Health Insurance Freedom

I posed a question up on Plum Line today and got some interesting responses. I think NoVA and jnc were active on the thread. We’ll make it a two parter. I thought Brent, Kevin or Mark might be interested.

1. Your employer pays for your family’s health insurance at a cost of $12,000 per year. Said employer offers to drop the coverage and increase your salary by the same amount. Under current law, you lose the tax benefit of deductibility, but gain the liberty to purchase whatever insurance you like. Is it worth the price?

2. Same as scenario #1, but assume that current law is changed to make health insurance deductible on Schedule A. That or make employer provided health insurance taxable.

—–

I was effectively asked the first question when negotiating terms for a possible new position. I responded that I would have to purchase health insurance of some kind as my better half is a freelancer. The offer included health insurance. I’d take it that way as I don’t care for the tax hit.

I’d say yes to Question #2 as I dislike the link between health insurance and employment. It’s a relic of wage and price controls from the 40s. The U.S. spends as many public dollars as most developed countries do and then kicks in a few more precent of GDP.

BB

Copied Without Permission from the WSJ

By
JEFFREY A. SINGER

Every so often I have an extraordinary and surprising experience with a patient—the kind that makes us both say, “Wow, we’ve learned something from this.” One such moment occurred recently.

A gentleman in his early 60s came in with a rather routine hernia in his lower abdomen, one that is easily repaired with a simple outpatient surgical procedure. We scheduled the surgery at a nearby hospital.

My patient is self-employed and owns a low-cost “indemnity” type of health insurance policy. It has no provider-network requirements or preferred-hospital requirements. The patient can go anywhere. The policy pays up to a fixed amount for doctor and hospital bills based upon the diagnosis. This affordable health-insurance policy made a lot of sense to this man, based on his health and financial situation.

When the man arrived at the hospital for surgery, the admitting clerk reviewed the terms of his policy and estimated the amount of his bill that would be paid by insurance. She asked him to pay his estimated portion in advance. (More hospitals are doing that now because too often patients don’t pay their portions of the bills after insurance has paid.)

The insurance policy, the clerk said, would pay up to $2,500 for the surgeon—more than enough—and up to $2,500 for the hospital’s charges for the operating room, nursing, recovery room, etc. The estimated hospital charge was $23,000. She asked him to pay roughly $20,000 upfront to cover the estimated balance. (emphasis provided)

My patient was stunned. I received a call from the admitting clerk informing me that he wanted to cancel the surgery, and explaining why. After speaking to the man alone and learning the nature of his insurance policy, I realized I was not bound by any “preferred provider” contractual arrangements and knew we had a solution.

I explained that just because he had health insurance didn’t mean he had to use it in every situation. After all, when people have a minor fender-bender, they often settle it privately rather than file an insurance claim. Because of the nature of this man’s policy, he could do the same thing for his medical procedure. However, had I been bound by a preferred-provider contract or by Medicare, I wouldn’t have been able to enlighten him.

Hospitals and other providers make their “list” prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price. Anybody who has seen an “Explanation of Benefits” statement from a health plan will note a very high charge from the provider, and an “adjusted charge” based upon the contracted fee schedule, which usually leaves the patient with little or nothing in out-of-pocket expenses. The only people routinely faced with list prices are those few people who have insurance like my patient’s—that doesn’t include a pre-negotiated fee schedule with contracted providers—or those who have no insurance.

Most people are unaware that if they don’t use insurance, they can negotiate upfront cash prices with hospitals and providers substantially below the “list” price. Doctors are happy to do this. We get paid promptly, without paying office staff to wade through the insurance-payment morass.

So we canceled the surgery and started the scheduling process all over again, this time classifying my patient as a “self-pay” (or uninsured) patient. I quoted him a reasonable upfront cash price, as did the anesthesiologist. We contacted a different hospital and they quoted him a reasonable upfront cash price for the outpatient surgical/nursing services. He underwent his operation the very next day, with a total bill of just a little over $3,000, including doctor and hospital fees. He ended up saving $17,000 by not using insurance. (emphasis provided)

This process taught us a few things. First, most people these days don’t have health “insurance.” They have prepaid health plans. They pay premiums to take advantage of a pre-negotiated fee schedule arranged for and administered by a third party. My patient, on the other hand, had insurance.

