A High-Low Approach for a New Kind of Health Care

Can the Affordable Care Act’s goal of widespread coverage be met while making the health care system more affordable?  Specifically, can a workable policy be crafted to (a) offer universal health care coverage for serious illnesses for everyone in the country; (b) initiate universal wellness screenings for lower-income households that receive such coverage; and (c) inject market-based pricing that will cut federal and private health care costs — all without resorting to mandates or a single payer system?

The Hi-Low Proposal: Permit insurance markets to sell catastrophic policies to everyone in the country and pay lower-income participants to buy it. Obamacare forbids selling most catastrophic policies now. All one needs to do to access a subsidy for a catastrophic policy is undergo annual screenings and follow the medical directives for the care indicated.

Next, fund Health Savings Accounts (HSAs) for lower-income citizens who obtain a catastrophic policy. Qualified recipients would receive an annual HSA contribution of $1,000 to $4,000. Funds contributed to HSAs that are used to pay health care bills directly must be spent before a participant can access any other federal health care benefit. Think of them as “first-out” HSAs. Senators Cassidy and Collins’ recently introduced plan includes a tax credit tied to HSAs to pay for the insurance premium for those living in states that drop the ACA. The High-Low proposal would directly fund HSAs too, but means test them so federal funds can be directed where they are needed most, i.e., lower-income Americans whose only insurance coverage may be a catastrophic policy.  For middle-income households, at least until health insurance premiums drop to their pre-ACA levels, Congress should increase HSAs contribution limits and even consider making direct contributions.

Funding HSA’s in this manner will inject badly needed pricing selectivity as recipients shop for the best health care prices using HSA cash. As a result, costs for everyone else should drop. Owner-participants of these new HSAs will have a stake in financing their health care and new relationships with financial institutions. By permitting both participant and employer to contribute additional tax-free funds, these accounts will build over time; in ten years, healthy participants can accumulate significantly more than $10,000, perhaps as much as $30,000 to $40,000, and even beyond that after investment returns. At some point, the accounts could be withdrawn as long-term care benefits or even as retirement supplements for healthier participants who manage their health resources wisely.

The Politics: Key Republicans want to ensure that current ACA policyholders do not lose coverage. With a well-executed High-Low option, more people will have catastrophic health care policies than now have ACA policies, and lower-income people will have HSA funds to pay for less serious care or insurance premiums. It may well be that a low-cost catastrophic plan coupled with a well-funded HSA owned by a participant is more attractive to an uninsured citizen than an annual ACA subsidy paid directly to an insurance company for a policy they think is unneeded.

Note that the ACA already permits lower-income people under 30 to purchase catastrophic policies and offers three free annual screenings per year. The High-Low health care proposal would simply expand this option to include more people. It would also call on participants to play a part to reduce health care costs, i.e., visit a doctor or a PA at least once a year. These regular screenings will drive down federal health care costs dramatically.

Providing affordable catastrophic care would also meet one of President Trump’s health policy goals shared by most Americans: slashing the bankruptcies of individuals in dire health circumstances.

The Economics: By restoring consumer parsimony with “first-out” HSAs, cost savings for federal health care programs could be significant. Injecting market-based health care pricing by expanding HSAs combined with early screenings could save enormous Medicare and Medicaid expenditures and reduce health care costs for everyone else. Further, this “first-out” feature means that much of the seed money in HSAs for participants who get sick will get spent before other federal health benefits are tapped. Therefore, much of the federal HSA contributions for such patients will be effectively cost-free to the government, which would otherwise pick up such tabs. Finally, money saved by ending current ACA spending will also be available to offset the High-Low program costs.

One More Thing: Giving low-income people a connection, perhaps their first meaningful one, with a financial institution by seed-funding HSAs can start them on the road to badly needed financial security. Banks and credit unions may find that low-income persons with new HSA accounts can be valued customers moving them out of the abusive shadows of fly-by-night lending and other predatory financial snares they now face. Such people will not only get a new banker for their new accounts; they will also get meaningful catastrophic insurance and health screenings to boot.

Mark Mackie is former Chief Counsel for the US Senate Committee on Rules who is now in the export business and practices law in the Dallas/Fort Worth area. Steven Kuzmich also practices law in the Dallas/Fort Worth area and writes for www.purplepartysolutions.com.