Thursday, October 21, 2004

Guest Blogger: The Lowdown on Healthcare

This summer, a fellow Rhode Island conservative wrote a column on President Bush's proposed reforms of healthcare plans. I found the column very compelling and informative. Sean is also a fellow Pharmacist and is very active in the community. Thanks Sean for letting me share your column and here it is:

Last week (June 23, 2004), the Wall Street Journal ran a front-page story about a supermarket chain’s decision to offer its employees a new, less costly type of health insurance plan in 2002. Whole Foods Market Inc. is one of the nation’s fastest growing grocery chins and one of the few companies nationally to adopt what could be termed a High Deductible Health Insurance Plan (HDHP). Like most companies, Whole Foods was grappling with employee healthcare costs, which were skyrocketing and threatening the company’s financial success. Enter a HDHP.

So what is a HDHP? A well-constructed HDHP has two important component parts. First, each employee must have catastrophic health care insurance. This insurance protects individuals against any large medical bill. Because catastrophic coverage includes a built in high deductible, the premium to purchase this insurance is greatly discounted. At Whole Foods, the company pays for the whole premium on the catastrophic plan. The employee’s prescription deductible is $500.00 and the medical deductible is $1000.00. The deductible settings can vary and would, of course, impact the premium of the catastrophic insurance.

The second component is a medical savings account. Here, the employee is able to save dollars, in the event that they need funds, for any medical costs within their deductible. At Whole Foods, the employer deposits between $300.00 and $1800.00 per year (Based on longevity of service) into each employee’s medical savings account. The money can be carried forward from year to year.

The Results? After the first year of embracing this new design, employee medical claims fell by 13% and 90% of employees had money left in their medical savings accounts (average of $560.00 per person). This is in a nation that is now experiencing double-digit annual increases in the cost of health care. (Note that for every 1% increase in healthcare cost, 300,000 Americans enter the world of uninsured citizens). The reason for Whole Foods’ success is very simple. The plan places price sensitivity squarely in the hands (or wallets) of each employee. This is the fundamental principle that properly economizes resources. It is the impetus that minimizes waste and improves productivity and efficiency. Price sensitivity is also the element most missing from our increasingly socialistic style of healthcare system.

HDHPs are almost antithetical to so called universal healthcare plans. In countries around the world, socialistic national healthcare has been adopted and failed miserably. Canada’s system is one such example. Although boasting that every citizen has an insurance card, in 2001 Canada saw 10,000 residents wait 15 months or more to have surgery. (Remember: Canada is only 1/10 the population of the US). They now have women waiting weeks to months after undergoing breast cancer surgery to begin radiation therapy. Why, you ask? Because their healthcare system has no price sensitivity, utilization has risen dramatically in Canada (and every other nation with comparable healthcare management) thereby creating an incredibly wasteful and costly system. Diminishing quality in healthcare and an inordinate increase in demand is a natural occurrence with socialized medicine. The reverse is true when price sensitivity is introduced.

President Bush is promoting HDHPs on the campaign trail. He hopes to offer tax free medical saving accounts to those who are self insured. These healthcare plans help individuals and every business, both small and large. As doors are opened to make these types of plans attractive, medical costs will slow and more Americans will be able to afford insurance. For example, at Whole Foods, 95% of workers are now enrolled in their healthcare plan, while only 65% were enrolled previously. The turn-around is owed to the fact that the employee premium contribution was too expensive in the past for many to participate. Such is the case now in the U.S., where approximately 43 million Americans are not carrying health insurance. Economizing healthcare by embracing HDHPs, that include reasonable price sensitivity, is the answer to combating rising costs and enabling more citizens to be insured. Raising taxes on “the rich” while continuing our march toward socialized medicine is clearly not the answer.

A price sensitive approach to better economizing our healthcare system is not only important nationally but will be felt locally. Last month in South Kingstown, budgetary issues in the education department surfaced that were either directly or tangentially related to rising healthcare costs. If we can put better healthcare options (I emphasize “options”) on the table for public as well as private employees, wages will be ale to rise due to resultant elimination of waste in benefit packages. This would be a win-win for both employees and employers.

It is inevitable that the type of healthcare plan adopted by Whole Foods will catch on nationally in the private sector. While only 1% of insured American possess HDHPs today, polling data shows that 19% of surveyed companies think that this type of plan is “very likely” to be adopted in the next 2 years, and over 50% of companies think that within two years they are “somewhat likely” to adopt these price sensitive plans. Let’s hope the public sector makes HDHPs at least an option for all employees. Such economizing, along with reasonable tort reform and greater competition amongst healthcare insurers, would be a good prescription for our healthcare woes.

I think that these HDHPs are definitely a viable alternative, if not the answer, to getting more people insured. Let's hope that Bush is successful in pushing this model forward. We never want socialized medicine in this country; and every alternative should be thoroughly investigated.