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Leonard Letter Articles on Health Care – 2004-2007
“Health Savings Account Can Help You Live Better” – October 3, 2005 With gas prices pinching our pocket books, this is a great time to revisit Health Savings Accounts, especially for young people and others who do not need to see doctors often. Another reason to bring up HSAs is because they closely mimic the strategy many have taken to lower their car insurance by opting for a high deductible plan. This is how it works: You switch to a high-deductible health plan. You are responsible for paying the cost of anything under a certain amount -- usually between $1,000 and $5,000 before the insurance pays for anything. In return you get charged a lot less for your premium. The tax-free HSA is used to pay the deductible. A practical example from the Wall Street Journal: A graphic designer had been paying $900 a month in premiums alone. By switching to a high-deductible health plan, she cut her premiums to $300 a month. To pay for her $3,500 deductible, she contributes $291 a month to a tax-sheltered HSA. The result: $600 per month savings, or $7,200 a year for exactly the same health care.
Your employer may offer insurance that is compatible with an HSA, but it is too rare. Currently, only 2.3% of employers offer a high deductible plan that is eligible for use with an HSA, according to the Henry J. Kaiser Family Foundation.
“Uninsured” – October 11, 2005 Much has been made of the number of people in California without health insurance. Some politicians see this as a huge issue. I was recently given some information as to who the uninsured are. First of all, the statistics are loaded. The number most often used is that 21% of California's population is uninsured. However, the pollster's question is actually this: “Have you been uninsured now or in the past six months?” The wording makes a difference. When asked the question, “Are you uninsured today?”, the answer is 16%. The question has been shaded to up the number, and the difference reflects the normal economic activity in California of people changing jobs.
Since there are public health programs (Medi-Cal) for the poor, the bulk of the uninsured are full- time workers. And the bulk of these folks work for companies that do not offer health insurance. This big group is the target for Health Savings Accounts and health plans with low costs. Interestingly, 17% of those without health insurance who have a job have actually refused the coverage. They have made their own economic decision.
So, more than 80% of the population does have health insurance and another 5% (17% of 21%) decline coverage which further minimizes the problem. The big group who do work and who are not offered health insurance mostly work in the agriculture and construction sectors where they have multiple employers over the year thus making employer-offered coverage impossible.
Government regulations on health insurance policies should be modified to encourage insurance companies to develop products that would be sold directly to the family. Families should be allowed to join their own groups not linked to a particular job so they can get the same discounts on health costs that the big employers get. I am convinced that individuals, if given the options, would be smart in choosing the best health care plans for their families.
“Overlooked Budget Item Will Alleviate Health Care Crisis” – January 23, 2006 I have written many times
on the wonderful benefits of tax-deductible Health Savings Accounts (HSA).
Many Californians would be better off with a high-deductible health care
plan. These typically call for subscribers to be responsible for the first
$2,000 in medical expenses before insurance covers the rest. This allows
people like small business workers or self employed individuals to save
hundreds each month on health care premiums. HSA's
allow people to deduct a monthly tax deductible contribution to an account
that covers the deductibles. The savings can make a huge difference for
people's budgets. High deductible plans would give tens of thousands of
Californians affordable health insurance, extra money for a car payment, or
a mortgage they would otherwise not be able to afford. The problem is that
while Congress created the tax dedcutible
accounts at the Federal level, the legislature defeated a proposal to make
California conform to Federal law last year. This change is needed to give
small businesses additional incentive to offer a high deductible plan to
their employees.
“Wanted: Health Care Directive Guidance” – February 21, 2006 I was given an advanced
health care directive by my new doctor. As I read the form it does not lend
itself to a sanctity of life perspective. The
form can be found by looking at California Probate Code 4701:
“My Nomination for Column of the Year” – February 27, 2006 LL Readers know I try to do a lot of reading. Even so, it is a rare occurrence that I read something in a newspaper that is truly exceptional. Last week, Dan Weintraub of the Sacramento Bee penned a piece for his California Insider weblog column that I am still thinking about, and I have concluded it deserves special recognition. Dan is known as a chronicler of political baseball in Sacramento. This column is only about politics on the surface; at its core it is a wonderful lesson about economics that would impress Milton Friedman. Those of you who are economics or social studies teachers might consider spending time dissecting this column with your students. What Weintraub does in a few hundred words is more memorable than the hundreds of pages of what I recall wading through for college economics.
