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Medical/Retirement Savings Accounts

One of the frustrating things for me this year is watching Republicans going up against health care “reform” unarmed.   Not that a single man can’t stop a tank every now and again, but let’s be serious, this is open warfare and the Republicans have fewer novel ideas than a Buick engineer.    HSAs used to be a Republican trial battle cry, pre-9/11, but  was quickly abandoned along with every other useful domestic idea for “Let’s just kill Taliban!”.    And here we are, with no one seeming to be able to muster anything more useful than “Hell no!”

There is something better than “hell no” and it’s called a Medical/Retirement Savings Account.   Oh, sure, it’s probably unconstitutional on some level, but not nearly so much as Social Security, Medicare or ObamaCare.  It is something behind which conservatives can rally, however, for a number of reasons.    Here is this idea, unedited, from my stint at American Solutions, back before I realized it was all about promoting Newtwear.

Medical/Retirement Savings Accounts

By JohnAshman

Solution Solves
Income tax complexity, income tax inequity, healthcare,
retirement, college funding, home ownership, social security
Solution Overview
Combining a ~25% flat tax with 100% deductable for the first ~$10,000 (per adult) and ~$2500 (per child) of the tax bill which must go into a Medical/Retirement Savings Account.   The account is usable before retirement age for medical expenses and after retirement for all expenses.   The account would be held in a banking institution or in a stock account.   The primary advantages are that all working families now have their own health coverage and, because there is an efficient cash based “infinite payer” system, health care providers will compete for providing health care at the lowest possible cost with low overhead.

Section One
Cost of this Solution
The initial cost to the government would be essentially zero as the program replaces virtually all of current social security, welfare, medicare/medicaid programs.   However, the cost of healthcare due to cost reduction and competition would quickly drop to less than 50% of current spending, as little as 25%.   This would cause an economic growth spurt as more money moves into the private sector, away from healthcare and more towards services and durable goods and providing a sharp rebound in tax revenue after a few years.   You can see the cost reductions in other countries where cash payment is common and healthcare costs can be as little as 10% of American healthcare.
Section Two
Key Facts/Specific Polling Data
We know that cutting out administration costs alone would save about $1000 per person alone.   This doesn’t include the cost of the government run social security system and medicare/medicaid system.

We also know that procedures that are paid by the healthcare recipient remain stable or decrease while those paid by government or insurance go up.
And some doctors are finding that dealing directly with patients changes their practice for the better.

Dr. Robert Berry had enough of the hassles of insurance companies and Medicare and Medicaid, so he decided to stop taking insurance. Instead, he offers his patients a price list, with low prices. How often have you seen that in a doctor’s office? With visits often as low as $40, it’s hard to see how he makes any money off it.

But Berry said, “Last year I made about the average of what a primary care physician makes in this country.”"

Section Three
Proposed Metrics for Measuring Success for this Solution
Because MSRA fund will be handled by banking institutions, raw data of healthcare expenditures will be readily available, as well as savings data.
Section Four
Strategies
One strategy for making the most of this program would be to foster the creation of Limited Liability Medical Clinics that have regulated limits on medical malpractice liability in order to limit the legal profession and its negative impacts on costs and procedures.   By legally limiting and supervising payouts to injured parties through a special oversight system, those who cannot afford to pay excessive costs can choose to accept more limited payouts or can choose to buy malpractice insurance of their own volition in advance of having a procedure.
Section Five
Opponents’ Lines of Attack
Opponents will complain that Social Security, Medicare, Medicaid and other government institutions are ‘sacred’ and ‘irreplaceable’.   This will be easy to test.  Every person will have the option each year to pay into Social Security and Medicare/Medicaid or can invest in their own MRSA.   The public can choose which works best for their family.  The best system will win in the end.
Section Six
More Information
There are additional benefits to this program.

