"High Deductible, Low Benefit" Plans May Worsen Healthcare Costs

High deductible, low benefit "catastrophic" health insurance is urged as an alternative to comprehensive health insurance frequently pushed by the likes of Newt Gingrich. And yes, those plans have a track record of saving money for employers - which is certainly not to say that employee costs go down. I'll repeat myself, briefly:

right now insurance companies act as a gatekeeper. If their analysis shows that a particular procedure is unnecessary, or that a more cost-effective procedure will suffice, they'll refuse to pay for the more expensive or "unnecessary" test or procedure. Sure, the denials can be frustrating, even maddening, but they do hold down health care costs.

Consumers don't have the information, resources, or sophistication to make a similar evaluation of a doctor's recommendation. They may not even have a chance to reflect on whether they should agree to an expensive procedure at an emergency room, let alone inquire and evaluate alternatives, assuming they're even in a state of mind to do so.

There's also the associated issue of health savings accounts - you're supposed to be able to pay for the coverage for which you're uninsured out of your savings. Let's say you're a young, healthy person but crash your motorcycle, fall on your leg the wrong way while sliding home in a softball game, or simply have your feet go out from under you on an icy driveway. You suffer a fractured ankle that requires an open reduction and fixation. Let's say the bills come in at $10,000 and you're responsible for the first $4,000. What are the odds that you have sufficient health savings to pay your share of the cost? Now what if it's a cancer diagnosis and we're talking a six figure medical bill?

It's a bit annoying that the right-wing acts as an echo chamber to this type of proposal, rather than taking a serious look at the problems of the proposal and how they might be corrected. I recognize that if we're talking Newt Gingrich, the problems become features - he seems to want people (other than himself) to go without adequate health coverage. But there are people covering these issues from a Republican standpoint who are approaching the issue in good faith, and it would be nice if they would spend some time thinking about this type of claim instead of mindlessly repeating it.

Ross Douthat recently wrote,

...Obamacare entrenches the very model of health care financingthat drove costs sky-high to begin with — a model in which every insurance plan has to be comprehensive, every significant payment is made by a third party, and consumers have no idea what their treatments actually cost.

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To address the first problem, Republicans should work to deregulate the new health care exchanges, so that high-deductible, catastrophic coverage can be purchased as easily as comprehensive plans.

Presumably Douthat is talking about the health insurance exchanges, which are intended to offer coverage comparable in its scope to that which might be obtained through an employer-sponsored plan. If you're under thirty or if you will otherwise be exempt from the requirement to purchase coverage because the premium exceeds 8% of your income, even if you're buying through an exchange you will be able to purchase a Gingrich-style catastrophic coverage plan. No matter what your age or income you remain eligible to purchase such a plan, just not necessarily through an exchange.

The idea that insurance purchased through an exchange will leave consumers unaware of the actual cost of their care? It's nonsense, and there's really no excuse for a New York Times columnist to distort basic facts. The exchanges will allow people to purchase comprehensive insurance at the "Bronze," "Silver," "Gold" and "Platinum" levels, respectively offering benefits equivalent to 60%, 70%, 80% and 90% of the full actuarial value of plan benefits. In other words, people will be able to purchase plans that include significant copayments and coinsurance, and will pay a substantial premium if they wish to reduce their out-of-pocket costs.

My concerns have focused on these plans as an ineffectual cost-shift - it seems reasonable to expect that they'll reduce the health insurance costs of employers by shifting that cost (and often more) onto the employees. So far, not a problem for Gingrich and friends. But Atul Gawande's recent coverage of "Super-Utilizers", the small percentage of patients who consume the lion's share of medical services, suggests that the exchanges probably have it right. That is, if you start insuring higher risk individuals through catastrophic plans, you can end up increasing the cost of medical care even to the employer.

[Researcher Nathan Gunn] told me about an analysis he had recently done for a big information-technology company on the East Coast. It provided health benefits to seven thousand employees and family members, and had forty million dollars in “spend.” The firm had already raised the employees’ insurance co-payments considerably, hoping to give employees a reason to think twice about unnecessary medical visits, tests, and procedures—make them have some “skin in the game,” as they say. Indeed, almost every category of costly medical care went down: doctor visits, emergency-room and hospital visits, drug prescriptions. Yet employee health costs continued to rise—climbing almost ten per cent each year. The company was baffled.

