Mitch Daniels sounds off on health care reform bill

Indiana Governor Mitch Daniels has spoken out recently on several occasions about the effects of federal health care legislation on states’ economies, and on the effectiveness of consumer-driven health care, such as under programs in effect in Indiana.

Daniels signed landmark health care legislation during his first term, called Healthy Indiana, providing health insurance for those who earn too much for Medicaid but too little to afford their own coverage.  Under the plan, the state contributes permanent funds to individual health savings accounts.  Participants may also contribute; and when the account is depleted, a catastrophic insurance plan kicks in to cover any additional expenses.  The plan promotes preventive care and encourages citizens to become more value-conscious consumers of health care.  A similar plan offered to state employees now has over 70% participation (including the Governor); and only 3% have chosen to opt-out for an alternative PPO.

Appearing on Fox News’ “Journal Editorial Report” with Wall Street Journal editor Paul Gigot, Daniels spelled out his belief that Indiana’s legislative contingent should turn down the pending federal legislation.  One of his greatest concerns is for the state’s programs.  Calling the federal bill “very ill conceived,” Daniels went on to add that, “[Indiana’s] program for uninsured citizens would be wiped out,” by passage of the healthcare reform bill.

Calling the proposed reforms “a vey large mistake,” Daniels said he would advise his state’s Congressional delegation to focus more on incremental improvements, adding that he believed that health care reforms (such as the Indiana HSA program) should “individualize tax benefits” and “trust people more with their own decisions about their own health.”.

In an interview with CBS’ Nancy Cordes, Daniels emphasized the contrasts between current health care programs and the Indiana HSAs: “It's our current system that favors the wealthy and the healthy.  [Healthy Indiana] … respects the autonomy and dignity of its participants.”  Daniels also noted, "It's saving a lot of money for the employee and the employer."

Mitch Daniels takes a populist position that health care consumers are the best decisions makers where costs and choice of health care are concerned.  He wrote in a recent Wall Street Journal editorial, “The Indiana experience confirms what common sense already tells us.  … There will be no meaningful cost control until we are all cost controllers in our own right.  Americans can make sound, thrifty decisions about their own health. If national policy trusted and encouraged them to do so, our skyrocketing health-care costs would decelerate.”

Why Health Insurance Doesn’t Work, and How to Fix It

Why Health Insurance Doesn’t Work, and How to Fix It

Health insurance has failed because it underwrites basic certainties, rather than risks. What risk is there that an average working adult will need medical attention in a 12 month span? Probably 50%; maybe better. Thus, a third party guarantor betting against the attendant expenses must be able to charge an inflated "premium" for his promise to pay the bet if he loses. The amount of his payment does not matter as long as his margin, the difference between the premium and the payment ( and the XX% risk-factor), is carefully maintained.

Since the need for some medical attention by a "fee for service" provider is high, the insured risk is not really a risk at all, but an eventual certainty. Over a 5 year period, the insurer/guarantor/bettor will almost certainly be called upon to pay. And, since the bettor does not barter or receive the services, he is mostly excluded from the base transaction. Attempts to inject himself into the purchase and provision of the services skews the focus of the underlying relationship away from the consumer and toward the guarantor, usually without consideration of the medical necessity or efficacy of the services sought, and more importantly to him, toward the cost/return on investment calculations vital to his success.

Health care insurance fails because it does not insure against a "risk." Working Americans do not benefit by spending their health care dollars underwriting the insurers' betting system. They would be better served, and their money more carefully spent, if they controlled the purchase of medical services. Insurers are necessary for those medical expenses that truly are risks; accidents, catastrophic and chronic illness, and the results of activities voluntarily engaged in by the consumer (e.g., skydiving, bullfighting, smoking).

If an average working American set aside the "premium" dollars he spent each month, tax free, to spend as needed at market-driven rates, he would have a readily available pool of funds with which to make his choices, much like pre-qualifying for a mortgage or pre-approval for a car loan. But, what about immediate needs before he has accumulated the "pool", and the danger of the unexpected emergency?

A lump sum payment, equal to the employer's share of his health insurance premium premium, would quickly establish the necessary pool of funds available to employees, per capita, or upon any system the company and employee agree upon. The employer's incentive would also be a reduction of his tax liability for any contributions and maintenance costs related to the creation, funding and administration of the fund.

Unexpected expenses could be insured against with individual policies, similar in terms to the "Accidental Death and Dismemberment" coverage so cheaply available that no one takes its costs seriously - or the risks! Which is why such coverage reflects true "insurance" and affordable leverage of risk by individuals and groups, depending upon the nature of the risk covered.

Imagine health care insurance being as cheap as "air travel" or "trip" insurance. Imagine the "Doc-in-a-Box" vying with the branch clinic of the local Community Hospital, or the dentist's office offering "employee discounts" to "Smith Toyota's" employees and preferred customers. This is market-driven health care. Not a no-frills industry, but a competitive marketplace in which special, expensive services are readily available to those who need them, with collective pools of consumer-controlled, and specific-risk-underwritten, dollars set aside for such eventualities.

Average workers with average needs and expenses will control their health care with their own money. Extraordinary expenses would be paid for with employer-contributed funds and insurance, or by a government-funded pool, for accident and catastrophic care expenses. (Careful employers will make "extraordinary expense" coverage a part of the pool contribution scheme.)