1.   The money is owned by the participant.  There can be no fraud as they can only defraud their own account.   This means that insurance fraud as we know it goes away.   This is as much as $300 per person per year.
2.  Because each child will accrue well over $50,000 before graduating high school, before healthcare costs, parents may use this leftover money to pay for college or other education upon request, up to a specified amount, as a deposit their children’s home home or deposit into their children’s own MRSA.
3.  Because most healthy, young working couples starting out will have accrued up to $100,000 by the age of 25, each person or couple may use part of this money, up to a specified amount, for the deposit on a home, dramatically increasing home ownership and decreasing the age at which it occurs.
4.  Participants may dip into their funds for emergency uses, up to a specified amount and time period, generally for periods of unemployment, reducing the need for welfare while keeping incentives to find work high.
5.  Rather than using insurance as a backup, all of the accounts in any bank or other system would have a pool system.  Once an MRSA owner is forced to use more than $10,000 from their account for health expenses, 75-90% of the spillover is paid out of the pool.  The pool’s monthly expenses would be divided up amongst the account owners each month.   If there are 1000 accounts and the pool uses  $100,000 that month, then $100 is automatically debited from each account that month to cover the cost of catastrophic losses.
6.  As an option, a business program could be created that would be able to replace expensive workman’s compensation insurance with a similar “EmployeeCompensation Savings Account” that they administer in conjunction with a legal representative in place of paying into the social security program.   This lowers the cost of creating more employment and increases incentives for reducing injured employees.   It also puts money into the general market creating investment
opportunity.
7.   There would be more money in the stock market and in the banking system for loans and investments, helping push forward the economy.
8.  Having a reasonable amount of children for your income is incentivized, having more than is reasonable is not.
9.  Accountants, bureaucrats, insurance companies add nothing to the wealth of the economy.   The need for all of the above is dramatically reduced, forcing many to find jobs that add to the economy (no offense, but shuffling papers or financially harming doctors isn’t terribly helpful).
10.  Medical care costs drop dramatically as health care providers become much more efficient and focused and everyone gets a “cash discount”, not just insurance companies.
11.  Deadbeat parents can expect to have a reasonable amount of money taken from their accounts to help care for their children.
12.  Costs of current retirees and those who elect to stay on the program will be funded by keeping the employer contribution as a buffer until the system is 100% switched over to the MRSAs.
13.  Account owners must keep approximately $10,000 in the cash portion of their account, but may take overflow and put that in a mutual fund or other stock account to gain higher rates of return.
14.  Bill padding by doctors and unnecessary procedures would drop dramatically, as would overmedication that is now common.
15.  Banks, now competing to draw MRSA customers, would naturally begin to educate customers on ways of saving money so as to keep their insurance pool expenses low.   By serving as a ‘health concierge’, banks win by helping to provide lower health costs and insurance pool charges to their customers.
16.  Prescription drug costs would drop precipitously as customers naturally seek the best prices, are reluctant to pay exotic prices and investigate other drugs or methods of solving their healthcare issues.
17.  Testing facilities will begin to market their services directly to the consumer with much lower prices and hospital/physician markup, possibly offering testing packages to promote preventative health care.
18.  Insurance company style risk aversion is eliminated as banks will not have access to medical records or the ability to refuse an MRSA customer.
19.  Healthcare and healthcare product providers will sign up for a more exclusive Visa/Mastercard style debit card that tracks all expenses and allows MRSA owners to pay for any and all allowed medical expenses easily.   Allowable items will be electronically tagged as MRSA eligible and the option will be made to pay for these items with the MRSA card at the register.   Software will allow you to pay for the healthcare items with the MRSA card, the rest of the items with other payment.   Itemized receipts will automatically be uploaded into the MRSA account, allowing the bank to do a quick audit if the account triggers an insurance pool ‘overdraft’.   The healthcare provider would be required to match the name of the person with a family member.
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20.   At the end of the year, account holders can use their account to pay or help pay for the healthcare of others as long as it does not trigger the pooling feature of the system.   This allows charitable donation of healthcare services or products for people not directly covered by the MRSA program, such as the homeless.
21.  Because MRSAs get the young and uninsured into the program, everyone contributes a little to the healthcare system, even if they use no services that year, by contributing money to the insurance pool.
22.  Because health care costs are lowered, some people may elect to pay for some or all of their yearly healthcare, short of extreme expenses, out of their own pocket, in order to leave as much money as possible in their MRSA.
23.  Because doctors are freed from the hassle of dealing with insurance and government, they are far more likely to set up private clinics and practices, both in big cities and smaller towns, effectively decentralizing healthcare away from costly hospitals and creating greater access to care.
