As more and more employers back out of the health benefit business, more and more individual consumers are shopping for health insurance these days. Yet sales have remained relatively flat The McKinsey Quarterly reports in its most recent issue. “What,” McKinsey asks, “is preventing health insurers from effectively addressing pent-up demand?”
My first thought was that the answer might have something to do with the fact that consumers are having a hard time finding insurance that offers good coverage at a price they can afford. But apparently I’m wrong. The article’s authors suggest that insurers just don’t know how to advertise their product: “Our research suggests that a primary barrier is [insurers’] belief that consumers make economically rational decisions about health benefits. It’s a misguided view. Faced with more choice, complexity, and financial exposure for their health care in an increasingly uncertain world, what consumers are really seeking is peace of mind.”
But in our health care system, peace of mind is hard to find. “A combination of economic anxiety, confusing insurance products, and inadequate distribution is leading to consumer paralysis,” McKinsey warns. “ Moreover, our research suggests that millions would fail to make rational economic choices even if they understood their options better. Unlike employers that purchase health insurance for their workers, consumers approach this issue by factoring in much more than expense management. More specifically, consumers’ purchasing decisions are often emotionally based.” So forget about making the product “transparent.”
So what should insurers do? Forget about appealing to a savvy shopper’s desire to get a good value for his dollars. Forget about appealing to reason altogether. Instead “meet the consumers needs.” Meet his healthcare needs? No, of course not. Meet his emotional needs.
Begin With Fear
“Although consumers are anxious, few understand the severity, or probability, of the risks they face.” the article explains. For instance, “Most consumers are unaware of how much major medical procedures actually cost.”
Tell them– that will really scare the socks off them.
“Additionally, few consumers accurately assess the probability of certain health-related risks. Most overestimate the risks of salient but relatively low-probability events (fatal accidents, for example) and underestimate the risk of more common health events (such as heart attacks).
“Educating consumers is an essential part of motivating them to address their concerns,” the article continues. . Messaging for example, really matters.” What’s a message? Maybe the insurers could provide numbers showing how likely it is that a 50 year old man will have a heart attack over the next ten years, combined with the average cost of a heart attack, set against the average cost of ten years of life insurance? Nonsense.
As the authors point out “cost–benefit information alone fails to address emotional anxieties. Consumers often respond much more effectively to anecdotes than to a recitation of facts.” A four-color pictures of a stroke victim lying in a hospital bed, surrounded by expensive-looking equipment and maybe a caption that says “Harry let his health insurance lapse just four months ago. Now his wife is afraid they will lose their home.” Not that’s a message. To bring the point home, you might want a picture of Jim, Harry’s twin brother, on the facing page. Jim, who is also in a hospital bed, appears to be in equally bad shape. But his wife is smiling. Caption: “Jim signed up for insurance just one week before the stroke occurred.”
“Concern over health care financing increases significantly when a friend or family member experiences a financial crisis,” the authors note. If you want to stoke a consumer’s fears, you need to give him someone to identify with. To that end, “insurers need to explore emerging social-networking and Web 2.0 approaches. For example, sites such as PatientsLikeMe.com are showing how insurers can use these new technologies to get closer to consumers.”
Be Personal
The Internet can provide a wealth of information about insurance options, but consumers prefer to have an insurance agent sell them the product. In fact, they want the agent to tell them which product to buy.
“When shopping for health insurance,” McKinsey reports, “consumers accept recommendations 58 to 88 percent of the time, depending on the channel. “Recommendations generated by a Web site, are accepted by consumers only 58 percent of the time;” recommendations from agents, on the other hand, “are accepted 88 percent of the time. Given the complicated and emotional nature of the decision and the consumers’ desire for personalized advice, agents’ recommendations continue to be the most persuasive ones.While, the Web delivers immediate information, including quotes, it does not offer a purchase experience that meets the consumers’ emotional needs.”
Thus “Consumers who are considering purchasing health insurance actually make a purchase only 38 percent of the time on the Web, while 65 percent do so when going through in-person channels.” No doubt, agents are much better at telling the anecdotes. And as any good salesman knows, price quotes come at the tail end of the pitch, after the customer is hooked.
“Keep it Quick and Simple”
“When faced with complexity or too many choices,” McKinsey advises, “consumers often fail to act. For example, 74 percent of those who purchased health insurance were satisfied with the ease of the process, compared with 47 percent of those who shopped but didn’t purchase. Few consumers can comprehend the detailed information presented to them—in fact, a third of those who found the purchase process confusing cited “too much information” as the main barrier to purchasing.”
So much for consumer-driven medicine. Don’t burden the consumer with too much knowledge about his options, costs, or what the product covers. Indeed, a seasoned insurance agent should be able to complete a sale in a very short time. Get in, get the John Hancock, and get out. Keep in mind that McKinsey’s research shows that “consumers who do purchase or switch health insurers report that the purchase process was fast. The likelihood of individual purchase correlates strongly with the turnaround time for the application. For example, 55 percent made a purchase when the process lasted only a few minutes, compared with 21 percent for a Web transaction that took place over a 24-hour period.”
These are only a few of the suggestions McKinsey’s consultants offer to insurers interested in scooping up a share of the 140 million Americans “who currently have discretion over health insurance purchases” [translation: their employer doesn’t offer insurance], representing a total of $785 billion in premiums or premium equivalents. They estimate that if insurance industry managed to close the gap between consumers [emotional] needs and product purchase,” they “could increase health insurance revenues by as much as $200 billion.”