Second, even with the markdown for upfront “cash-pay” patients, none of the providers was losing money on my patient. Otherwise they wouldn’t have agreed to the prices. With the third-party payer taken out of the picture, we got a better idea of the market prices for the services. It is the third-party payment system that interferes with true price competition, so “market clearing prices” can’t develop.

Take the examples of Lasik eye surgery or cosmetic surgery. These services are not covered by insurance. Providers compete on the basis of quality, outcomes and price. And prices have continually dropped as quality and services have improved—unlike the rest of health care.

When my patient returned for his post-op visit we discussed the experience. It was clear to both of us that the only way to make health care more affordable is to diminish the role of third-party payers. Let consumers and providers interact through market forces to drive down prices and drive up quality, like we do when we buy groceries, clothing, cars, computers, etc. Drop the focus on prepaid health plans and return to the days of real health insurance—that covers major, unforeseen events, leaving the everyday expenses to the consumer—just like auto and homeowners’ insurance.

Sadly, we are heading in the exact opposite direction. ObamaCare expands the role of the third party and practically eliminates the role—and the say—of the patient in the delivery of health care. Will they ever learn?

Dr. Singer practices general surgery in Phoenix, Ariz., and is an adjunct scholar at the Cato Institute.

A version of this article appeared August 22, 2013, on page A15 in the U.S. edition of The Wall Street Journal, with the headline: The Man Who Was Treated for $17,000 Less.

Flip Flopper in Chief?

I just don’t see how someone with so many different opinions or statements on one subject can realistically believe he can or even should be President.

A quote from Romney’s book “No Apology”;

After about a year of looking at data — and not making much progress — we had a collective epiphany of sorts, an obvious one, as important observations often are: the people in Massachusetts who didn’t have health insurance were, in fact, already receiving health care. Under federal law, hospitals had to stabilize and treat people who arrived at their emergency rooms with acute conditions. And our state’s hospitals were offering even more assistance than the federal government required. That meant that someone was already paying for the cost of treating people who didn’t have health insurance. If we could get our hands on that money, and therefore redirect it to help the uninsured buy insurance instead and obtain treatment in the way that the vast majority of individuals did — before acute conditions developed — the cost of insuring everyone in the state might not be as expensive as I had feared.

It’s not as if this interview with Glenn Beck was while he was in college, it was in 2007.

When they show up at the hospital, they get care. They get free care paid for by you and me. If that’s not a form of socialism, I don’t know what is,” he said at the time. “So my plan did something quite different. It said, you know what? If people can afford to buy insurance … or if they can pay their own way, then they either buy that insurance or pay their own way, but they no longer look to government to hand out free care. And that, in my opinion, is ultimate conservativism.

And in a 2010 interview on Morning Joe he was asked if he believed in universal health coverage and said;

Oh sure. Look, it doesn’t make a lot of sense for us to have millions and millions of people who have no health insurance and yet who can go to the emergency room and get entirely free care for which they have no responsibility, particularly if they are people who have sufficient means to pay their own way.

And then surprise of surprises last night on 60 Minutes he reversed course.

“Well, we do provide care for people who don’t have insurance,” he said in an interview with Scott Pelley of CBS’s “60 Minutes” that aired Sunday night. “If someone has a heart attack, they don’t sit in their apartment and die. We pick them up in an ambulance, and take them to the hospital, and give them care. And different states have different ways of providing for that care.”

h/t Sam Stein & Amanda Terkel

My oldest daughter finally convinced one of her friends to apply for the CA PCIP enacted as part of the ACA. Her friend Sara completely lost the ability to speak and also lost control of many motor skills while in graduate school about three years ago. Her medical insurance expired as she was forced to quit school and was also unemployable. Luckily, her partner was able to support the two of them, but just barely. Sara was unable to purchase health insurance and had no medical diagnosis so was also denied disability.