24.  Over prescribed procedures, such as C-sections will drop precipitously as healthcare consumers more carefully weigh options and risks.
25.  Because health maintenance costs could be deducted, preventative healthcare clinics, such as health clubs for seniors with on staff physicians will likely sprout all over the country, allowing more health monitoring and healthier living.
26.  Any working person would be able to put enough money into their accounts to manage their health and their retirement, though some tweaking of percentages, deductions and caps may be necessary.
27.  There are several possible ways of dealing with people that, for whatever reason, cannot put away significant money into an MRSA – those that can’t work, the mentally or physically disabled, etc.
a.  The process could allow ‘gifting’ of medical care or even a portion of someone’s MRSA funds to needy family members, friends or even charity, the latter acting as a management team to help folks in need.
b.  A portion of unused money from deceased MRSA holders could be put into a pool for the indigent.
c.  A person could potentially be allowed to ‘adopt’ someone in need by claiming them as a dependent and provide them with an account in their name if they make enough money to take another deduction.   These people would have to be someone who are unable to contribute significantly to an MRSA and are dependent on others for assistance.   This allows family members or friends to assist each other as community members, helping to create more inter-reliance and family ties, rather than rushing to the government for aid.
d.  Once current social security holders have passed on or have been weaned from the old system, a smaller employer ‘contribution’ which is now unused could be used to take care of only the most needy in society, creating universality by extending the program artificially to the <5% of the population that cannot fully participate easily.
e.  A national sales tax on interstate only retail sales could generate a significant amount of revenue while helping to level the playing field for local businesses.
f.  ?????
28.  UHC creates less expense for the poor, but more expense for the upper classes.   MRSAs drop the price for everyone, especially creating a low cost cash based health care business that will dramatically help even immigrants who now just pass on the cost to taxpayers and hospitals since the they currently have no hope of either affording insurance or a hospital bill.    By creating a low cost method that favors cash rather than paperwork ridden insurance payments, everyone benefits, even those not directly in the program.  Especially those not directly in the program.   This then takes the weight off of the rest of the system, multiplying the benefits.
29.   Employers would be responsible for filing the appropriate taxes and declarations for each employee and depositing MRSA funds into the account of the employee’s choice.   Investment firms would do essentially the same thing, though personally, I would eliminate all capital gains taxes as that punishes investment.   I think people should be taxed on actual monetary income that they receive, such as stock dividends, just as businesses should not be taxed on growing their business, just on growing profits, but I digress.
30.   Larger businesses could create their own semi independent MRSA ‘bank’ if they choose, with which they could provide extra health benefits to employees or enter into agreements with nearby providers to offer their employees lower costs or annual checkups.  Or the company could create their own health concierge services to help their employees get the best deals on health care.
31.  Fraud is extremely easy to combat.   There is little incentive for fraud by MRSA owners as, unless they can pad the bill dramatically, there is no payback.   Will an MRSA owner work a deal with a chiropractor to rack up $20K worth of bills in a year?  Not terribly likely as going into the pool would likely trigger an audit by the bank to verify the costs.   And the chiropractor would have little to gain in the transaction and a whole lot to lose.   There is little incentive for a thief to try to grab account numbers to try to buy healthcare items.    Address and account verification, e-mail receipts for all purchases and/or picture ID requirements should easily squash any significant fraud attempts.    A ‘verify by e-mail’ or ‘verify by text message’ system could easily be implemented, making MRSAs far more fraud resistant than a typical Visa card.
32.   Insurance companies, eager to stay in the game, will become far more competitive to try to keep people from going to the MRSA system from regular SSS/Medicare/Insurance system.   Therefore, those that fear making the jump will still benefit from the competition
33.  Democrats, eager to keep people from abandoning SSS will become much more proactive and creative at reforming the existing system to keep people in the system, which also benefits those that remain with the older system.
34.  The federal welfare system can piggyback on some of the systems created for the MRSA system.   Rather than sending out welfare checks, an MRSA style card, with built in limitations could be used.  This creates itemized statements and tracks where and how welfare recipients spend their aid and also lock out certain types of purchases.
35.  Similarly, Medicare/Medicaid and government health insurance programs that remain would benefit by offering recipients MRSA program cards that allow those on the old system to pay doctors as quickly and easily as an MRSA owner, allowing the government to reap the same benefits of simplicity and price offered to individuals.
36.  Employers who wanted to offer additional benefits to their employees could create business MRSAs that covered their employees completely, allowing them to keep most of their money in the MRSA or offer companion programs that allow employees to put more money into their MRSA than required or add bonuses into their account.