His basic thesis is that we need to look for an alternative to employer-managed health care. To illustrate his point, he talks about what life would be like if government mandated that employers sign us up for plans to manage our nutritional needs, or our housing, instead of letting us deal with these decisions and costs on our own as we do now. The result would most certainly be bad food and substandard housing - and probably shortages of both. Why then are we so wedded to the notion that health care consumers need something between them and the providers of the health care? It is exactly the right question to ask -- let the light shine on this column: http://www.sacbee.com/content/politics/columns/weintraub/v-print/story/14214335p-15040397c.html
“Your Job and Health Insurance” – March 6, 2006 Last week I commended Dan Weintraub’s thoughtful column about our expectation that employers provide health insurance to workers. Dan discussed how poorly Americans would react if their employers designed housing or transportation plans for employees. Yet, we do not rebel against having employers design our health care plans? Why? How did we come to the where Americans came to expect health insurance from their employer when we do not expect our automobile or homeowners insurance to be provided through our employer? What I discovered is that this practice can be traced back to post WWII. When the soldiers returned from the war they all wanted jobs and there were more jobs to fill than men to fill them. For companies to attract the best employees, they needed to offer more than just good salaries. One benefit companies offered that did attract people was health insurance. Once a few companies found that successful, nearly all companies started offering that benefit. Although the great competition for jobs eventually leveled out, the health care benefit was here to stay, and that is why we find ourselves in the conundrum Weintraub wrote about last week.
“Your Tax Dollars and Health Insurance” – March 6, 2006 The Legislative Analyst’s Office released a report last week about the cost of retiree health benefits. The cost of providing coverage to state retirees and the dependents now exceeds $1 billion annually and is growing rapidly. In the past nine years, those costs have tripled and there is no end in sight. The report says, “Our educated guess is that unfunded retiree health liabilities for state government will total in the range of $40 billion to $70 billion and perhaps more.” Those drastic numbers are the result of both increased mandates on insurers (more than 30 new requirements from 1999 to 2000 that drove costs up 40%) and new accounting standards from the Government Standards Accounting Board (GASB). The GASB rules will mean that governments must report their liabilities differently than before and in California that could mean $6 billion of payments compared to today’s $1 billion. As Assemblyman Ray Haynes opined: “This is in addition to the state’s already $2-3 billion increase in pension costs, and the existing $5 billion structural deficit, the state is on the brink of a crisis.”
“Hidden Taxes” – January 8, 2007 The new buzz words in
political debate are “hidden taxes.” In almost every case, this does not
refer to secret payments to the government. The more accurate definition of
the phrase would be “cost shifting.” Because lots of people use health care
services without paying for those services, hospitals and doctors are forced
to charge the rest of us more to cover their expenses. But cost shifting
goes on everywhere. We all pay more for products to cover the extra costs
businesses have due to shoplifting or other expenses.
“CA Makes Life Difficult for Taxpayers” – January 8, 2007 The New Year’s Day edition of Spidell’s California Tax newsletter began with this: “With one minor exception, California does not conform to any of the provisions of The Tax Relief and Health Care Act of 2006, and the mood in Sacramento is moving even further away from conformity to HSAs (health savings accounts).” The new lawmakers who took up offices in Sacramento this week should take a serious look at why the state consciously chooses to make life so difficult, and taxes higher, for California taxpayers. There is much bloviating about increasing efficiency in government this very simple way to accomplish that is ignored.
Consider Spidell’s example of the termination of a health savings account: “In order to establish a HSA, Ron’s employer, with a home office in Colorado, terminates its [Health Reimbursement Account] and transfers Ron’s $2,000 balance into an HSA. Unfortunately, Ron is a California resident. The $2,000 is tax-free for federal purposes but is taxable income subject to income and payroll tax withholding for California purposes. The rollover is treated as a distribution to Ron for California purposes.”
If California were to conform with these federal tax laws, the taxes on Californians, including Ron, would go down. We should simply make those changes to make filing taxes easier for our residents. When taxes become simpler, voluntary compliance increases and government efficiency improves. These goals are more important than collecting a few dollars on HRA tansfers.
