12C: Congress should create and fund a permanent Health Savings Account Monitoring and Research Agency. It should have representation from subscribers and providers of these instruments, with power to hold hearings and make recommendations about technical changes. It should meet jointly with the Senate Finance Committee and the Health Subcommittee of Ways and Means periodically. It should have extensive access to the appropriate Executive Branch department, to review current activity, detect changing trends, and recommend changes in regulations and laws related to the subject. On a temporary basis, it should oversee inter-cohort and outlier loans, leading to recommendations about the size and scope of inter-subscriber loan activity. At first, it might conduct the loan activity itself, with an eye toward eventually overseeing a commercial vendor. By this time, Congress should be aware that it cannot cope with a program so large without an enlarged staff.(2718)

REVENUE SMOOTHING.

Proposal 16C: Where two groups (by age or other distinguishing features) can be identified as consistently in deficit or surplus -- internal borrowing at reduced rates may be permitted between such groups. Borrowing for other purposes (such as transition costs) shall be by issuing special purpose bonds. These bonds may also be used to make multi-year intra-family gifts, such as grandparents for grandchildren, or children for elderly parents. (2606)(2735)

Proposal 18C: Congress is urged to permit pooling (at low interest) between the accounts of an age (or other) group in consistent surplus, -- and other age groups in consistent deficit status,-- occasioned by persistent divergences between revenue and medical withdrawals at different ages. If there are temporary imbalances created by differential depositing, they should be corrected by adjusting internal interest rates. (2735)

Proposal 17C: A reasonably small number of escrowed accounts within a funded account may be established for such purposes as may be necessary, particularly for transition and catastrophe funding. Where escrowed accounts are established, both parties to an agreement must agree, for the designation to be enforceable.(2606)

Proposal 19C:At this point, it probably would be wise to add some legislation clarifying the ground rules, if several professions would have to cooperate in allowing a new line of business for whole-life insurance, which seems a desirable outcome. (3277)

Proposal 25G: That hospitals and others involved in cost accounting be encouraged to cost-shift the indirect costs of obstetrics to other departments of a general hospital, to whatever extent is possible, to reduce the strain on the first year-of life, a constantly vulnerable point.(3255)

WHOLE-LIFE HEALTH SAVINGS ACCOUNTS.

Proposal 14D: Congress should authorize exploration of a new, lifetime, version of Health Savings Accounts, which includes annual rollover of accounts from any age, from cradle to grave, and conversion to an IRA at any termination. The model would be whole-life insurance instead of term insurance. Investments in this account are subject to special rules, designed to produce maximum safe passive total return, and limiting administrative overhead to a reasonable, competitive, amount. The account should be linked to a high-deductible catastrophic health insurance policy, with permanently guaranteed renewal, and be transferable at the client's annual option. The option should also be considered of linking the HSA to a policy for retrospective coverage of first year of life and last year of life, combined.(2606)

DIAGNOSIS-RELATED GROUPS PROJECT

Proposal 5E: Congress should be asked to commission a computer program to translate English language diagnoses into SNOMED code, preferably by voice translation. Suggested format: a search engine where English variants of discharge diagnoses are entered, and a SNOMED code number returned, along the general lines of -- entering common phrases into Google and receiving file location numbers in return, except it would return the SNOMED code. If the code is not found, the computer accepts a manual entry by a trained person. verified by an expert over the Internet to become officially entered into a master list which is periodically circulated as an update. The search program and its supplements should be produced on DVD disks to be used on hospital record room computers by other professional users. It should provide "hooks" so the Snomed codes and patient identification can be readily transferred electronically to related programs, such as payment codes and billing. (2634)

GRANDPARENT ROLLOVER SYSTEM. All children are dependents of their parents, and the heavy costs of obstetrics (magnified by the unusual concentration of malpractice claims) make it impossible to devise pre-funding schemes. Young parents are often strapped for funds, so the lack of pre-funding is a growing problem in a Society uncertain of its family structures. Therefore, we have devised the grandparent roll-over. Tort reform would improve but not eliminate this work-around. (3252)

