Nathan Sass

How Wisconsin Can Revolutionize Health Care (and avoid ObamaCare!)

In Health Care Reform, Politics on September 4, 2013 at 11:01 AM

Wisconsin is in a tough economic spot right now.  We are competing with other states that have lower tax rates and less regulatory red tape for employers.  Now comes the news that insurance in Wisconsin will be more expensive thanks to ObamaCare.

The Wisconsin Office of the Commissioner of Insurance (OCI) recently released the rate impacts related to ObamaCare showing a 50% increase in premiums in 2014.

Is there anything Wisconsin can do about this, or are we just stuck because ObamaCare is federal law and we cannot just ignore it?

Well, there is something that we can do, but it will take a lot of guts to pull it off.  I think if Wisconsin were to try, employers might just flock here, and employees might just see a better standard of living, increased wages, and lower costs for health care.

When the Supreme Court ruled ObamaCare constitutional, it did so using the power of the federal government to tax.  It rejected the argument that health care (and insurance) was “interstate commerce”. 

That ruling leaves a pretty big door open to Wisconsin if we are brave enough to walk through it.

Because the Supreme Court said health care and insurance is NOT interstate commerce, it means that a state like Wisconsin still has the right to make the rules regarding insurance and health care in its state. 

More specifically, it means that if a state decides to redefine “insurance”, it can do so.

Wisconsin could, if it chose to, pass a state law that bans all “third party payer insurance”.

So what does that mean in plain English?  Well, simply put, people have to pay for their health care services themselves.

But that isn’t as bad as you think…let me explain.

We already pay for everything else out of our own pocket right now, so this isn’t as scary as it might sound.  We pay for our housing, cars, education, food, electricity, water, and all the other essentials with “our own money” today. 

Health care is the lone exception to this rule, and not surprisingly it gets more expensive faster than all the other essentials we pay for every day.

To fix this, WI could eliminate traditional “insurance” and convert to a financing system, similar to student loans and mortgages.  I will call it a health care credit account. 

The law in WI would state that anyone can get approved for a health care credit account, and that the interest rate is limited to the prime rate plus, say 1%.  Today that would be 4.25% (that is less than most mortgage rates today, for reference).

That interest rate isn’t very high, but allows the finance companies (who likely used to be insurance companies) to make a little money and stay in business.

Because there is no more “insurance” in WI, that would mean there are no more monthly premiums for you or your employer to pay. 

Since you employer was likely paying part of your premium, the law would require that they raise your salary by that amount.  For most people, that is a pretty big raise.

For an average person living in metro Milwaukee making about $50,000 with family plan insurance in WI, here is what that would mean. 

The WI OCI published averages for family plan insurance in July 2012 (the most recent data I could find) (source).  That average premium was about $1,300 per month.  Your employer pays about 75% of that premium, or about $1000 a month (source).  The employee pays the rest.

So our average person would immediately see a raise on his paycheck of about $1,000 per month PLUS they would no longer have to pay their share of $325 a month. 

That means they take home $325 more a month AND their new salary is now about $62,000 a year.  That is a raise of more than 20%!!!!  When was the last time you got a 20% raise?

Even better, that raise didn’t cost their company a single cent!  Your employer is spending the exact same amount they did before, but now you get more of that money!

So our average person has more money in his pocket, and that is good. 

“But they have no insurance!!!!” you say?  Well, that is not exactly true, either.

Our average person would have a health care credit account that works just like a Visa or Master Card.  If he doesn’t use it, it costs him nothing (or almost nothing if there is an allowed annual membership fee).  When he uses it, he has to pay off the balance, just like his credit card.

Since it would only be good at medical facilities, he cannot run up a bill on it at Best Buy, or use it for things other than health care, so people will not be tempted to abuse it.

And since the interest rate is locked at a low rate, the payments will not be as high as a Visa or Master Card who usually charge 19% interest.

So our average person can go to the doctor, any doctor he or she wants to, and only pays for the visit itself.

Because he/she is paying the bill, no one can tell him which doctors they can see.  No one can tell them what tests they can have, what drugs they can use, what treatments they can get or otherwise interfere with their medical care in any way. 

