• A Sick System: What won’t work A Sick System: What won’t work By St. Louis Post-Dispatch The latest buzz in health insurance is “consumer-driven” health care. Make Joe and Jane Consumer pay a bigger chunk of their medical bills,
• A Sick System: What won’t work
A Sick System: What won’t work
By St. Louis Post-Dispatch
The latest buzz in health insurance is “consumer-driven” health care. Make Joe and Jane Consumer pay a bigger chunk of their medical bills, the theory goes, and they’ll start talking back to their doctors, shunning unneeded tests and shopping for gall bladder surgery the way they shop for blue jeans.
In other words, individual patients are supposed to do what employers and giant health insurers cannot: Make the American health care system behave like a free market.
Joe and Jane can’t do that, of course. Sure, the “consumer driven” trend is likely to save money for employers by shifting costs to workers. But it probably will leave consumers with less money in their pockets and possibly sicker as well. And it will do little to control the soaring cost of health care in the United States.
The fact is that shopping for health care never can work like shopping for blue jeans. The costs and complexity of serious illness make that impossible. Trying to make American medicine function like a free market is like entering a hippo in a horse race. Given the moral stake involved in human health, it’s foolish to try.
But the Bush administration is going to give it a shot. During the recent re-election campaign, President George W. Bush praised the idea of medical savings accounts as a way to bring health costs under control. That plan involves combining high-deductible health insurance policies with tax-free savings accounts.
A family will be responsible for the first $2,000 to $5,000 it spends a year on medical care before insurance kicks in. To help with that, families can set up savings accounts that never will be taxed. Employers can contribute to the accounts, but they don’t have to. Anything not used one year can be saved to cover future medical bills.
The underlying assumption is that consumers will be smarter medical shoppers once more of their own money is on the line. The problem, of course, is that the health business treats the individual consumer as an easy mark. Hospitals and doctors’ groups grant discounts to insurance companies that can bring in thousands of patients. But people with no coverage get gouged. Hospitals in St. Louis, for instance, charge uninsured people 230 percent of their true cost of delivering service – much more than insurers or Medicare actually pay. Do we really expect Joe and Jane Consumer to successfully haggle for a better discount than a giant insurance company?
Skipping care
King-sized deductibles also sting average families. Median family income in the United States is $50,000 per year, meaning that half make less and half more. Add a couple of kids and such families have little spare cash. Faced with a $5,000 deductible, will a sick mom or dad skimp on their own medical care in order to care for the kids? Absolutely. And will skipping care now make mom and dad sicker – and more costly to treat – later? Right again.
Shifting more cost onto consumers is also supposed to make them reject care that provides little benefit. But is it wise for consumers, who have little medical knowledge, to disobey their doctors’ advice in order to save money? Can Joe and Jane tell an unneeded MRI from a needed one? Will people stop taking cholesterol medicine to save money, only to suffer heart attacks years later?
We’re probably going to find out. About 10 percent of companies already offer some form of consumer-driven insurance, and 60 percent plan to do so, according to a Hewitt Associates survey.
That brings up a problem for employers who offer a choice of health plans to their workers. High-deductible policies are more attractive to young, healthy people. They’ll take the lower insurance premiums, betting that they’ll stay healthy. Given a choice, sick people will stay with low-deductible plans.
But insurance works by spreading risk broadly between the healthy and the sick. If healthy people bail out of low-deductible plans, those premiums could shoot through the roof until they become unaffordable.
Saving little
Another problem: We won’t save much by putting patients on the financial hook. If everyone in the country were forced into a high-deductible plan – which obviously won’t happen – costs would drop only 7 percent or 8 percent, says Ken Thorpe, who chairs the health policy department at Emory University.
That’s because most U.S. health care dollars are spent on very sick people, who would blow through any deductible quickly. The sickest 5 percent of Americans account for 50 percent of the nation’s health spending. The unhealthiest 50 percent of Americans account for 95 percent of spending. If you know you’ll spend the whole deductible anyway, you have little incentive to keep costs down.
Dreamland
Stripped of dreamland economic theories, consumer-driven health care will shift more health costs from employers to employees. In fact, workers’ premiums and out-of-pocket expenses have doubled in four years to more than $2,500 a year, according Hewitt Associates.
High-deductible plans could have one real benefit. Today’s plans shave about $600 a year from an employer’s cost for covering a worker, according to figures from Mercer Human Resources Consulting. That savings might be enough to prompt more employers to offer some kind of health coverage. Estimates hold that 2.4 million to 6.7 million more workers may gain coverage. That would make a dent, but not a big one, in the ranks of the 45 million Americans without health insurance.
Another scheme for fixing health care involves turning back the clock 10 years to a time when managed care actually was controlling health care costs.
Dubbed “managed competition,” it would use government regulation to force health care to perform like a real market. It would break up the big hospital groups to lessen their bargaining clout. It would allow insurance companies to boot doctors who won’t comply with spending and quality rules. It would shift pricing power away from medical providers and back to the insurance companies. As an added twist, “managed competition” would let consumers chose among several insurers so that the companies would have to compete against each other.
Such a system probably would control costs better, as it did in the early 1990s. But it would preserve much of the expensive, inefficient billing and insurance bureaucracy that clogs the current system. And it would not cover the uninsured. Managed competition probably would face the same fate as managed care did in the 1990s – a forced retreat in the face of resistance by patients and politically powerful hospitals and doctors’ associations.
