The health insurance system fails most Americans, according to a new survey from the Kaiser Family Foundation. Nearly 6 in 10 insured adults have trouble using their coverage. Within that group, nearly 1 in 5 was unable to get needed care.
It's tempting to see this survey data as proof that health insurers aren't doing enough to meet the needs of patients. But there's another way of looking at this situation — one that could point the way to a saner, more dynamic healthcare system.
The problem with health insurance isn't that insurers do too little. It's that patients expect them to do too much. An arrangement in which people paid for more of their care out of pocket and used insurance only for medical catastrophes would eliminate much of the bureaucratic sludge that makes our health insurance status quo so frustrating.
And by enhancing efficiency in the healthcare market, it could yield higher quality care at lower long-term cost.
If this approach to healthcare economics seems counterintuitive — or even radical — it shouldn't. Most forms of insurance function in precisely this manner.
Auto insurance protects drivers from the costs associated with catastrophic events like crashes. The cost of routine maintenance, like oil changes and tire rotations, comes out of the car owner's pocket.
Similarly, homeowners insurance tends to cover the cost of repairing or replacing a home in the event of a disaster, such as a fire or tornado. No one expects to file a claim for reimbursement of the cost of a new coat of paint.
And yet, what we refer to as "health insurance" in the United States bears little resemblance to these other kinds of coverage. Patients generally expect their health plan to cover even the most minor medical expenses, from annual check-ups to generic prescription refills.
A better description for American health coverage would be "pre-paid medical care."
By inserting a third-party payer into nearly every healthcare transaction, the current system distorts the market dynamics that might otherwise lead to lower costs, higher quality and easier access.
More than that, it gives insurers an incentive to avoid paying. It should come as no surprise, then, that so many insured Americans struggle to access care.
The most reasonable response to this situation isn't to demand or even require more comprehensive benefits from insurers. It's to reduce the number of treatments and procedures health plans cover — and encourage patients to pay for routine expenses with their own money.
The most promising mechanism for facilitating this model already exists — in the form of health savings accounts.
HSAs are triple tax-advantaged. People with high-deductible health plans can deposit up to $3,850 for an individual or $7,750 for a family this year tax-free. Those 55 and older can save an additional $1,000 tax-free. Any money withdrawn for medical expenses is tax-free. And any growth that results from investing HSA funds isn't taxed, either.
Today, about 33 million Americans have HSAs.
Raising the deposit caps, or at least drastically raising them, would be essential to empowering patients to pay for more care directly.
Obamacare's insurance market regulations, which effectively ban bare-bones health plans and thus artificially inflate the cost of coverage, would also have to go. The benefits of rolling back these clumsy regulations would be ample.
Imagine a future in which Americans used their pre-tax HSA dollars to pay for routine care up to a specific limit. Any medical services that exceeded that limit would then be covered by their insurer.
In such a model, patients would be incentivized to shop around for the highest-value care. Healthcare providers would have to compete for their business. Health insurance premiums would fall precipitously, since insurers would only be on the hook for catastrophic expenses.
Over time, healthcare costs would plummet, quality would improve, and the amount individuals spent on health care each year would likely fall. Best of all, patients would no longer need permission from their insurance company in order to visit the healthcare provider of their choice.
Such a future isn't as far-fetched as it sounds. Direct-to-patient care platforms, in which doctors provide their services in return for modest cash payments, are growing.
If given the chance, many Americans would gladly break away from the current health insurance model — and stop handing so much money to third-party payers for a job they can do themselves.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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