37.   After the age of 65 or so, a second credit card would be created for each person to use for non-health related living expenditures.   Similar to a social security check, the monthly expenses would be capped based on calculations intended to keep each person from running out of money before they die.
38.  In order for someone to retire earlier than the preset age for the MRSA, they would need to save money in a separate account to cover them from the age they retire to the age when the MRSA’s retirement fund would activate.
39.   In order to handle cases where people outlive their accounts, the pool would activate full time as soon as their accounts hit zero.    The pool would replenish itself from the rest of the accounts in the system.   A “liquidation fee” could be charged to the account when an account holder dies with leftover funds.  This fee could help replenish the pool’s costs for long living members, while still leaving monies that could be passed on to descendants.
40.  Veteran care could receive the biggest boost from the MRSA system.  Rather than continuing to fund specialized veteran care, MRSA type cards could be supplied to veterans to handle their care through normal healthcare providers.  The amount usable each year could be tailored based on the obligations made by the armed services.    For instance, soldiers permanently injured could have more open ended MRSA cards, whereas other service members, while others simply get a supplemental card to take care of a preset amount per year.    This would allow the sell off of most VA buildings and a dramatic reduction in overhead and cost.
A few case studies:
Steve is a high school grad, 18 and single, gets paid $10/hour, 40 hours a week and grosses $20,000.  He pays zero taxes to the government, but pays 25% or $5000 to his account and averages $2000 per year in healthcare costs over his working life.    He puts $25K of his account down on a house at the age of 28.   If his pay never increased, he remained single and he worked for 50 years and got 4% interest in the bank, he would retire with about $360,000.
George and Emily go to college for 4 years.   They make negligible money until the age of 23 and get married after college.    They get relatively average paying entry jobs and make $80,000 between the two of them.   Because they each have a $10,000 deduction, they are just at the dividing line of not paying any taxes and are putting away $20K into the bank.   By the time they have twins at 28, their salaries have improved a bit, to $100,000 combined income and the kids allow them to deduct an additional $5000, meaning they still just avoid taxes.    Within the first 5 years, they’ve socked away $100K.   They take out $30K for a down payment on a home and $10K for the birth of the kids, dropping their account to $60K.   For the next 18 years, they are putting $25,000/year away, spending about $5000 on average per year for family healthcare.   At the age of 46, their kids are off to college and they have $650K in the bank after healthcare costs.    They take out $100,000 for the cost of their kids’ educations, but offset virtually all of that of that over the 4 years with their deductions and interest.   At the age of 50, their contributions are back down to $20K and their total income is now $160K.  25% of their income is $40k, so they are paying $20,000/year in taxes.   At 50, they have $650k in the bank and are contributing $17k after an average of $3000/year in  medical expenses.   They retire at 60 with $1,175,000 in the bank and never even dabbled in the stock market.  They never made more than $80,000/year each and only paid $100K in income taxes closer to the end of their career.
Linda has paid $100K into social security over 20 years.   She decides to switch to the new program.    At $60K/year in salary and with two kids, she pays no taxes under the new program so she elects to switch.   She puts about $12,000 net per year into a mutual fund that grows an average of 8% each year and retires with close to $1M in the bank.  Should she live long enough to use up her savings (not likely!), she will be able to take money from SS in the normal fashion.   If she does not, 50% of the remainder can be willed tax free to her children’s MRSAs.   The other half goes to a fund for healthcare for the disabled or otherwise unable to work and save significantly towards an MRSA program.
Gordon is quite successful.   He made $2,100,000 last year.   Like most people, his MRSA will grow to about $1M over time based just on he and his wife’s deductions.  He knows he can’t keep his lifestyle up in retirement without help.  He has the option of putting extra money into his MRSA or any other vehicle he chooses.  His gross tax bill is $525,000.  Because he can only deduct $25,000 for he, his wife and his kids, he pays $500,000 in the form of a flat tax on his income.  He can’t deduct his lavish home’s interest or other lifestyle expenses, so while his tax rate was higher the previous year under the more complex tax code, he actually pays a little more this year because he has fewer deductions.   On the other hand, he didn’t have to hire a room full of tax attorneys, nor go through elaborate plans to try to lower his taxable income, nor worry about discrepancies with the IRS.
Eduardo is a Mexican immigrant, living purely on cash from the work he does.   He can’t afford $500/month for health insurance, nor all but the most basic healthcare and can’t get a social security number to create an MRSA for himself until someone solves this problem.   However, with the MRSA system, healthcare cost has dropped enough that he can now afford a lot more healthcare than previously.  Moreover, since his employer has a business related MRSA for workman’s comp purposes, he can extend some basic coverages to Eduardo and his family so they don’t need to ‘dine and dash’ at the emergency room.
Section Seven
Wisdom from Dr Robert Berry…..
I never knew of Dr Berry’s PATMOS philosophy until something Smitty said caused me to go out and look for information to bolster some of my ideas.   I hope he doesn’t mind me posting this from his website as everything he does is an almost ideal proof of concept  -

