OPINION:
The most expensive day in many American families’ lives isn’t the day they buy a house or a car. It is the day they have a baby.
A young couple earning $100,000 or $125,000 a year may feel solidly middle class. They have jobs, they have health insurance through work and they are doing everything society expects of them. Yet when a child is born, they often discover that having insurance is not the same thing as being financially secure.
They may spend thousands of dollars on premiums before the baby arrives and thousands more on deductibles, copays, prescriptions, and other medical expenses afterward. By year’s end, health care can consume more than 10% of household income. That makes health care one of the largest expenses in the household budget.
The MVP Plan — Money and Value for Patients — starts with a simple idea: if Washington is going to help Americans afford health care, it should help the families caught in the middle — those earning too much to qualify for full assistance yet still struggling to pay the bills.
The proposal does two things. First, it requires price transparency so that the patient has the power to make the best decision for their pocketbooks and their health. Second, it pre-funds health savings accounts for middle-income families with employer-sponsored coverage so that they have money in their pocket at the beginning of the year for their out-of-pocket costs.
The MVP plan focuses most on middle-income families because America’s health-care subsidy system is upside-down. Most Americans assume federal health care assistance primarily helps lower-income families, but the reality is that the system provides its largest subsidies at both ends of the income spectrum.
At the lower end, Medicaid often covers nearly the entire cost of health insurance. Families purchasing coverage through the Affordable Care Act exchanges frequently receive subsidies covering 80%, 90%, or even more of the total cost of coverage. At the upper end, the tax code provides substantial assistance through the favorable treatment of employer-sponsored insurance.
Between those groups lies a vast population of working Americans who often receive comparatively less assistance than either group, despite carrying some of the largest health care burdens relative to income. The result is what might be called a subsidy valley.
Federal assistance is highest at the bottom of the income scale. It rises again near the top. And it falls in the middle, precisely where millions of working families are trying to pay mortgages, raise children, save for college and absorb rising medical costs.
If health policy were designed from scratch today, no one would intentionally build a system this way. That is why the MVP Plan focuses on middle-income families with employer-sponsored insurance.
The proposal does not attempt to replace Medicaid. It does not dismantle employer-sponsored coverage. It does not create a new entitlement. Rather, it fills the gap created by our current system.
Most families need protection from predictable costs, not million-dollar medical catastrophes. In fact, for most households, annual out-of-pocket spending is less than the proposed HSA contribution. In practical terms, that means many families would have little or no out-of-pocket medical spending during a typical year.
As an example, a parent taking a child to the pediatrician would not have to wonder how the bill would be paid. MVP provides financial certainty, ensuring families no longer see their deductible every January and hope no one gets sick.
That is why the most important measure is not the premium. It is the total cost of being insured.
A family paying $7,000 in premiums and another $4,000 in medical expenses experiences healthcare as an $11,000 annual obligation. Whether those dollars are labeled premiums, deductibles, copayments or coinsurance makes little difference to the family budget.
The MVP Plan attacks both sides of that equation.
Premiums fall because the system becomes more transparent and competitive. Out-of-pocket spending falls because families receive resources before medical bills arrive. The result is a health-care system that directs assistance where affordability problems are greatest.
For decades, health-care reform has focused on expanding coverage. The next challenge is making coverage affordable once families have it.
Middle-income Americans should not be the forgotten families of health policy; they should be its central focus. That is what the MVP Plan seeks to achieve.
• Sen. Bill Cassidy, M.D., is Chairman of the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee.
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