There hasn’t been much in the popular press about consumer-directed health care of late. What a relief. That doesn’t mean we can bury the idea, as economists and policy makers of a libertarian bent are going to keep returning to the “market as solution to all” mantra until we successfully implant a wooden cross in their cold small hearts.
And to some degree consumerism in health care is appropriate and warranted, and therefore part of the answer to the health care reform question.
Mercer’s latest study indicates that 3% of employees have selected CDHP options; that’s a bit misleading as some employers only offer CDHP plans, making it tough for their workers to choose another option. Those areas that have experienced faster growth include Kansas City and Indianapolis; again when you dig a little deeper you find that the number of Kansas City employers offering consumer-direct health plans hasn’t increased over the last year.
On the research front, Jason Shafrin of Healthcare Economist has done his usual excellent job making a paper on the economics of consumerism in health care understandable and relevant to the rest of us. Read his post, and then read the paper if you must. Jason’s net – “the authors claim that increasing prescription drug copay costs can actually increase health care spending and make patients worse off“. And they make a pretty solid case to support their claim, citing multiple studies and explaining the nuances of each..
What does this mean for you?
Beware of those touting consumerism as the solution; it is part of the solution, but the potential costs of consumerism should be carefully weighed before designing a plan.
When I get an EOB from my insurance carrier (Tricare), it shows what the provider charged, and what the insurer allows. Usually the insurer’s pay schedule, which is always accepted by the providers, is about 40% of what the providers charge. THAT’S 40%!!!
What I want to know is with CDHP, until you reach the high yearly deductible, are you paying the provider full charges or the negotiated fee prices that your high deductible carrier has pre-negotiated for its low deductible products??
I ask this because if individual patients shopping around is suppose to be how CDHC lowers costs, then that is a joke because no amount of INDIVIDUAL shopping around will equal the 60% off that powerful payers can negotiate!
Comments??
As I know it, you do get the negotiated rate since, as part of having one of the spending accounts, you have to enroll in a qualifying health plan, which 90 percent of the time is a PPO (some states, like Michigan, have rules flexibility that allow HMOs to qualify). So in seeking the service, you would go to a network physician, and pay the rate that the physician negotiated to be on the plan’s network in the first place.
Of course, if you chose to go out of network, you’d be on the hook for the non-negotiated rate. But then, that would also be true if you didn’t have a spending account anyhow.
That said, I seem to recall UnitedHealth/Golden Rule tried to sneak something past members of its Individual CDH plan along these lines. I can’t find the link, but perhaps it is something Joe blogged about. Seems to me it came up last fall in the med-blogosphere.
Thanks Rick.
The point I wish to stress again is that conservatives are fond of saying that CDHC will cause cheaper prices because there will then be shopping around. Now it remains to be seen if such shopping around is realistic period in healthcare, but based on what you say here, if the patient already gets the 40% lower negotitated rate that his high deductible insurance company gets, what ‘s the point of shopping around. They are not going to ever get less than that! Makes you wonder what the real purpose of CDHC is!
“if the patient already gets the 40% lower negotitated rate that his high deductible insurance company gets, what ‘s the point of shopping around.”
You’re kidding, right? You don’t really believe all providers charge the same to begin with?
“You’re kidding, right? You don’t really believe all providers charge the same to begin with?”
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Stella, it does not matter what minor variations each provider might start out with charging because these 60% off fee schudules are in a different universe. Only a large volume powerful payer could secure such deals. The individual patient one on one with powerful providers is like and ant to an elephant in both information possessed and in economic clout. Therefore I reiterate that how can shopping around by individuals ever hope to beat the already 60% discounted figure that insurance companies have negotiated, unless of course the patients have to pay the “full” provider charges under the deductible in CDHC plans, which was my original question.
I think you all are missing the point. The shopping around that the carriers want to take place is taht of the consumer to go to the provider that charges $100 for a procedure (which is then reduced by 40%) vs. going to the provider who charges $120 for the same procedure (and is then reduced by 40%). The savings is not directly to the consumer but to the payor and in theory would passed to the consumer in lower premiums in the future…in theory.
“Therefore I reiterate. . . ”
Pardon me, I thought you were talking about insured individuals.
As to the uninsured, I agree they don’t have much opportunity or incentive to shop for a physician (shopping for our physician is really how we shop for health care anyway). The uninsured might be able to negotiate a special deal with their physician but more likely their physician will not even want to have them as a patient. That’s called “charity care”.
It is seldom stated (but nevertheless true) that 65% of the uninsured are the poor or working poor who earn less than 2X’s the poverty limit and 98% of uninsured are under 4X’s the poverty limit. (according to the Kaiser Family Foundation)
But why are these individuals not covered by Medicaid?
Why do the states and the federal government stand by while the millions of poorest Americans lack health insurance, and at the same time maintain a massive entitlement program whose mission is to provide health insurance for the poor but is clearly failing to do so?
