Source: Forbes
The relentlessly rising cost of healthcare will be a big issue in the fall elections. The cure is free markets, and, to that end, unshackling Health Savings Accounts (HSAs) would be a huge step forward.
In free markets customers call the shots, and if a seller doesn’t meet buyers’ wants or needs, the seller fails. However, that basic fact isn’t true in healthcare. We don’t yet have a single-payer, government-run system—so beloved by the left—which suffocates innovation and controls costs through rationing via long waits for service. But we also don’t have genuine free markets either. Currently, the customer, in this case the patient, doesn’t control the purse strings; third parties—large insurers, hospitals and Medicare and Medicaid—dominate the market.
Without the discipline of competition, costs soar. To control costs, government regulations and mandates grow like kudzu. Insurance companies second-guess doctors and all too often deny coverage. Shockingly, one-fifth of in-network claims are denied; one-third of out-of-network claims are rejected. Reimbursements by Medicare and Medicaid don’t cover actual expenses. The Medicaid system in particular encourages providers to go for volume with quick, indifferent assembly-line care. Fraud is rampant.
Certain solutions proffered by politicians destructively deal with symptoms, such as imposing price controls on drugs, not the underlying cause, which is the lack of free markets. With coverage increasingly costly, employers have resorted to higher deductibles and higher co-pays on plans for employees. Other employers have dumped their plans and opted to have workers get coverage on the heavily-subsidized Obamacare exchanges.
HSAs are crucial to getting sanity into healthcare. Contributions are tax-deductible, assets grow tax-free and money used from these accounts for allowable medical expenses isn’t taxable. Around 60 million people are covered by HSAs.
While the Big Beautiful Bill passed last summer made positive changes, HSAs are still hemmed in by regulations that prevent them from being the powerhouse vehicle for patient-control of healthcare dollars. HSAs should be available to all individuals, whether or not they’re covered by a high-deductible insurance plan or are on Medicare. Contribution limits—now $4,400 for individuals and $8,750 for families—should be tripled. After all, typical family plans now cost $27,000. Any remaining barriers for buying individual health insurance plans by using HSA funds should be abolished.
Other free-market changes include removing restrictions on catastrophic health insurance policies, which have low premiums and provide coverage for big medical expenses. People should also have the freedom to buy cheap, short-term policies that avoid certain Obamacare mandates that make insurance unnecessarily expensive. Currently, such plans expire within a year and, depending on regulations, can be renewed annually for up to three years. Goodness gracious, make these permanent by law and remove the time limits altogether. Everyone should have the choice to buy their own insurance.
Competition works. In Singapore the taxes people pay for healthcare coverage don’t go to the government, but to their own accounts. They choose their policies and the hospitals they use. Providers compete for their business. The result: Healthcare expenses in Singapore come to about 5% of GDP vs. 18% in the U.S., and longevity is higher in Singapore than in the U.S.
