DOI vs CDHC (Part 2)...

In Part I we began our dissection of California Insurance Commissioner John Garamendi’s baseless screed against Consumer Driven Health Care plans. Interestingly, in his own backyard, such plans are helping to drive down the cost of health insurance. The Galen Institute (a think tank specializing in health and tax policies) reports that:

“Premiums for HSA-eligible insurance dropped 15% between 2004 and the first half of 2005...Several California cities, such as Long Beach, had the most affordable rates."

In any case, let’s complete our analysis of Commissioner Garamendi’s dire warnings that Health Savings Accounts and Health Reimbursement Arrangements would:

“Make the health system more complex” If anything, the beauty of CDHC is that it simplifies how medical care is reimbursed. By way of example, let’s compare a typical, ubiquitous “plain vanilla” co-pay plan with a generic HSA plan:

Under the co-pay plan, one has the privilege of paying just $25 at the doc’s office. Let’s say that occurs twice a year. There’s also a prescription drug card that allows one to pay just $15 for that generic medication the doctor prescribed on one of these visits. Already, there’s three things to keep track of (the premium, the doctor’s visit co-pays and the prescription co-pays). Plus, one has to keep in mind the different co-pays on the medication, depending on whether it’s generic, brand name, or even formulary (confused yet?). Add to the mix one’s $1,000 deductible for the “big-ticket” items (like MRI’s. Or bloodwork), and the co-insurance percentage once that deductible is met. Was that 80% or 75%? Was that before or after network discounts were factored in?

Contrast that with the High Deductible Health Plan that’s at the heart of CDHC. There’s no co-pay, no drug card, no co-insurance. It’s your pocket (the deductible) or the insurance company’s (after the deductible is met). So which plan is more complex?

“Result in inefficient use of resources” The argument here is particularly disingenuous:

“It is estimated HSA’s will cost the federal government $7 billion in lost tax revenue over the next 10 years.”

Leave it to a member of the political class to claim that letting people keep more of their own money, and make more empowered decisions about their own health care, will cost the gummint money. That’s just silly. And it has nothing to do with how resources are used, efficiently or otherwise.

And finally:

“Increase inequities in access” While that’s nice alliteration, it’s without factual foundation. His argument is that these plans “favor and will be used predominantly by upper income individuals.” But the facts don’t bear that out. Don’t take my word for it, let’s see what one of the carriers that spearheaded HSA in the marketplace has to say:

“Assurant Health, an HSA provider, says the rich and healthy are not the only consumers opting for HDHPs in conjunction with a tax-free account. The insurer reports that as of Feb. 28, 75% of its HSA enrollees have an income of $50,000 or less, with 27% reporting a net worth of less than $25,000.”

$50,000 doesn’t sound like “upper class” to me. So despite all the dire warnings that CDHC will lead to the immediate and catastrophic collapse of our health care system, the facts indicate otherwise. Kinda makes one miss (former CA) Commissioner Quackenbush.

UPDATE: David Hogberg, senior research analyst at the Capital Research Center, also has a good article about this subject at The American Spectator.