Tag: "consumer driven health care"

Health Reform Through Tax Credits

health-care-costs(A version of this Health Alert was published by RealClearPolicy.)

Lost in the blur of the presidential campaign, the evidence indicates the Republican Obamacare replacement plan will include refundable tax credits. In its purest form, this means each person with employer-sponsored benefits, an individual health plan, or dependent on a welfare program like Medicaid or the Children’s Health Insurance Plan (CHIP) will start with a clean slate and a fixed sum of taxpayer-funded money to choose health care of his choice. The Republican proposal will not likely go that far, but it will go a long way to introducing fairness in the tax treatment of health benefits, which is currently broken.

Chicken & Egg in Consumer-Driven Health Care

debtAn advocate of consumer-driven health care will often be challenged by this question: “So, when I am hit by a bus, or have a heart attack or stroke, or am suffering from dementia, you want me to go shopping around for medical care?”

Obviously not. Nevertheless, this is a serious challenge and invites the question: How much of our health spending can be meaningfully controlled by discriminating patients? Researchers at the Health Care Cost Institute (HCCI) recently addressed this. The HCCI has a unique advantage in producing such research, because has access to a database of claims for employer-based plans run by a number of insurers.

The research categorized “shoppable” versus “non-shoppable” services. It found:

  • At most, 43 percent of the $524.2 billion spent on health care by individuals with employer-sponsored insurance in 2011 was spent on shoppable services.
  • About 15 percent of total spending in 2011 was spent by consumers out-of-pocket.
  • $37.7 billion (7 percent of total spending) of the out-of-pocket spending in 2011 was on shoppable services.

So, it looks like only 7 percent of health spending is subject to price-conscious patients spending their dollars wisely. The researchers concluded that “Overall, the potential gains from the consumer price shopping aspect of price transparency efforts are modest.” That would be true if we were talking about just forcing price transparency on the current benefit design. However, that is a distraction.

When You Need Care Now But aren’t Likely to Die, Urgent Care is the Answer

According to a Wall Street Journal article, urgent care centers are becoming Americans medical home away from home – mainly evenings and weekends when their primary care providers are not available.  About two-thirds of patients at urgent care centers have a family physician.

There are an estimated 10,000 urgent care centers in the United States and another 1,400 are expected by 2020. Increasingly, traditional providers are getting in on the act. Hospitals are building, acquiring or partnering with urgent care providers. Walk-in patients are welcome, although many allow patients to make an appointment. Wait times are 30 minutes or less whereas a wait in the emergency room can run eight times that length. The average cost at an urgent care center is about $150, compared to $1,354 for an emergency room visit. Centers are usually open evenings and weekends when doctors’ offices are closed.

When a retail clinic won’t do, this sounds like a much better solution that non-emergent ER visits or waiting a week for a physician visit.  It would be even better if these facilities were integrated so you could choose the level of provider (and price level) you need. As one of the commenters said in the WSJ article, why doesn’t every hospital have one of these next to the emergency room?  I’d go even farther; why doesn’t every hospital have one of these with a retail clinic inside next to the ER?

Two Thirds of Patients’ Hospital Debts Unpaid

Doctors Rushing Patient down HallHolly Fletcher of The Tennessean has written a very informative feature on the hospital revenue cycle, including a seven-deck slideshow that translates the process into layman’s terms. (The Tennessean is the best daily newspaper for understanding hospitals, because Nashville is home to over for-profit hospital chains which control 60 percent of the beds in that industry, so the journalists know what they are talking about.)

Ms. Fletcher describes an insane system of billing which has been focused on getting dollars out of the byzantine bureaucracies we call health insurers. The main economic reason insurance should be for rare, unforeseen, catastrophic events is that claims processing is expensive. It is not just shuffling paper around, but also managing fraud, waste and abuse. This adds to what is called the “load” of insurance.

When it comes to getting money from patients directly, hospitals are hopeless, with two thirds of their accounts receivable remaining unpaid: “Billing practices are not designed to collect small, incremental payments from hundreds or thousands of patients. They are designed to bill a handful of large entities — insurance companies — not individuals who walk in the door.”

One might think this was a problem that is not too difficult to solve: Just call the supermarket or department store and ask them to recommend a point-of-sale technology vendor.

