A Modest Proposal

The system I propose functions like a third party or liability insurance. The payouts are minimal, and the members can control them with incentives, penalties, referendums, information, and counseling services. This system encourages long-term savings, keeping premiums low. The self-managed portion of the insurance is the largest part. 80% of the premiums is left in the beneficiary's hands, to be used at his/her discretion. The other 20% is the ‘catastrophic fund’ component, which is managed by a small administration with membership representation. The catastrophic fund is egalitarian among members, while the self-managed account is individual. The separation in personal accounts verifies that the ‘over-users’ could never deplete (or influence) the funds of other members. Each member’s personalized account must be used first before he/she could apply for catastrophic coverage. Most probably, hospital emergency departments will be qualified to define an emergency for the purpose of claiming the catastrophic fund. Even so, the catastrophic fund’s administration will set conditions that must be met before a claim is approved, and periodically set the equal amount due to the beneficiary. You may recognize that this ‘catastrophic fund’ is very different to the one with the same name in the Medicare system. We are living with recession in some areas of the economy, inflation in other areas, and high inflation in most medical services. Inflation is detrimental in any economic system, even more in medical services and its insurance. Medical insurance intends to cover a person who joins at early age, 18 or 20, or even earlier when covered by his/her parents, and continues providing coverage until death, around the age of 76. Any economic system as that increases spending today at a pace double the rate of inflation is doomed to collapse. I propose that the medical inflation rate be pushed lower than the general inflation, as to provide a margin for innovation and development. As prescribed by the Friedman School of Economics, ‘crash therapy’ is the best medicine against inflation when the side-effects are affordable. If ‘crash therapy’ seems to be too harsh, it could be dealt in portions over period of time, so that its final effect could be achieved. On the other side of the coin, the margin for innovation should be decided by the whole population, not by politicians alone, as it is done today. The cost/benefit ratio should be a matter of public concern, free of the influence of interest groups. In a similar fashion, the level and quality of services should not be an artificially controlled factor, such as the external beauty of clinics, but a continuous decision of the general public.

For long term economic systems as health insurance, there is only one word that best describes how to continue functioning in a viable form. This word is SAVINGS.

The American public, through budgetary funding, spends eight times more on health care for people over 65 than on the average citizen, as stated in an article by Pete Peters on and Neil Howe. I am limiting myself to the American medicine, but today we can transport this same problem to every other country and medium. Older people naturally consume more health services than the young, which is not the case for the consumption of food, clothing, housing and entertainment. Only long term savings would provide the means to cover for them. Our individual plans will promote competition among providers, increasing efficiency and consumer acceptability. This is in contrast to the present system, where the provider and the third party are the main beneficiaries. On pure economic grounds, this is an anomaly. I expect to be hearing from readers proposing to implement savings in order to save the environment and our planet!

My proposed system, Self Managed Health Insurance (SMHI), calls for frequent referendums, to change the internal policies as they should be in any system where the payer is also the consumer. Our national budgets are set today by delegation, or representation, through the Executive, Legislative and Judicial administrations. The referendum mechanism is seldom used, as in California’s Proposition 17 in the 80's. But in this SMHI, referendums are the principal policy-making function, converting the consumer, the share-holder, to a kind of regulator. SMHI will function as a ‘share-holders’ corporation, where the amount of money saved is proportional to the number of votes a member has. Since the strongest and longest term savers have more clout, the over-user and over-spender will be in the minority, with little power to decide when and how he/she may bankrupt the system. By definition, this type of system (SMHI) cannot assume debt that it cannot return. The catastrophic fund should function through a ‘floating key’ that allocates the benefits according to the number of claims and the available funds in the coffer. The increase or decrease of the catastrophic fund is a prerogative of the members through the referendums. According to different sources, per capita health expenses in America is around 12 to 17% of the GDP. I propose in SMHI to start premiums at 4% of the gross family income, and gradually increase relative to age, up to 8%.