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Sorry folks for the long break since my last post. I have been a little busy but thought that this morning I would write about the new Statistics Canada report on the shortage of doctors. Rather, the number of Canadians without a family doctor.
According to the report, 4 million Canadians do not have a regular doctor, and recent immigrants are the most likely to be without one. Only 73% of people living in Quebec have a regular doctor, the lowest rate in the country. Nova Scotia, however, had the highest percentage at 94%. Of those who do not have a family doctor, the study showed that 76% use local clinics and community health centres as their primary source of care.
This lead to me thinking…what does this mean for the corporate consolidation we are starting to see in places like Alberta and Ontario for medical services? ListenUp Canada, as an example, are consolidating hearing clinics and making access and service more streamlined. Will private walk-in clinics be branded next? For those looking for new business venture ideas, might I suggest a coffee in the coming weeks? We may be onto something here, especially if this trend continues!
Seeing how we receive questions on how HSAs in Canada are different from those south of the border, we have added a new dedicated page on Health “Savings” Accounts. You can access this page on the top navigation under the tab US Model.
We will be adding even more content in the coming weeks. Stay tuned folks!
Well, who would have thought that my posts regarding Consumer Driven Healthcare would spark so many calls and e-mails. Since a blog is an ongoing story that is forever being written, I don’t always get the chance to write every detail. Over time, this will change as I add more and more content – I can only type so much in a day.
One of the e-mails I received asked if I believed that Consumer-driven healthcare could work without insurance. The answer of course is no. If you had the chance to read my article in Benefits Canada this month, I provided some options for Canadian companies to use the US-model of delivering CDH with the use of a Health and Welfare Trust (HWT). In the article, I suggested that companies offer an Health Spending Account in the form of an HWT as a replacement to traditional insurance for predictable claims. An HSA is an ideal funding model to cover predictable claims, the ones you know your employees will incur and therefore you have no need to insure for the event. After all, nobody would ever consider buying gas insurance for their car so why would you pay a premium for your annual dental cleaning.
However, I cannot stress enough the importance of insurance for the unpredictable. That is, after all, why we buy insurance. If anyone thought that I suggested we abandon insurance and go to a cash-savings model only, I apologize. What I wanted to stress is that the decision making on how premiums are paid and what they are paid for should be part of the decision making process of the consumer. Maybe not immediately, but certainly down the road once the support network is in place to educate and inform consumers to make sensible choices. The key issue at hand is the ability for consumers to make choices and spend their money in a more sensible manner. Buying insurance for the unpredictable claims and using their HSA for the predictable is money spent, in a sensible manner.
What a week for the markets with yesterday being the biggest drop in 7 years for the Toronto Stock Exchange (TSX). And as I type this, people on Wall Street and Bay Street are panicking, waiting for the bell to see what will happen in the US. So far this morning, the Fed unexpectedly cut interest rates by 75 basis points and U.S. Treasury Secretary Henry Paulson, spoke to the US Chamber about the need for Congress to agree quickly on a package of tax cuts and other measures to boost the economy. Everybody is nervous – especially those with Health “Savings” Accounts south of the border. Some of our US counterparts have their HSA money invested in a wide variety of funds and equities. It is one thing to loose $500 in one day on a bad stock bet. It is another thing when that $500 was to pay for your diabetes medication!
Luckily, I live in Canada. My Health and Welfare Trust does not earn interest for me and I cannot invest the funds. It sits in the account, through good times and bad times, waiting for me to make a claim. The only thing bothering me today is my retirement fund…it is getting battered to pieces. But I have invested in solid companies…so I know they will come back. They always do. So I will sit back, relax, and hope that my HSA colleagues south of the border can afford their medication by the time the bell rings this evening.
A new report from the Employee Benefit Research Institute (EBRI) claims that the consumer-driven healthcare model is doomed. The report states that “should health education initiatives prove ineffective, the ‘consumer-driven health movement’ could well be doomed, especially if it relies upon fully educated health consumers taking self-initiated actions.” The report goes on to say that consumers lack the education to fully understand their plan. “They have not been taught to speak up to health care providers, to be partners in their own health coverage and care,” states the report. Nor do they know what to expect in connection with the finances of health benefits or healthcare.”
While I am sure everyone agrees that communication is key to the success of consumer-driven plans, I disagree with the statement that they are doomed. Consumer-driven plans using HSAs can easily be compared to investments and savings in the early 80s. Up until the early 80’s most people required a stock broker to buy and sell stock on their behalf. Mutual Funds existed, but few people understood how they worked or how to participate. Many people had a defined-benefit pension, but nobody understood how the money was managed and invested. Consumer access to information was scarce and the ability to enhance personal wealth through investing was limited to the few. However, over time the market access expanded, information became more readily available, and consumers became more savvy. It did not happen overnight and it took several product failures before the investment industry found the right products and tools to turn personal wealth and investing into a consumer-driven product. But it still happened.