Proposal 24G: That a new form of "tail" insurance be devised for children and obstetrics, which covers economic damages but not "Pain and Suffering". Comment: the great majority of awards are not for economic damages, because that is generally covered by health insurance. The vast majority of spectacular awards are for pain and suffering, which cannot be measured, denied or remedied.(3255)

Proposal 23G: Congress should enable one voluntary transfer initiated per person between the Health Savings Accounts of members of the same family, especially grandparents and grandchildren, and one transfer to a general pool for balances left over from the family transfer. Members of the grandparent generation who have no grandchildren may choose one substitute from outside the family.(3254)

VOLUNTARY MEDICARE BUY-OUT OPTION

Proposal 22G: Congress should study the practicality of modularizing Medicare, in order to facilitate gradual buyouts. Voluntary buy-outs from the Medicare program might become desirable if Medicare costs should fall as a result of scientific progress, and religious exemptions are already desirable for a few. Consideration should be given to: returning payroll deductions, and fair accounting for premiums, copayments and benefits already paid for by age groups in transition, as early candidates for study.(3254)

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BASIC INSURANCE FOR HEALTH SAVINGS ACCOUNTS, (AND OTHERS,TOO.) TRI-CHALLENGE BASIC COVERAGE.

Proposal 25G: Combine the high cost of the first year of life with the very high-cost last year of life, as the basic foundation of minimum health insurance.
It would undeniably be universal. What I am technically trying to achieve, is to combine one life situation, which sometimes generates surplus it can't use, with another situation, where every baby creates a difficult debt for someone else to pay. And whereas 100% of the population experiences birth and life at the two ends of life, there are societal constraints about sharing liabilities outside of families which must be explored.

Proposal 25I: And then, add Catastrophic coverage regardless of age, less the cost of overlaps. Title for the Package: Tri-Challenge Basic Coverage. (2882)

We thus design the basic benefit package to include two universally-unavoidable costs, plus the universally-inescapable risk of unpayable health costs at any age. It does not include any named service benefits. It is clearly superior to less universal, and more unaffordable, coverages.(2882)
Proposal 25H: Require the necessary coverage to age 21 for one grandchild per grandparent to be transferred between HSAs at grandparent's death or earlier option. Grandparent need not have a Health Savings Account, but must assure the required transfer amount, and grandchild must have an HSA to accommodate the gift. Probably it would go to a designated grandchild by inheritance, or to a designated pool of unassigned third-generation recipients -- either without grandparents, or from large families. (2882)

This childhood feature adds about $28,000 to the cost of needed coverage, but because a century of compound investment income intervenes it would only require $42 at the child's birth to his death to fund the succeeding generation. (added of course to the other two premiums, at 6.5% interest compounded from one year of age). The transferred sum at birth would have a declining balance and be entirely consumed by the 21st birthday. Because transition at grandparent age 42 (for example) would require $400 one-time contribution to catch up with late enrollment, rising to $28,000 for someone aged 65, it might be better during the transition to assess $200 a year for three years to latecomers, so as to reduce the even greater cost of even later joiners (over age 40) to the plan.

The latest of latecomers must be enticed, however, because they are the ones closest to activating the transfers, and hence represent the most important support to enlist to an innovation. That $28,000 seems like a high figure, and should also be investigated. Although it is only one of three cost components, paying for children is the most stubborn one, requiring the greatest contortion to resolve. The cost of the last year of life can be obtained from Medicare, and although the premium of Catastrophic coverage will vary with the deductible, its costs have been well worked out in the past.

The plan is not entirely complete: it offers the three components of the benefit package, the intergenerational funding mechanism, the HSA transfer mechanism, and the passive investment concept. How they are linked together is negotiable.

Its two important uncertainties are the size of the deductible, and the net investor return on investment in index funds.

Proposal 25I: This is voluntary Tri-Challenge Basic Coverage. Whether to make it mandatory, whether to subsidize it for the poor, and whether to replace Obamacare with it -- are political decisions, not questions of insurance design.(2882)

(2737)

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