She has spent the last three years in emergency rooms and trying to get care and a diagnosis through the health department but most tests were denied and no one seemed able to make a diagnosis even though she has gone down hill dramatically in the past three years. At one point the state sent her to a mental health expert as they thought she was making herself sick or something. She now walks with the help of a walker, can no longer drive and barely leaves the house as it’s too much effort.

About a month ago she received her insurance through PCIP and was finally able to see both a GP and the neurologist he sent her to and now has a likely diagnosis and even medication to improve her condition. Her tests were ordered on an emergency status and she was diagnosed with PLS a very rare (only 500 cases in the US) and degenerative form of ALS (Lou Gehrig’s) that is not as deadly or rapidly progressive. There are treatments and while it is debilitating it isn’t a death sentence and can be mitigated while improving her quality of life.

We had a similar experience with our niece who died in 2008. We waited a very long time for her insurance company to approve the tests she needed but the approval never came. Instead she received a notice that her insurance had been terminated. We couldn’t get in to see a neurologist until we could prove we had the money to pay for whatever tests and treatment she might need. We converted our IRA’s to cash and put our rental house on the market but we were too late. While I was on the way to bring her home from Albuquerque to see the neurologist I’d found to treat her she had a seizure and died.

Mitt Romney can’t even seem to figure out if we have an obligation to help people in these circumstances or not.

Health Care Link Dump

Just wanted to post some of the recent health care news.  There’s also been an uptick in the number of SCOTUS ruling previews, but none of them are really all that insightful.  Just parlor game speculation.

Also, the White House has issued a veto threat on the medical device tax repeal bill.  [Edit:  Link to Statement of Administration Policy]

AHIP released a survey that found the number of people enrolled in health savings accounts and high deductible health plans has tripled over the last five years.  Survey is available here.  The Washington Post and Kaiser Health News recently profiled employers’ increasing use of high deductible health plans.  Most of these plans already covered a lot of the essential benefits stuff for free, even before the ACA, which I probably should have known.  The article is available here.

Medical costs are expected to rise by 7.5 percent in 2013, the fourth consecutive year of modest increases, according to a study released by PricewaterhouseCoopers LLP’s Health Research Institute.   Four factors that will continue to slow the rise in medical costs in 2013: medical supply and equipment costs are moderating under market pressure; growth in physician services is expected to be one of the slowest areas of cost growth as consumers choose alternatives to traditional office visits; accessibility to information on prices is exerting downward pressure as consumers in high-deductible plans seek cost information and pricing information becomes more readily available; and pharmaceutical patents are expiring.  The study is available here.

The Washington Post and GAO on a ACA tax credit in that small businesses aren’t using due to the complexity of taking it.  article is available here.  The GAO report, “Small Employer Health Tax Credit – Factors Contributing to Low Use and Complexity” (GAO-12-549) is available here.

Video:  Former CMS Administrator says that premium support (aka vouchers) is going to happen.

Health Care Costs Flattening. Why?

The New York Times has an article on the the slowdown and leveling off of health care cost, as a percentage of GDP. The economy is undoubtedly a factor, as people simply delay care. But consumer-directed plans might also be a factor.

Many experts — and the Medicare and Medicaid center itself — point to the explosion of high-deductible plans, in which consumers have lower premiums but pay more out of pocket, as one main factor. The share of employees enrolled in high-deductible plans surged to 13 percent in 2011 from 3 percent in 2006, according to Mercer Consulting.

That means thousands of consumers with an incentive to think twice about heading to the doctor. One study by the RAND Corporation found that health spending among people who shifted into a high-deductible plan dropped 14 percent — though the study also found that enrollees cut back on some care that tended to save money in the long run, like vaccinations.

The article notes that there also haven’t been any big “blockbuster” drugs released in the past few years.

I think that makes the case for high-deductible and/or consumer-directed care. Patients that are insulated from the true cost of care will consume more. Shift costs their way and they consumer less.