“Cuban Health Care – Our Model?” – January 22, 2007 It now appears that
Cuba's dictator Castro is dying and it also appears that the Cuban universal
health care system botched his surgeries. Botched them so badly that the
government doctors (are there any other kind?) may have hastened his end.
“More of a Bad Thing?” – January 29, 2007 It makes no sense to require employers to provide health insurance. It is no different from requiring them to provide food, clothing or shelter for their employees and their dependents. Imagine if your employer had to pay for all of your family's clothes with clothing insurance. Popular clothing items would immediately disappear because they would be “free” to employees and their families, so people would demand more of them. Clothing stores would change their business practices to cater to employers' insurance companies, who would be their real customers. Clothing insurance companies would set clothing allowances and prices that would not stress service or a wide range of choices. If this scenario is too far fetched for you, then substitute food or shelter as an employee insurance benefit and imagine what might happen if you had to go through your insurance company to get either.
Many employers began offering healthcare during World War II because wages and prices were strictly controlled by federal law. In order to attract workers or retain them, profitable wartime manufacturers used healthcare as an incentive. The cost was a tax deduction for the employers, but it was not treated as compensation for the employees (so it was both tax exempt and exempt from the wage freeze). Employer-based healthcare is an example of the way the free market always triumphs over government's attempts to evade it. The whole nutty system would have ended the moment wage and price controls ended but for the fact that state and federal tax authorities continued to treat these benefits as tax exempt (but tax deductible to employers). If an employer chose to pay higher wages instead of providing free healthcare to its employees, an outright majority of these wages could be lost to taxes (i.e., state and federal income taxes, employer and employee contributions to Social Security and Medicare, State Disability Insurance, Unemployment Insurance premiums, etc.). Now, we are stuck with a healthcare system that largely depends on where you work, not what you want, what you need, or what you are willing to pay.
A better plan would be tax-free healthcare savings accounts. Contributions would be tax deductible for employers and employees alike. Consumers could purchase any insurance plan with pre-tax dollars, not just those offered by their employer. Insurance coverage and account balances would have nothing to do with your employer. Many consumers could actually shop for medical services for the first time in their lives, the way they shop for everything else. Competition would improve services, reward innovation, and lower prices. Who knows, we might even have discount all night medical clinics the way we have all night supermarkets in every corner of the state.
“Fitness Tax Credit” – February 5, 2007 California is engaged in a debate about government sponsored health plans. Besides creating government programs, another means of directing social policy is through tax credits. As the Governor and the Legislature discuss health care here, they could look into what is being proposed in Canada: a non-refundable tax credit of up to $500 paid by parents who register a child in an eligible physical activity program. The government does not care whether the program is basketball or dance, just so that it contributes to cardio-respiratory endurance, plus either muscular strength, muscular endurance, flexibility or balance. For more information, go to:
“Health Care Wishes” – August 6, 2007 The OpinionJournal’s Best of the Web Today cited a story from the London Guardian describing the plight of Olive Beal. The Guardian says that Mrs. Beal “finds it difficult to hear with her five-year-old analogue [hearing] aid and needs a digital version that cuts out background noise and makes conversation easier.” She sought help from the local office for Britain’s National Health Service and was told that the new hearing aid was possible, although it would take more than 18 months on the waiting list. Once those 18 months pass, Mrs. Beal will be 110 years old, but as she notes, “I could be dead by then.” The Opinion Journal snarkily encourages her to take comfort in the fact that the hearing aid is free. Then L.A. Times columnist Steve Lopez profiled Melanie Winter, a Californian who needs hip replacement surgery but does not qualify for Medicaid or have private insurance. She has managed to raise and save the money needed to pay for the surgery and she has negotiated payment plans with the doctors involved. Lopez writes that Ms. Winter does not “trust any reform plan that doesn’t remove the profiteering of the insurance and pharmaceutical industries.” Perhaps Ms. Winter should chat with Mrs. Beal (oh, except perhaps Mrs. Beal would not be able to hear her well enough over the phone) and see if a socialist medical system lacking that evil “profit” motive really does work better than what we have here. Removing profit is not a solution, but there are many, many other changes that would improve the market mechanisms that can make health care work much more efficiently than it does now.
