I Present to You the Perfect Plan to Fix the Broken American Health Care System

Earlier this year I wrote an article on PolicyMic presenting the idea that TRICARE, the health insurance program used by the military to cover active duty service members, retirees, and dependents that do not have access to military treatment facilities; clinics and hospitals could be used as a blueprint to lowering America’s health care costs. In this follow-up, I present the numbers and potential savings that could be achieved to individuals, employers, and the government by adopting the TRICARE model.    

I am proposing the American Health Care Restructuring Act. Like TRICARE it uses private insurance companies contracted by the government to provide health insurance.   

The Plan:

Creates six healthcare districts; Northeast, Southeast, Upper Midwest, Lower Midwest, Northwest, and Southwest. Each district contracts with private insurance companies to offer separate plans for:

Catastrophic – Aimed at healthy individuals who feel a need to only insure against major illness or injury. Lowest premiums with higher deductibles

Normal – Similar to most insurance now offered. Covers preventive and routine care, pre-existing conditions, and catastrophic illness. Plan should include basic dental, vision, and prescription drug coverage. Premiums should be kept low with mid-range deductibles.

Cadillac – Includes coverage of catastrophic and normal plans plus total dental, vision, and prescription drug coverage. Plan could also offer a long-term care option. Highest premiums with low deductible.

Medicaid – Similar to normal plan but coverage based on current Medicaid eligibility. An income-based premium should be assessed.

Medicare – This will be seamless to seniors with choice of either normal or Cadillac plan

To encourage competition and provide for the maximum number of insurance companies to be involved, each contract should be awarded to a different company.

Individuals would enroll in the plan they believe best suits their needs and for which they are eligible.

Individuals will be able to purchase additional supplemental plans as currently allowed through contract or non-contract insurance companies.

Coverage, deductibles, co-pays, and premiums for companies winning contracts should be set by an independent commission comprised of health care providers, hospital administrators, insurance company actuaries, and consumer advocates.  Participating insurance companies agree to accept these rates. Except for Medicare and Medicaid which will remain partially subsidized but at lower than current amounts and contract administration costs, program should involve no government funding.

Encourage the health care industry to develop and implement efficiencies that reduce costs and improve care.

Veterans Affairs and Military medicine to include TRICARE remain separate. 

Paying For It:

As of 2011, employers paid an average of $10, 944 per participating employee per year. Using the latest available information, there are approximately 142 million persons employed with 55% participating in employer-sponsored health insurance. This means employers payover $854 billion to private insurance companies. Employee premiums averaged $4,129 per year or $322 billion. Total premiums paid — over $1.1 trillion. In 2010, total health care expenditures in the U.S. were $2.3 trillion. Of this, $1.1 trillion was Medicare and Medicaid, meaning private healthcare expenditures were $1.2 trillion, just $100 billion less than total premiums collected.  

Because of the increase in customer base to those insurance companies awarded contracts and cost controls put in place by the industry, I see policy costs being greatly reduced to employers and employees. Premiums would be paid to the region administering the contract.

Changes to Medicare must be seamless to participants. To do this, the regions would set up Medicare Fund Accounts. Medicare Part B premiums currently deducted from Social Security checks, approximately $4.75 billion at current level; 2012 Part B premium $99.90 with 47.5 million in Medicare and Medicare payroll taxes, currently approximately $188 billion, would go into these accounts instead of the U.S. Treasury marked for Medicare. Seniors would not be required to do anything differently. Projected Medicare costs for 2013 are approximately $403 billion. Given the current customer base has a projected growth rate of 3% each year through 2020, a huge increase in available customers, insurance companies awarded the Medicare contract in each region should be able to significantly reduce premiums below the current rate. Improvements by the health care industry should also contribute to reduce costs and lower total federal subsidy to the program.

In 2012, total Medicaid costs to the states is projected to be $406 billion with federal costs of $345 billion for a total of $751 billion. Medicaid costs would be reduced to both the federal and state government based on volume of customer base and the initiation of an income-based low premium.

 The American Health Care Restructuring Act is based on private insurance companies, not the government providing insurance. Sizeable increase in the customer base and a collaborative approach to setting premiums and reimbursement rates, plus steps taken by the healthcare industry, costs to employers, employees, seniors, and government should be significantly reduced. The proposed 2013 budget for the Center of Medicare and Medicaid Services is $809 billion. Only 1.2% of that is administration. Since regions will be administering the contracts, this portion of the federal budget should also see a significant reduction.