No more networks.  No more pre authorizations.  No more denied coverage.  No more co pays.  No more mandatory generic drugs.  No more disallowed treatments.

So now our average person has a lot more money in their pocket, and total control over every single aspect of their health care.  So far, so good.

“But what if someone gets really sick!?” you ask?

That is where the State of Wisconsin steps in to fill in the gaps.  Right now WI spends about $ 2,000,000,000.00 ($2 billion) per year on BadgerCare.  Because everyone can get a health care credit account, there would be no need for BadgerCare as it is today. 

Remember, regardless of income, everyone has access to an account.

That means the state can redirect that $2 billion to other things, specifically turning BadgerCare into a catastrophic “over the top” plan that steps in when people get seriously ill.  The state would set rules around how that help works, what illnesses or conditions qualify (things like cancer, for example), and how much it covers.

So if our average person has a serious illness, they still uses their medical credit card to pay up front for their treatment (that only they have control over), and when the medical credit card company gets the bill, they notice that the medical code is for something covered by the new BadgerCare and sends a request for payment to the state. 

The state transfers the money to the medical credit card company from the BadgerCare account and by the time our average person gets their monthly statement, the payment from the state is already there. 

They are kept from going broke just because of illness, and can control all the care they get.

Better yet, because our average person is paying up front, they are going to naturally be more interested in how much all the things they buy cost, and the doctors and hospitals will have to compete for his business based on price, just like grocery stores do with food (another essential need we all have and pay for).

That means health care costs in WI will probably DROP over time instead of constantly going up like they do today.  No more $5 aspirins at the hospital.  No more $200 basic blood tests.

For the doctors, life gets much easier, too.  They no longer need to hire people to manage all the insurance contracts and claims processing.  They no longer need to figure out if something will be covered.  They just need a credit card machine (which they all have anyway), and be aware of the prices their competitors charge.  Things every other business already does. 

They will have lower costs just from eliminating all the insurance overhead, and more time to devote to their practice.  They might even find they make a little more money and still charge less for services.

To sum it all up, our average person has more money every paycheck, total control of their health care decisions, help if they get seriously ill, and the ability to shop for health care like they do for anything else.

Their employer has no extra costs, a better paid work force, and no longer has to screw around with insurance plans every year.

Doctors and hospitals have much less overhead, no longer need to have dozens of insurance contracts to haggle over every year, and can devote more time to care of patients.

The State of Wisconsin would become a choice destination for employers, no longer has the expensive BadgerCare of today, uses the same money to help seriously ill people, gets more tax revenue because most employees got a big raise, and no longer is entangled in the Medicaid rules from the Federal government. 

Plus we as a state can return all that federal Medicaid money to the treasury and do our part to reduce the federal deficit.

If “traditional insurance” is illegal in WI it means there could be no mandates from the federal level to buy it.  It also means that there are no penalties for employers not providing it.  It basically means that ObamaCare is meaningless here.  I doubt that the Supreme Court would rule that we can be taxed for not buying something that is against the law.

This is an idea that solves a lot of problems:

  • It provides universal access to heath care to everyone in Wisconsin, regardless of income. 
  • It reduces the costs of health care over time. 
  • It increases health care choice and freedom for individuals. 
  • It reduces health care red tape to almost nothing. 
  • It frees doctors to be doctors again. 
  • It increases incomes for almost every single person in WI. 
  • It makes WI a better place to locate your business. 
  • It reduces the federal deficit.  AND
  • It totally frees everyone in WI from ObamaCare

It may sound radical to propose banning “insurance” as we know it today, but like the finger traps we played with as a kid, the solution is to do the opposite of what you think you should.  In this case, less “insurance” means lower medical costs and more freedom.

There are certainly details to hash out, but the basic concept it sound and one we already know works because we use it all the time to buy other things we need.

This is an idea that all parties can be proud of.  If politicians on the left and the right mean what they say about making health care affordable and easy to access, they should be willing to seriously consider this concept.

Wisconsin can lead the way to a brave new future, and once again show the nation how to solve problems productively.


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