Today, very few people would have difficulty identifying and explaining the features of an RRSP, a Mutual Fund, or a GIC. Likewise, they would probably have one already in place and be making regular contributions. A growing number may even self-manage their portfolio on-line and access information and resources from a variety of Web sites and cable channels such as BNN or CNBC. Now, don’t get me wrong, I am not saying that everyone should rely on CNBC for their investment advice. What I am trying to explain is that the investment industry shifted from being a consumer-excluding to a consumer-driven one over the past two-three decades and I think consumers would agree that it worked out for the better. The same holds true for health benefit programs.
One could argue that the health benefits industry is behind other industries due to the relationship plan sponsors have played over the past few years in doing the work for their employees. When consumers are not forced to make decisions and find information, the support tools for the industry never evolve. Nobody would have envisioned twenty years ago that consumers could access real-time stock quotes and perform on-line stock trading without a broker. We never would have imagined self-directed RRSPs or “day-trading”. Why should it be so difficult for the health benefits industry to evolve as well? Plan Sponsors accepted defined-contribution plans, and turned their employees into consumers. Perhaps we need to step back and let the industry evolve? Who knows…20 years from now a Health Spending Account could be as basic a savings vehicle as a chequing account.
The Canadian Taxpayers Federation, with the help of the CD Howe Institute, released a tax-proposal for the federal government this morning entitled Lower, Simpler, Faster – Towards a single tax rate for Canada. The proposal recommends the federal government embark on comprehensive tax reform with the goal of adopting a single personal tax rate. As an immediate first step, the authors (Mark Milke & John Williamson) recommend that Canada move to two federal income tax rates of 15% and 25% by 2012. There are currently four tax rates of 29%, 26%, 22% and 15%.
Their proposal also called for a decrease in the number of deductions available to Canadians. While they noted medical expenses as a deduction, I was disappointed to see less emphasis placed on reforming the current medical tax credit. The CTF plan proposes a generous personal exemption, stating that “Basic personal exemptions should be set at a generous level to exclude those with the lowest incomes and ensure the tax system remains progressive“. Supporters of the HSA could argue that the CTF proposal would have more support from other lobby groups (and the voting public) if it balanced their tax model with more sensible deductions.
A workforce with more money in their pockets is only beneficial if they are healthy and can produce. While I agree with the report, one could argue that the replacement of the medical tax credit with some of the HSA policies outlined in the US Medicare Modernization Act might prove to be an additional benefit. Allowing every Canadian to have access to an HSA and deduct it from their personal income taxes like an RRSP would be a good step forward to keeping Canadians healthier, and not just wealthier. While I understand the CTF proposal was focused on tax and not deductions, I certainly hope we see more discussion in Ottawa regarding the US-model for Health “Savings” Accounts as tax-savings vehicle to promote healthier and wealthier citizens.
I thought I would shed some light on the growing movement in the US regarding consumer-driven healthcare. Each weekend, I read my Sunday New York Times. Over the past few years, I have noticed an ever increasing volume of content related to Health “Savings” Accounts as the driving force behind consumer-driven health care. Recently, the topic has started to surface in Canada as well. In fact, I have an article on this very topic in the upcoming edition of Benefits Canada – be sure to check it out! (Sorry about the gratuitous plug on my work!)
The controversy in the US over consumer-driven healthcare comes from the growing trend of large corporations pushing the decision making process for health spending into the hands of their employees. In doing this, many corporations have decided to offer their employees a Health Savings Account with a high-deductible insurance product and abandon their fully-insured plan. The key driver is cost as an HSA offers greater budget certainty versus traditional insurance plans. Those who oppose the model claim that consumer-driven healthcare places too much power in the hands of the employee and that the employer no longer has any responsibility in their health and well-being. Those in favor of consumer-driven healthcare believe that the model is a more sensible approach as it allows the employee to tailor their health benefit program to the unique needs of their family as opposed to being presented with a canned plan designed to satisfy the needs of all employees. Either way, the trend has become major news in the US and the HSA industry south of the border is exploding as we speak. By what about Canada and other countries? Will they follow suit?
My upcoming Benefits Canada article (the January edition) outlines the differences between the Canadian Health “Spending” Account and the US Health “Savings” Account. It also examines the challenges and opportunities for Canadian companies interested in adopting a similar consumer-driven healthcare model as their contemporaries in the US. While I will not get into the details on this blog before the article is printed (I would prefer that you pick up a copy of the magazine), I will cover some of these similarities in future posts.
HSA Information for Canadians 