My name is Steven Trobiani, M.D. I am the author of Sustainable Healthcare Reform: Harnessing the Power of Capitalism to Fund Our Social Needs, the host of the radio program Sustainable Healthcare on Salem Broadcasting 1570 am, and the chairman and president of Politics and Healthcare Forum, a 501(c)(3) educational nonprofit established by me in 2013. Sustainablehealthcarereform.com is the online arm of Politics and Healthcare Forum. It is the mission of Sustainable Healtchcare Reform to reclaim control of our healthcare.
For decades the health insurance industry and our government agencies have interposed themselves between our doctors and us. They have told us that we lack the judgment, knowledge and sophistication to manage our own healthcare. They have told us that our doctors cannot be trusted to act in our best interest. With this in mind, they have erected a healthcare model in which the health insurers and our government manage our healthcare. This has left us with fewer and fewer choices and has left our doctors with less and less autonomy in determining our treatment options.
This managed-care model for healthcare was sold to us under the guise of containing cost. It has never done so. From its inception in 1980 (when healthcare expenditure per capita was $1,110) it has driven healthcare costs into the stratosphere as the following chart illustrates.
While the insurers and the government will point to the need to further reduce healthcare delivery costs to make healthcare affordable, it is a fact that healthcare delivery costs, with the exception of pharmaceuticals, have been flat for 20 years. The real driver of healthcare costs for the last 20 years has been the cost of managing our healthcare as illustrated in the next chart.
Both our population and the number of physicians in the U.S. increased 125% between 1970 and 2009. However, during this same period the number of administrators in healthcare increased over 3,000%. This increase between 1992 and 2009 correlates precisely with the extreme rise in the cost of healthcare in the U.S. when compared to the rest of the world as illustrated in the previous chart. By my estimate, we now spend more annually to administer our healthcare than we do to deliver our healthcare.
ObamaCare has only made this situation worse. By imposing a 10% excise tax on the largest health insurers, ObamaCare has guaranteed that our health insurance premiums will increase by a minimum of 18% per year to allow for this 10% tax, a 3% inflation rate, and a 5% profit to be passed through to us. Little wonder that our government now predicts that Americans will be spending $1 out of every $5 on healthcare by 2024.
What I am proposing is elegant in its simplicity. First,
after 40 years of failing to contain cost, it is time to recognize that the
managed-care model for healthcare has failed. This model needs to be scrapped.
Since ObamaCare is based on the managed-care model, ObamaCare needs to be
scrapped as well.
Next, we need a new paradigm for the finance of healthcare. For too long we have forced the healthcare needs of our population to fit within a predetermined available set of funds. This is senseless in a capitalist society. We can and should create the funds to more than exceed our healthcare need. To do so, I have created the following employer-based system.
This system has the following 5 components:
The HSA account is funded by pre-tax payroll deduction. Using 2016 contribution limits, this would amount to $128.85 deducted every 2 weeks for an individual or $259.62 deducted every 2 weeks for family coverage. The entire HSA contribution for any given year must be exhausted before employer HRA funds are utilized. However, this is the only cost for any employee. There are no insurance premiums to be paid, outrageous deductibles to be met, or endless copays at the doctor’s office.
Therefore, the maximum cost for any employee is the individual or family HSA contribution. Since the HSA is owned by the employee, not by the employer, this is a remarkable benefit for young, healthy employees. So Millenials, listen up. If you are a young, healthy employee who uses no healthcare over the course of a year, you pay nothing to be fully insured over the course of that year. The funds deposited into your HSA account remain in your HSA account and roll into the following year where they remain in the account untaxed. The unused funds in the HSA account can be invested and the investment returns are also untaxed. Do this for 10 to 15 years and the annual investment return on the funds in your HSA account can replace your annual HSA contribution being made via payroll deduction. From this point forward, as long as your investment return on your HSA account exceeds your annual contribution, you can elect to replace your payroll deduction with those investment returns. You now pay nothing to be fully insured. This is the path to truly free healthcare, not the socialist schemes being sold to you by the Democrats that will raise your taxes to unmanageable levels and still leave you at the mercy of the bureaucrats who will ration your healthcare. Of course, if you leave your employer for any reason, your HSA account moves with you.
In the employer-based system that I have created, the HRA account is funded by the employer with untaxed revenue and is used to pay healthcare claims for any employee after his or her individual or family HSA annual contribution has been exhausted. HRAs currently exist and current law places no limit on the amount that an employer can deposit into an HRA. However, once the funds are deposited into the HRA they can only be used to pay healthcare claims. If the funds are used for any other purpose, the employer is subject to taxation and fines on the funds removed from the account. Current law under Section 419 of the IRS Code also provides for taxation of any funds remaining in the account beyond what is needed to pay 13 months worth of healthcare claims.
Companies that self-fund healthcare currently utilize HRAs to do so and self-fund because it is about 30% less expensive to do so when compared to the cost of purchasing health insurance for their employees. Recognizing this, employers limit their HRA contribution to what they anticipate spending over the course of a year.