Trouble Paying Medical Bills: 2015 Versus 2005

iStock_000007047153XSmallAfter having read my colleague Devon Herrick’s Health Alert discussing the New York Times’ survey (conducted with the Kaiser Family Foundation) of adults having trouble paying medical bills, I had a look back and compared the 2015 results to those a similar survey from 2005. The results are almost exactly the same!

Despite a large decrease in the proportion of working-age people categorized as “uninsured” (even though many have actually become dependent on Medicaid, a joint state-federal welfare program, instead of actual insurance) one quarter of us still have trouble paying medical bills.

  • In 2015, 15 percent spent “all or most” of their savings on medical bills. In 2005, it was 12 percent.
  • In 2015, 10 percent “borrowed money from friends or family” and nine percent “increased credit card debt.” In 2005, eight percent reported “borrowing money or taking out another mortgage.”
  • In 2015, 32 percent “put off/postponed getting health care you needed.” In 2005, 29 percent of adults report “they or someone in their household skipped medical treatment, cut pills, or did not fill a prescription in the past year because of the cost.”
  • In 2015, three percent declared personal bankruptcy because of medical bills, the same as 2005.

Understanding Why Employer Benefit Costs Are Rising Slowly

Aon Hewitt, a leading actuarial consulting firm, has reported extremely good news about the cost of employee benefits:

2015 Records Lowest U.S. Health Care Cost Increases in Nearly 20 years

– Rate of increase was 3.2%

– Average health care cost per employee topped $11,000

– Employees’ share of health care costs have increased more than 134% since 2005

After plan design changes and vendor negotiations, a recent analysis by Aon (NYSE: AON) shows the average health care rate increase for mid-size and large companies was 3.2 percent in 2015, marking the lowest rate increase since Aon began tracking the data in 1996. Aon projects average premium increases will jump to 4.1 percent in 2016.

Aon Hewitt’s 3.2 percent rate of growth includes only premium. When employees’ out-of-pocket costs are included, the reason for the slow growth becomes apparent.

High-Deductible Health Insurance Crushes Health Spending

A new working paper published by the National Bureau of Economic Research (NBER) shows how much high-deductible health plans reduce spending:

We study consumer responsiveness to medical care prices, leveraging a natural experiment that occurred at a large self-insured firm which forced all of its employees to switch from an insurance plan that provided free health care to a non-linear, high deductible plan. The switch caused a spending reduction between 11.79%-13.80% of total firm-wide health spending ($100 million lower spending per year). We decompose this spending reduction into the components of (i) consumer price shopping (ii) quantity reductions (iii) quantity substitutions, finding that spending reductions are entirely due to outright reductions in quantity. We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).

(Z.C. Brot-Golberg, et al., What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics,” NBER WP No. 21632, October 2015.)

Jeb Bush Health Reform: Innovation and Patient-Centered Care

Bush2(A version of this Health Alert was published by The Hill.)

By avoiding sound bites and respecting voters’ ability to understand issues, Governor Jeb Bush’s health-reform proposal demonstrates strong leadership. Repeal and replace Obamacare? Sure, Bush is for that, but no Republican politician should win points simply by regurgitating what many citizens fear has become little more than a slogan.

Jeb Bush’s Health Plan

BushJeb Bush’s health plan is out – and it is very good. Bush leads with fundamental reform of the Food and Drug Administration. “It should not cost $1.2 billion to $2.6 billion nor take 12 to 15 years to advance a medicine from discovery to patients, but that is the case under the Food and Drug Administration’s current regulatory mess.”

In recent weeks, we’ve read stories about drugs that have been around for decades, for which prices have been hiked sky-high. These price hikes are carried out by executives taking advantage of obscure FDA rules that impede competition.

Employee Benefit Costs on a “Winning Streak”?

Mercer, a leading firm of consulting actuaries, tells us that the cost of employee benefits in 2016 will grow slowly – a “winning streak”:

Early responses from a major Mercer survey still in the field show employers predicting that health benefit cost per employee will rise by 4.2% on average in 2016 (see Fig. 1) after they make planned changes such as raising deductibles or switching carriers.

Mercer2

A closer look indicates no real reduction in the rate of cost growth of employee benefits.