Gunn’s team took a look at the hot spots. The outliers, it turned out, were predominantly early retirees. Most had multiple chronic conditions—in particular, coronary-artery disease, asthma, and complex mental illness. One had badly worsening heart disease and diabetes, and medical bills over two years in excess of eighty thousand dollars. The man, dealing with higher co-payments on a fixed income, had cut back to filling only half his medication prescriptions for his high cholesterol and diabetes. He made few doctor visits. He avoided the E.R.—until a heart attack necessitated emergency surgery and left him disabled with chronic heart failure.

The higher co-payments had backfired, Gunn said. While medical costs for most employees flattened out, those for early retirees jumped seventeen per cent. The sickest patients became much more expensive because they put off care and prevention until it was too late.

Keep in mind that when we're talking about people buying through the exchanges, we're talking about people who won't be getting good health insurance through their employers. So we're really talking about workers in lower paid, more marginal positions of employment. If our goal is to shift those people into healthier lifestyles, get them to manage their medical conditions (such as diabetes and hypertension) properly, and to avoid having them become high-cost patients, pushing them toward insurance plans that are "cheaper" up front but force them to choose between their medications or to forego the care they need to manage their health conditions is likely, in many cases, to backfire. And what happens to that population when they become too sick to work? They end up on SSI, SSDI and Medicaid. Ouch?

Part of the goal of healthcare reform is to emphasize cost reduction through preventive care. Gawande's column suggests that, to the extent that savings can be realized, the government can expect an enormous push-back by the industries that are presently reaping huge profits from the status quo. But even in a small picture sense, a lack of primary care can result in significant expense, a twenty-five year old who had run up more than $50,000 in medical bills over ten months:

She suffered from terrible migraines. She took her medicine, but it wasn’t working. When the headaches got bad, she’d go to the emergency room or to urgent care. The doctors would do CT and MRI scans, satisfy themselves that she didn’t have a brain tumor or an aneurysm, give her a narcotic injection to stop the headache temporarily, maybe renew her imipramine prescription, and send her home, only to have her return a couple of weeks later and see whoever the next doctor on duty was. She wasn’t getting what she needed for adequate migraine care — a primary physician taking her in hand, trying different medications in a systematic way, and figuring out how to better keep her headaches at bay.

Can we count on doctors to be part of the solution instead of part of the problem? Although the doctor covered in the article was encountering some resistance in trying to create a positive customer service model in medical practice, one focused on saying "yes" instead of "no", and to reduce costs through increased quality of care instead of through rationing, but I expect that most doctors will get on board if presented with evidence that overcomes their skepticism about the feasibility and scalability of reform. However, some won't. As with any profession, some health professionals seem far more concerned about their profits than their patients' needs. Gawande offers some anecdotes:

Fernandopulle told me about a woman who had seen a cardiologist for chest pain two decades ago, when she was in her twenties. It was the result of a temporary, inflammatory condition, but he continued to have her see him for an examination and an electrocardiogram every three months, and a cardiac ultrasound every year. The results were always normal. After the clinic doctors advised her to stop, the cardiologist called her at home to say that her health was at risk if she didn’t keep seeing him. She went back.

The clinic encountered similar troubles with some of the doctors who saw its hospitalized patients. One group of hospital-based internists was excellent, and coördinated its care plans with the clinic. But the others refused, resulting in longer stays and higher costs (and a fee for every visit, while the better group happened to be the only salaried one). When Fernandopulle arranged to direct the patients to the preferred doctors, the others retaliated, trolling the emergency department and persuading the patients to choose them instead.

“‘Rogues,’ we call them,” Fernandopulle said. He and his colleagues tried warning the patients about the rogue doctors and contacting the E.R. staff to make sure they knew which doctors were preferred. “One time, we literally pinned a note to a patient, like he was Paddington Bear,” he said. They’ve ended up going to the hospital, and changing the doctors themselves when they have to. As the saying goes, one man’s cost is another man’s income.

These anecdotes highlight the aforementioned need for a gatekeeper, so that a patient can make an informed decision when a doctor declares, "If you don't have this expensive medical test you could die." A patient with catastrophic coverage could see her savings depleted by a single visit with such a physician, and be left unable to pay her share of the cost of medical care she actually needs.