A common reaction we’ve received to Dave’s Plan to reform the Affordable Care Act (ACA) is that it’s just too complicated.  Why mix retirement and other savings plans in with medical care reform?  Actually the point was to simplify both by reestablishing the link between savings and expenditures. In the U.S. as with many other countries we don’t save as much as we should.  This leads to problems as populations age. In the not too distant future entitlements for the retirees will crowd out most other Government spending.  That of course will prove to be impossible.  For instance, we just might need a national defense.   Australia looking at a similar future has already opted for a mandatory 10% savings plan.  It isn’t that we don’t have people participating in retirement plans.  According to the American Benefits Council, defined contribution plans such as 401ks had 74 million active participants and that was in 2010.  In that year total employment was 138,641,000.  Employer health plans cover the majority of Americans.  Obviously, we have a good base.  All we are proposing is the accounts be held by Individuals with employers and the self-employed making the payments directly into Personal Benefits Accounts (PBA).  Add a Catastrophic Health Policy to the PBA and everybody having one and we have the basics.  We kept the ACA’s popular features of making the policies non-cancel able and children being able to stay on their family policy till 26. The ACA Subsidies and Medicaid payments based on age group experience would be deposited directly into qualifying PBAs by the IRS when their tax forms are processed, just as we do the Earned Income Tax Credit.  With the PBA’s constant inflow of funds and growth, adding a Medical Credit Card completes the package.

Surely our plethora of retirement and other savings plans could use some simplifying.  401Ks, IRAs, SEP IRAs, Roth IRA, 529s and on and on are a recipe for confusion.  Many people end up with more than one leading messy situations.  Even when people try to simplify, it can lead to problems.  We just talked to a veterinarian who transferred a SEP IRA into his personal IRA this past year.  Even though he waited the required 2 years, he was notified of a taxable event that would greatly increase his tax.  This is probably a correctable error, but not without time and expense. The idea behind these plans is to encourage savings but are needlessly complex.  Every time one changes employment a new plan can be involved.  The way Americans change jobs this has made problems for many people.  Wouldn’t it be so much easier to replace all of them with just one, the PBA?  But won’t the poor and less educated have something they don’t understand?  Wow, in a capitalist society something that gives everyone a savings account and a link to a financial institution is suspect?  This would enable more people to understand how things actually work, rather than being on the outside looking in.  Schools would have answer questions because everyone would have an account and would want to know all about them.  Bringing everyone into the mainstream just can’t be a bad thing.  After all, a touch of wealth does wonders for self-esteem.

Next to our healthcare system however, savings plans are a walk in the park.  Under the ACA,  State and federal exchanges with  multiple  plans that include mandated services that may or may not apply to the purchaser.is obviously too complicated.  Employer plans that end with termination.  We suffer high cost cobras and hour limitations.  Do we ever know what’s covered? Third parties make decisions for us while greatly increasing costs.  We hear that the rate of costs are rising has gone down but in part that reflects a slow economy and worse Washington directed price controls.  Low reimbursement rates present a false picture.  Just as gas rationing gives the illusion of low prices, Medicaid looks cheap until you can’t find a provider.  That’s a problem under the present system will continue to grow probably to a crisis.

Dave’s plan by comparison is simple.  Everyone has a catastrophic policy as part of their PBA to cover any big problems.  These can be bought across state lines to provide the widest and most competitive market to keep premiums as low as possible.  All other costs would be paid for by their PBA linked medical credit card at providers that individuals found to offer the best service at a competitive price. Just as we purchase any other product or service.  Providers would be in a better position to offer their services at good prices because they wouldn’t have to go through third parties and wait for payment for most of their services.  They would get paid immediately just like any other credit card transaction.  We see convenient clinics (think CVS Minit Clinics and the like) expanding now in response to higher deductibles.  This trend would be greatly enhanced by the paper work reduction and instant payments. Everyone having the same credit card and catastrophic policies would preclude the coming Medicaid provider crisis.  More important, the plan works better with every passing year as assets in each PBA grow.

With little government involvement, innovation would be given full range.  For example, what if providers offer discounts to people who embed a chip in their body that would provide vital information over the internet for speedy low-cost diagnosis.  Those that like the deal would take it.  Those that didn’t would pay more.  Now think if the government got involved in any way with embedding chips in people.  “People in order to keep down ACA costs we will embed a chip in everyone’s body.”  We think everyone could imagine the outcry.  Keeping the government in a lower profile is a good thing.  Actually the only part of government to really be involved would be the IRS and it would overhauled and given the software and over sight needed. Actually all it would do is collect and direct money to where it needs to go.  Errors could simply be corrected in the next tax year rather than persecuting simple errors.  After all the IRS would know where everyone’s saving plan was which would cut down on the  impetus to cheat.  Over site  would be much easier with just one agency rather than the present multitude.  With this plan, all those exchanges and much of HHS involvement and rules would go away.

Doesn’t this sound a lot simpler all around?  Simpler would translate into better service at lower price.  It is in our philosophic nature to use Government to enhance individual independence and fortune rather than stifle these endeavors too much government.

(for those unacquainted with Dave’s Plan or want to refresh their understanding, the series is archived starting in Policy in October 2014)