http://www.patmosemergiclinic.com/index.html

PATMOS means Payment At The Moment Of Service.  We request that everyone treated at our clinic pay when they are seen.   This keeps our overhead at a minimum since we do not have to incur the costs associated with medical billing.  We then are able to pass this savings on to our patients.

Payment At The Moment Of Service can give patients the freedom to choose the physicians they want when they want.  They are not herded into some pre-selected panel of healthcare providers that changes at their insurer’s whim.  Patients are then free to manage their own care, while insurers can concentrate on managing risk.

Payment At The Moment Of Service can enable physicians to provide the highest quality of care without having to justify medical decisions to impersonal government and managed care bureaucrats who are neither qualified nor licensed to practice medicine.

Payment At The Moment Of Service forces patients to seek out the best value for their healthcare dollar.  Likewise, it forces physicians to partner with patients in delivering that value.  The addiction of both to OPM (other peoples’ money) – i.e. third party payers – is then broken.   This change in mindset for both patient and physician, if applied to the hundreds of millions of outpatient doctor-patient interactions yearly, could result in significant savings in health insurance premiums for everyone.

Payment At The Moment Of Service is for routine medical expenses that should be anticipated as a matter of everyday living much the same way routine car maintenance is budgeted.  Insurance, then, can cover the unexpected calamity or large medical claim.  It seems that some people have been lured by the siren songs of low co-pays and medical deductibles and discover their mistake only too late. They crash on the rocks of personal bankruptcy because their particular ailment is excluded in their policy’s fine print.

Payment At The Moment Of Service for small medical claims might currently be just a quaint, old-fashioned idea reserved for the fringe of the healthcare marketplace – people with high deductibles, religious medical cost sharing plans, or no insurance at all.  However, there is a perceptible shift in the healthcare climate today fueled by increasing costs, patient and physician discontent, and people without insurance.

It should also be mentioned that PATMOS has other significance.

As it was a Greek island to which political prisoners were exiled during Biblical times,PATMOS is here today for the politically exiled within our healthcare system – the 47 million or so Americans without health insurance.

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