Stella Baskomb
Well??
Stella, I WAS talking about the insured, but my point was that a huge payer with almost monopsony-like clout can get the best fee schedule from some providers, which will always by itself be far lower than an individual patient in need will get.
However, there is the caveat of real access even if insured on paper with such prices, which relates to your question about the uninsured. Yes there is an entitlement program for the poor (Medicaid), but the commitment to it by the system is not really there and not coordinated.
Let me tell you a life story to show what I mean. I spent my career in dental public health mostly treating Medicaid patients and later trying to get the system policy-wise to get kids on Medicaid dental care. Only about 25% of kids that have Medicaid can find a dentist willing to take them even though they have by far the most dental disease!! Therefore, we have the government saying that dental care is important and that the government will pay for such care. However, the only profession licensed by that same government to treat these kids says no, we will not see them because we don’t get paid enough and we just don’t have to! You see there are not enough dentists to see everyone!
The problem is no systematic committment, no systematic cooridnation to a mission of getting everyone timely access to proven good quality care without bankrupting anyone. If a single payer system with a single fee schedule was put in place for all, then the access problem would at least be more egalitarian and based on number of providers more than ability to pay.
Up to now the question is which solution is more acceptable to most Americans along with which would be easier for politicians to pull off??
“my point was that a huge payer with almost monopsony-like clout can get the best fee schedule from some providers, which will always by itself be far lower than an individual patient in need will get.”
OK, let’s look at it.
In my plan I pay 20% of the net (negotiated) fee.
An office visit with Dr “G” costs me 20% of the negotiated fee, and with MD “C” it costs me 20% of the negotiated fee.
Dr “G” charges $180 and my insurance company has negotiated a discount of 50%, so the net fee is $90 – I pay 20% or $18.
MD “C” charges $220. Again, the net fee is 50% or $110 and I pay 20% of that, or $22.
Well, then $22 would be more.
Since I am a patient “in need” and other things being equal (I know, they never are) I would choose to pay $18 not $22 for an office visit. Wouldn’t you? So we leave MD C and switch to Dr G. We are not technically shopping for health care but it’s close enough. In this way, the physician may well suffer a loss of patients and income if she does not reduce her fees. What are the elements? (a) patients exercise choice based on their perceptions about cost vs. benefit, (b) patients bear a meaningful share of the cost, and (c) patients’ decisions are likely to affect physician behavior. THAT is what the so-called consumer health plans intend to test.
So I still don’t see your point.
As to Medicaid, you say “The problem is no systematic committment, no systematic cooridnation . . .” I would add “no money” but I am not so much asking what the problem is, as I am asking WHY.
“Why do the states and the federal government stand by while the millions of poorest Americans lack health insurance, and at the same time maintain a massive entitlement program whose mission is to provide health insurance for the poor but is clearly failing to do so?”
Maybe even more important, why does the public not demand accountability for this mess from elected officials? Why don’t more of the public understand that the uninsured are mostly the poor? And that Medicaid is failing to meet its promises to the poor? Where is the accountability? Why is this allowed to stand?
Stella wrote:
“In my plan I pay 20% of the net (negotiated) fee.
An office visit with Dr “G” costs me 20% of the negotiated fee, and with MD “C” it costs me 20% of the negotiated fee.
Dr “G” charges $180 and my insurance company has negotiated a discount of 50%, so the net fee is $90 – I pay 20% or $18.
MD “C” charges $220. Again, the net fee is 50% or $110 and I pay 20% of that, or $22.”
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This is where you a likely incorrect. The large payer does not negotiate a % discount, but an exact fee period. Quite often it is the medicare fee schedule that is used. So the question for a patient in a high deductible CDHC plan would be do they get to pay under the deductible limit as if the entire charge was at the negotiated insurance company fee schedule, or do they pay the full charge until the deductible limit is reached.
Again as for anything related to the negotiated rate, that rate would be a set fee schedule and not a percentage of whatever the provider cares to charge!
“This is where you a likely incorrect. The large payer does not negotiate a % discount, but an exact fee period.”
“Likely incorrect”?
I think not.
Please re-read what I stated – I refer to the negotiated fee. But insured individuals do not pay the full negotiated fee, otherwise what is the purpose of insurance? My insurance pays 80% and I pay the 20% balance.
My insurance also has a deductible which I must pay in full before the insurance begins to pay 80%. The size of the deductible affects how much of the negotiated fee I end up paying and how much the insurance company pays. A higher deductible makes me pay a greater share – which is the intent of a so-called consumer directed plan.
Stella wrote:
“My insurance also has a deductible which I must pay in full before the insurance begins to pay 80%. The size of the deductible affects how much of the negotiated fee I end up paying and how much the insurance company pays. A higher deductible makes me pay a greater share – which is the intent of a so-called consumer directed plan.”