“Proof in the Pudding; Devil in the Details” – September 10, 2007 As this legislative session wraps up, there is a renewed focus on the Governor’s health care proposal. At the core of the Governor’s plan, announced last January, is that idea that every Californian have health insurance. Think about what a dramatic paradigm shift that it. What other insurance does the government mandate you to carry? You are required to have automobile insurance if you own a vehicle, but you can post a bond demonstrating your financial responsibility instead of having a policy. Most people think of homeowner’s insurance as required, but really it is just a condition of your mortgage so if your home is paid off, you do not have to carry, say, fire insurance.
One of the biggest obstacles to the state mandating that you carry insurance is enforcement: how will the state know whether you have purchased a health insurance policy for yourself? With your car insurance, you confirm your policy each year when you register your vehicle. There is no similar mechanism for proving to the state that you have health insurance, and I shudder at the size of the bureaucracy and the intrusiveness that would be required to accomplish that mission. Some have suggested that people just list their insurance carrier on their state income tax returns. Imagine how a tax bureaucracy could complicate that.
Improving health care is a complex issue, and I do not believe the state legislature will work it out before this session adjourns. It will continue to be debated, but those discussions should recognize that further involving state bureaucracy will not improve the quality, cost or availability of health insurance in any way.
“Our Principles Should Guide Health Care Session” – September 17, 2007 The Governor’s goal for the special session on health care he called last week is to produce something for the February ballot. However, ballot initiatives require a two-thirds vote of both houses. This means Republicans can and should aggressively participate in this process. The current dialogue is about merely adding up how much is being spent on health care in California, then simply dividing this cost among the different “players.”
Californians deserve much more from this session than what calculators can produce. The present approach disregards reforms that could deliver more care for less money. This is the hard work that needs to be done. In short, applying what we know to be true about markets and human behavior is the only way to improve health care for Californians.
To get ahead of the curve for the special session, I looked back over the past couple of years to health care articles I’ve written for this letter. I have posted the articles here: http://www.billleonard.org/
These include articles on Health Savings Accounts and how Californians, especially those who are young and single, could have affordable coverage by choosing high deductible insurance plans supported by HSAs. In one piece I used practical examples to illustrate the point.
There are also discussions about the history of employee mandated health insurance. Asking how we came to insure ourselves this way and why ought to be the first step toward identifying what reforms are needed.
“State Department of Public Health Should Pay Up” – October 1, 2007 The Childhood Lead
Poisoning Prevention Act fee is currently assessed on just two industries
(motor vehicle fuel distributors and paint distributors) even though we know
there are many other sources of lead out there. The state collects $22
million a year from these industries. The money funds various programs
dealing with lead abatement and education. According to Cal-Tax, fuel
companies, which have not produced leaded gasoline since the early 90s, pay
85 percent, and paint companies who always have not produced lead based
paint for decades pay the remaining 15 percent.
“What Is the Crisis in Health Care?” – October 8, 2007 Before there is any
significant action in the health care special session, the Governor and the
legislative leaders should define the problem. The Governor has repeatedly
called for a government sponsored plan where insurance is mandatory. From
this, he defines the problem as “lack of insurance.”
“Health Care Coverage Ho Hum” – November 12, 2007 Last week the Democrats announced their new ideas about universal health coverage for Californians and the media dutifully reported that they and the Governor are moving toward each other. Most people did not cheer the news. In fact, the entire health care issue is met with a yawn in California because, as Sacramento Bee columnist Steve Wiegand writes, “millions of Californians who already have health insurance don’t give a rat’s patootie.” In a recent survey about the most pressing issues facing California, health care did not even break the top ten. The Census Bureau reports that more than 84% of all people are covered and a Moore Information survey showed that of the voters with health insurance 72% are satisfied with their coverage. Those are nationwide numbers, but can probably be extrapolated to California. As I have noted here before, the fact that perhaps 6.6 million of California’s 37 million do not have health coverage simply does not a crisis make no matter how often the Governor or the Speaker declare it so. So how do the Governor and Democrats get the 80+ percent of us who already have health insurance excited about providing insurance for the 17 or so percent who do not? I do not think they do, even if they do come to an agreement about how to get us to pay for it.
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Copyright © Bill Leonard Officeholder Committee - Board of Equalization 2006 Committee ID No.1297464 2150 River Plaza Dr. #150 Sacramento, CA 95833-4131 Phone: (916) 441-1043 ext. 2 Fax (916) 441-1043 |