There are certain objectives reforming health insurance must be shaped by. These include;

• bringing costs down
• providing individuals with incentive to pursue healthful lifestyles
• provide universal coverage
• have medical treatments decided solely by doctor and patient

The way to do this would be to set up an independent not-for-profit financial institution, (not to be confused with a non-profit organization) to handle medical savings accounts for individuals and families. This would be a Medical Savings Bank MSB with a particular charter to service medical savings accounts.

There would be no government involvement and account holders would pay for their medical expenses themselves with checks or debit cards issued by the bank that could only be used to pay medical bills.

The bank would make prudent investments and in that sense operate as any other bank. Being a not-for-profit institution, however, the money earned on investments would become part of the insurance pool. Staff and management of the bank would receive relatively modest salaries.

Interest would be earned on medical savings accounts which would provide incentive for people to maximize their deposits.

The population of the US is over 300 million. So, with full participation by every adult plus those with children providing an account for each child the amount of deposits would be enormous. An average deposit of, say, $100 a week would amount to 30 billion every week, or over 1.5 trillion every year. That plus interest on investments made by the bank equals a considerable pool of money. And interest earned for individual accounts would be higher than regular banks could offer. Account holders could make withdrawals, up to a certain percentage of their account, to use their money for other purposes.

Individuals would be responsible for paying their own medical bills but they would also be backed up by the bank, if necessary. For instance, let’s say I have an account of $10,000 and I have a medical procedure costing $20,000. So, $10,000 out of my account is paid to the health provider and the other $10,000 is loaned to me by the bank to pay the full amount. So, my account is now overdrawn by $10,000. Now, let’s say the bank picks up half of what I owe and the rest is paid off by me over time with a low interest loan. The loan is paid off by making deposits to my savings account, say $60 a week. If over the next ten years or so I have no major medical expenses my account without the debt would have been $31,200 but would actually amount to something like $25,000 given the deductions over time due to my debt.

Any medical costs one incurs due to unhealthful habits like smoking, drug addiction, drinking and preventable obesity will be entirely one’s own responsibility, i.e., no subsidies for related illnesses.

Such a system would:

• Keep decisions about medical treatment between doctor and patient
• Provide incentive for people to pursue healthier lifestyles than is now the case
• Bring down demand for health care and lessen the cost
• Reduce operational costs for doctors since they would not have to process all the various insurance plans now in place
• Cost for health care would be market driven and much more affordable
• Eliminate the cost of waste, fraud, and abuse

Now, although the MSB would cover a portion of the debt incurred by some account holders, individual depositors would not be charged for anyone else’s expenses. Whatever debts the “bank” would cover would be furnished from the general pool. Like any bank, one’s deposits are not kept in a drawer with one’s name on it, everyone’s money is used for bank business while individual saving and checking accounts show the full amount deposited along with any interest earned.

This would be a system where everyone contributes and everyone benefits. The rich, with sizable accounts, would be earning a hefty interest while the poor, if needed, could be generously subsidized.

Another benefit of this system would be to the economy whereas businesses would no longer be paying for employees’ health insurance plans. This would free up a lot of money that could be used to invigorate the economy and produce more jobs with generous salaries.

Restricting payment for medical services to MSB issued checks or debit cards would ensure everyones participation. A low minimum weekly deposit would allow for those with lower incomes to participate.

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