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But I thought the purpose of CDHC was for you to shop around for the lowest price. I am trying to show you that you will never get a lower price than the negotiated fee schedule that insurance companies already have achieved. Therefore, no shopping around is needed. Now if you are saying that people will get less care because they pay toward a higher deductible than before, well that may be true, but considering the huge inof assymetry out there, is that a good thing to have consumers deciding on needed care???????
“But I thought the purpose of CDHC was for you to shop around for the lowest price.”
But I disagree.
The ideas behind CDHC are (1) I’ll have to spend more of my own money which (2) makes me ask more questions about whether I really need what I’m being told to buy and (3) that induces me to make more cost-benefit decisions on my own. This gets at the “utilization” part of the cost problem which I understand to be different from the “price” part of the cost problem.
After I pick my doctor, I’m not going to “shop” unless for some reason we don’t get along. That would not necessarily be purely price-driven. Price is always a factor, but I think just as important will be one’s physician relationship and the physician’s attitude toward the patient – for example, cooperation and willingness to share information. I’m asking a lot more questions these days (and the internet is helping answer some of them). I think changing docs based only on price will be rare – and silly – don’t you?
“Maybe even more important, why does the public not demand accountability for this mess from elected officials? Why don’t more of the public understand that the uninsured are mostly the poor? And that Medicaid is failing to meet its promises to the poor? Where is the accountability? Why is this allowed to stand?”
The cost of both the Medicaid and Medicare programs have been growing significantly faster than general inflation for years. In fiscal 2006, the Medicaid program cost slightly over $300 billion (federal and state shares combined) while Medicare cost another $450 billion or so. Medicaid, while a comprehensive benefit package on paper, pays so poorly that it is hard for beneficiaries to find doctors willing to see and treat them. For many services, Medicare doesn’t pay very well either, and providers shift costs to private payers to the extent that they can. There are also millions of people who don’t meet the income eligibility criteria for Medicaid today but make far too little to afford health insurance.
The underlying problem from a politician’s perspective is that (a) money is a constraining resource and (b) there are limits to how many tax dollars can be coerced out of citizens’ pockets. There is also lots of fraud and inappropriate care delivered under the Medicaid program, especially in nursing homes, which doesn’t exactly help to build political support for expanding it. To the extent that we could reduce utilization by reducing futile and often unwanted care at the end of life, doing a better job at combating fraud and inappropriate care, and, over the longer term, reduce defensive medicine through sensible malpractice reform, perhaps we could free up more resources to better take care of the poor and near poor.
BC said
“lots of fraud and inappropriate care delivered under the Medicaid program, especially in nursing homes, which doesn’t exactly help to build political support”
OK, back to my question. Why isn’t this building a political fire under the politicians that take the credit ?
Stella wrote:
“The ideas behind CDHC are (1) I’ll have to spend more of my own money which (2) makes me ask more questions about whether I really need what I’m being told to buy and (3) that induces me to make more cost-benefit decisions on my own.”
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I do not beleive we know if this is true, but more importantly, I do not believe this will result in better health outcomes which is what you want when you go to the healthcare system.
Providers are the source of care and haphazardly picking and choosing various pieces of professional advice will lead to poorer, more haphazard results. Patients certainly retain the right of refusal, but they should not be in control of what is offered to them by a professional evidenced-based healthcare system.
“I do not beleive we know if this is true, but more importantly, I do not believe this will result in better health outcomes which is what you want when you go to the healthcare system.”
That is why these plans are being tried. So the result can be determined as a matter of fact and knowledge, not as a matter of faith or, as you put it, belief.
“haphazardly picking and choosing various pieces of professional advice will lead to poorer, more haphazard results. Patients certainly retain the right of refusal, but they should not be in control”
Somehow I thought you were opposed to patients having control. Somehow that came thru in your earlier posts. Somehow.
Stella wrote:
“patients having control”
You must define control. I stated patient’s should have the right of refusal when possible, and that is ultimate control. However in an emergency situatiuon, you have a case when even the patients loses control, which quite boldly makes my overall point!
The medical profession evolved because of a great and powerful human social need, and you just cannot make believe that history of professional evolution means nothing just because the cost factors get high. Deal with the true underlying social systematic needs and principles involved to make a good, mission oriented public health improvement system. That is what we will eventually have to have to make this system work sustainably!
“You must define control. ”
Oh yeah, “definitions” – the last refuge of a debate scoundrel. Not playing, thanks anyways. If my preferred doctor-patient relationship as I’ve described it is not clear to you – oh well.
“you just cannot make believe that history of professional evolution means nothing”
I nowhere suggest that.
“haphazardly picking and choosing various pieces of professional advice”
I nowhere suggest that, either.
Perhaps you feel you lose too much control by responding to what people actually say to to you. I don’t know about that, but I can tell you that you lose control by failing to respond to what people actually say.
Best regards,