Wednesday, May 23, 2007

Hypocrite Series: John Edwards' Health Care Plan

In browsing the blogs today, I came across this post about John Edwards' Health Care Plan. Written in the usual inane drivel fashion, I figured there would be no concrete plan to backup the blogger's assertions. Damn was I ever wrong, and here's the link:

John Edwards' Health Care Plan (PDF)

Now in my ideal world, Health Insurance would return to being just Insurance today isn't really insurance. It's more like a warranty where the two parties are in a contest to see who comes out ahead at the end of the warranty term. The difference is that the warranty provider in this case has a limited amount of knowledge about the warrantied device upon which to make a decision on the cost of the warranty. In some cases, they just won't sell the warranty to someone. In other cases, they raise the cost of the warranty to cover the worst case scenario so that they're always ahead at the end of the term.

Insurance, on the other hand, takes care of you when something catastrophic happens. We've lost track of that in this country, and we need to figure it out in all areas of insurance, not just health insurance. You don't use insurance to fix the crease you made in your bumper backing into a light post. You don't use insurance to replace a mailbox destroyed by the neighborhood houligans. And you certainly don't use insurance to pay for routine Doctor's visits, prescriptions, and tests. You use insurance when it's something big....a 2 week hospital stay, a stolen car, or a house destroyed by a tornado.

However, let's be realistic. Neither consumers nor insurers want to dramatically change the system we have today. It makes people happy to walk in, pay their $10 co-pay, see the Doctor, and walk out, and insurers love raking in the dough. If that's the kind of system the country wants, then let's evaluate Edwards' proposal in that context.

Edwards' proposal doesn't depart too far from what we have now, but it makes two dramatic changes. First, it establishes tax credits for health insurance. One of the great inequities of working in America right now is the fact that if you work for a large employer, you have access to pre-tax health insurance and what are called cafeteria plans. Effectively, you can pay almost all of your health expenses pre-tax. For those seeking private insurance (often small business employees), the situation isn't quite so rosey. There's a 7.5% floor below which you can't deduct any health expenses (unless, of course, you're self-employed). That means if you make $100,000 per year gross, you have to spend $7,500 after-tax before you can deduct. Needless to say, I agree 100% with Edwards' plan to provide equity in the tax system for health expenses.

The second major item in Edwards' plan is the establishment of Health Markets. Health Markets sound very much like what MediShare attempts to do for Christians except it does it on a much larger scale with the blessing and participation of the government. The great thing about this is that it allows small businesses to compete with big businesses for employees. Right now, my company can't hire anyone because it can't offer health insurance. We have just a handful of employees, and the owners have had health problems and have coverage through a separate group plan. Monthly premiums could easily top $1,000/month per employee so it's impractical. With Health Markets, businesses can establish their own coverage, establish coverage through a Health Market, or simply pay a portion of their employees' premiums. And, the most important part, is that the health market has to accept you regardless of pre-existing conditions. If we're going to do a warranty system, we need Health Markets or something like them to make it work.

Like I said, I disagree with the approach of extending health insurance as the American version of socialized medicine. It fails to let the market function as it should. If the consumer doesn't pay, they have no motivation to seek better prices or better service. Nevertheless, there are arguments on both sides, and I'm resigned to accept some level of socialism in health care as a result. If it's Edwards' plan or the current system, I'll take Edwards' plan.

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