Across the silos of care the only constant is the patient. Policymakers are being on “patient-centeredness,” but that typically means some way of monitoring and tracking patients. I think these can be a useful tool to complement, but not replace, what ultimately has to be the patient’s responsibility.

Unfortunately, the ACA makes the high-deductible plans more expensive and subjects them to the same requirements to offer “free” preventive care and the like, thus defeating the purpose.

Bartlett on Health Care in the Financial Times

Lapsed R Bruce Bartlett says government can do it better.  Hmmm.

 

America
The folly at the heart of the US healthcare debate

America is the only developed country that does not offer some form of national health insurance to all its citizens.

Those over the age of 65 have coverage through Medicare and the poor are covered through Medicaid, both established in 1965. Those who are neither poor nor old are expected to obtain their own health insurance or get a job that provides coverage. The federal government does subsidise private insurance through the tax code by allowing its cost to be excluded or deducted from taxable income. This reduces federal revenues by some $180bn per year.

In 2009, the Obama administration put forward a plan for extending health insurance to those who did not have it through an employer, those who could not afford it and those who could not obtain coverage due to a pre-existing medical condition. A complex system of subsidies was established to make coverage affordable to everyone and a mandate was put into place requiring people to get coverage or else pay a fine.

The mandate is by far the most controversial element of the Affordable Care Act. Its rationale is that insurance companies cannot be forced to cover those with pre-existing conditions without it, or else people will simply wait until they are sick before buying health insurance. Nevertheless, many Republicans view the mandate as an unconstitutional intrusion into the economy and they have brought a case before the Supreme Court to declare the legislation null and void for that reason. Court watchers believe the case could go either way, with a final decision expected just before the election in November.

Exactly what would replace the Affordable Care Act if it is found unconstitutional is a mystery. The Obama administration appears to have no back-up plan and Republicans have steadfastly refused to offer any proposal for expanding health coverage. One problem is that before Barack Obama became president, Republicans were the primary supporters of an individual mandate, viewing it is as a more market-oriented way of expanding health coverage without a completely government-run health system. Indeed, Mitt Romney, the likely Republican presidential nominee, established a healthcare system in Massachusetts, where he was governor, that is virtually identical to the national system created by Mr Obama.

Simultaneously, Republicans are keen to cut spending for Medicare and Medicaid, because they are among the most rapidly expanding government spending programmes. A plan supported by Republicans in the House of Representatives would effectively privatise Medicare, giving the elderly a government voucher to buy insurance or health services, in lieu of the pay-for-service system that exists now. Medicaid would be devolved to the states.

What neither party has made any effort to grapple with is the extraordinarily high cost of health, public and private. According to the Organisation for Economic Cooperation and Development, the US spends more of its gross domestic product on health than any other country by a large margin. Americans spent 17.4 per cent of gross domestic product on health in 2009 – almost half of it came from government – versus 12 per cent of GDP or less in other major economies. Britain spends 9.8 per cent of GDP on health, almost all of it through the public sector. The total government outlay is almost exactly the same in the US and the UK at 8.2 per cent of GDP. This suggests that for no more than the US government spends on health now, Americans could have universal coverage and a healthcare system no worse than the British.

However, the option of a completely government-run health system was never seriously considered in the US when the Affordable Care Act was debated in 2009. Americans are too convinced that everything government does is less efficient and costs more than if the private sector does it. The fact that this is obviously wrong in the case of healthcare has never penetrated the public consciousness.

At the moment, everyone is waiting for the Supreme Court to speak before moving forward on any serious new health reform plan. Whichever way the court rules, it is likely to give some push to further action next year regardless of the election outcome. Moreover, the growing governmental cost of Medicare and Medicaid is something that has to be addressed if there is any hope of stabilising the national finances. That alone would be an impetus for action even if the Affordable Care Act had never been enacted.

The writer is a former senior economist at the White House, US Congress and Treasury. He is author of ‘The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take’

Drive by Post: Combining Free Market Insurance with Universal Catastrophic

I’m passing this along because I thought it was an interesting model. Unfortunately, I don’t have the time right now to do a full post on it.

Liberals Are Wrong: Free Market Health Care Is Possible

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