My model will require changes in the laws governing HRAs. Presently, employers are prohibited from coupling an employer-funded and owned HRA with an employee-funded and owned HSA. Changes in the laws governing HSAs and HRAs will therefore be needed to enact the model that I have created. Furthermore, it will be necessary to amend Section 419 of the IRS Code to eliminate taxation of retained funds in an employer owned HRA if we are to create the funds to exceed the need. Were Section 419 of the IRS Code thus amended, companies could deposit into an HRA account the exact same funds that they would otherwise spend on a health insurance policy from a traditional insurer. However, they would now retain the 30% previously saved in their HRA account untaxed. Do this annually along with an 8% return on investment of those funds and the average company with 100 employees will have grown an HRA account in excess of $13 million over 15 years. At this point, the investment return on the account is able to replace the employer’s annual contribution and the employer no longer need fund the account. As long as utilization rates do not change, the account will continue to double every 15 years even without further employer contribution.
The advantages of this model to the employer are numerous. Health insurance premiums have doubled over the last decade and are likely to double or triple over the next decade. Therefore, instead of spending 2-3 times more on healthcare in 15 years, the employer will have no healthcare related expenses. This will free up capital to expand the business, develop new products or service lines, eliminate debt, increase advertising, hire new employees and/or increase wages.
The HRA account is an asset owned by the business and consequently increases the value of the business. If the business is publicly traded, this should improve the share price of the company. If the business is privately held, this is an asset to be factored into the value of the company when and if the company is sold. The funds retained in the HRA account can also allow the employer to initiate meaningful preventive healthcare programs that will further limit employee healthcare expenses, reduce employee absence due to illness and improve productivity. Finally, the account doubles every 15 years, so individuals retiring after 30 years or more with the company could retain coverage in retirement and thus lessen the burden on Medicare.
A third party administrator (TPA) is needed to process healthcare claims and pay the healthcare professional providing the service. This can be largely automated and should account for no more than 10% of total healthcare cost. The TPA is hired by the employer and paid by the employer.
To prevent a catastrophic claim from derailing this plan, the employer also purchases a stop-loss policy. This is generally a low-cost group policy that provides payment for healthcare expenses after claims paid by the company exceed a set amount. In addition to protecting the employer from catastrophic loss and insolvency, these plans protect the employee from loss of healthcare coverage in the event of catastrophic claims.
Finally, this model includes a well-managed investment vehicle coupled with the employee-owned HSA funds and employer–owned HRA fund to provide for safe and consistent return on investment.
While this model is built around employers with 100 or more employees, it is not necessarily limited to those employers. Through the creation of a small business healthcare alliance, smaller businesses with from 1 to 99 employees could pool their members for the purpose of obtaining coverage through a stop-loss carrier at a competitive price. Each employee will still retain his or her individual or family HSA and each employer within the alliance will still retain its own HRA to provide payment of claims after each of its own employee’s annual HSA contribution has been exhausted. Such small employers will need to assess the risks versus benefits of self-funding. Yet, even for those employers or individuals for whom the risks of self-funding outweigh the benefits, the competition created by this model will drive down the cost of health insurance premiums and consequently make them much more affordable.
Public programs such as Medicaid will continue to service the healthcare needs of the unemployed. However, the access to care and the quality of care under these programs should improve as healthcare costs are reduced through the elimination of the administrative waste inherent in managed-care. Furthermore, as fewer public resources are spent on individuals whose healthcare is privately funded, the funds available to attend to the needs of the unemployed increase proportionately.
I have spent decades examining solutions to our healthcare dilemma. In that time, I have encountered nothing that makes more sense or offers more promise than this model. Yet nothing will come of this without your help. The socialist arm of the Democratic Party is firmly committed to a government run healthcare system employing a managed-care model. The Republican Party seems equally wedded to preservation of the insurer’s managed-care model. After all, the health insurers spend in excess of $300 million per year on lobbyists in Washington to ensure that the managed-care model continues regardless of which party is in power.
The great advantage to our form of government is that no amount of money from a lobbyist in Washington can keep a politician in office if he or she opposes the will of a large enough block of voters. It is therefore my goal to galvanize voters nationally behind the approach to sustainable healthcare reform.
Your choice is simple. You can continue to pay endlessly rising outrageous premiums for healthcare insurance that pays for less and less each year. You can continue to deal with a bureaucracy that is unconcerned with your needs. You can put your faith in our elected officials in Congress to finally place your needs and concerns above their self-interest. Or you can join with me and create a movement that will force our elected officials to act in the interest of all Americans. Healthcare is not a blue issue; nor is it a red issue. It is an issue that affects us all. And because it is an issue that affects us all, how we handle our healthcare will define our country. I am asking you to join me in building a better model for healthcare. As a registered 501(c)(3) educational nonprofit, your donation is entirely tax deductible. With as little as a single $10 donation from enough people, we can drive a media campaign through print, radio, television and online advertising to force the changes in our tax laws that will enable us to create the funds to exceed our healthcare needs.
With your support we will restore the doctor-patient relationship vital to responsive healthcare and eliminate the intrusion of managed-care bureaucrats. With your support we can and will have unlimited access to high quality, affordable healthcare. With your support we will build a better future for not only ourselves but for generations to follow. Sustainable healthcare reform is within our reach. Donate now and join us today to make it a reality.
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"Change is coming to Health Care. The more our lawmakers are exposed to solid information about Health Care along with realistic models to change it, the better off we can all be. We have seen the power of grass roots movements in our recent elections. The same is needed for meaningful Health Care Reform. I became a member of the Sustainable Health Care Reform Organization, as it is my chance to have my voice heard and to learn more about it." ~David Berdahl,