Assuming consumers can afford to fork over another $200 billion for health insurance. I still can’t help but wonder if the high cost of the product has something to do with those flat sales. . .
it is a bit of a stretch to suggest that insurance decisions be rational. Asked what the most important thing insurance must include should be Congress decided, in response to very robust public demand, that it was an inpatient maternity stay.
Two things never cease to amaze me: the venality of corporations and how economic discourse in this country is pitched at a level that would bore a C student in Econ 101. One of the most important ways in which health care markets fail to satisfy perfect competition axioms is lack of complete information for both producers and consumers. Most people are completely inadequate to the task of making informed choices as to which health insurance to buy. Hell, I’m inadequate to that task. Hence regulation or government provision. Unfortunately, many members of Congress either do not understand this, or more likely, will not admit that they understand this.
I think it is not fair to play on customer’s emotion for the sake of insurance. However I know some people including myself who would not give in to such fear factors. I would rather decide against it if I see the insurer using the fear factor.
Anything involving Congress is likely to involve pandering. Recall the Mary Schivo case, with Congressmen adjusting her ventilator setting remotely from Washington. And you wonder why people don’t trust the government?
Drastic cuts are required to preserve healthcare in this country. Reformers won’t admit it and bitter enders won’t either.
Where I part company with many of you is that I think that shrinking the role of doctors is not only going to hurt healthcare, but also, it is going to be a lot more expensive.
Jim & Jrossi
Thanks for your comments.
Jim- Yes, I remember the backlash against short maternity stays under HMOs.
And both the backlash and the Congressional reaction was a “motherhood and apple pie” emotional reaction (rather than something based on medical evidence.)
But the interesting thing is that many (if not all) Federal Employee Health Plans pay for only a two-day hospital stay for normal deliveries . . .
(I personally think everything depends on both the overall health and age of the woman, and, perhaps most importantly, what she is gong home to.
If she is going home to one eight-year old and can afford hire an eight-hour a day helper, then two days should be fine. If she’s going home to three children under the age of 6, in a household where her husband cannot afford to take time off work, and they cannot possibly afford to hire help, then she needs more time to rest up.
Ideally, national “guidelines” for
insurance coverage would take these factors into account.
Also, age. Both a very young (15 or 16) and a older (46- 53 year old) Mom are probably going to need more recovery time.
But going bck to ratoinal insurance decisions, I think that universal coverage should mean that everyone receives the same comprehensive coverage for the same price. It’s very difficult to predict what coverage you, as an individual, may need.
You may think you don’t need maternity–and then you get pregnant. You may be a healthy 23-year-old, and suddenly develop a brain tumor.
The point of pooling our preimium dollars is to
protect all of us against the unexpected as well as the expected.
Zeke Emanuel’s brilliant plan in his book ‘Healthcare Guaranteed” creates an equitable system by giving everyone an identical voucer for health insurance. All insurers have to honor it and provide the same set of benefits that is modeled on and euqual to what the most generous employers (the top 20%) offer. (The voucher is funded by taxes. Rather than paying part or all of an insurance premium, you pay higher taxes, based on how wealthy you are and how much you spend. It turns out to be a very progressive tax becuase poorer people, who don’t spend as much, pay much less in taxes than wealthier people who almost always spend more. Yet the poorer people get health insuranced that is worth just as much as the insurance wealtheir people get.)
Ultimtely, I think that universal health insurance, whether provided by private insurers or public sector insurers should be like Medicare –with some of the holes filled it.
One reason people like traditional Medicare is that everyone gets the same coverage.
Under univeral coverage, physicians and public health experts would use medical evidence to determine what should be in the package.
INdividuals shouldn’t be trying to sort through hundreds of consusing options, trying to figure out “what can I afford.”
They need unbiased experts (not insurance salesmen) tellng them: this is what you need, and if you can show you can’t afford it, we’ll provide a subsidy.”\
Of course what is in the package would change over time as medical knowledge advances.
JRossi–
I agree that most of us are not up to sorting through the options and making an informed decision about insurance.
I spent much of last week-ed trying to sort through the Federal Employee plans available to New Yorkers. I’m still not done; and I do this sort of thing for a living.
Most people don’t want 45 choices. Thus just want someone to tell them what they need, which means pionting out that since no one knows when they might have an accident or get sick–this is what Everyone needs: A comprehensive package of preventive and acute care.
And it shouldn’t be a matter of figuring out what you can afford. Everyone gets the same package at the same price; if you can’t afford it, you’ll get a subsidy.
This is essentially how Medicare works. There are holes in Mediare that should be filled in, but by and large it’s equitable. See my reply to Jim above.
Finally, I agree about the leve of economic discourse. The McKinsey article is incredibly
flat-footed, and often hard to follow.
Christohper
Toc cite any of hte bizarre things that happened during the Bush administration–including
Congressional internvention the Schiavo case– is to cite examples that are Not typical of how government operates.
Considering that it is such a large and complicated program that covers so many people, Medicare has worked relatively well for 44 years.
After all of these years, it is now very much in need of reform: both cost-containmet and reduction of waste, using the best, unbiased scientific information.
But for a great many years, many patients have been quite happy with Medicare–generally much happier with Medicare than they have been with private insurers.
The vast majority of doctors also take Medicare, and while in recent years there has been grumbling about the level of payments (some of it entirely justified, some of it not, depending on the specialty and the services provided–more about this in a future post), many doctors have preferred Medicare to private isurers because it pays on time, and you don’t have to spend hours on the phone negotiating permission to provide a particular treatment.
The rules of coverage are quite clear.
Medicare is not a cost containment program.
It also doesn’t negotiate fees. Fiat pricing has the potential for wide swings in payment and major dislocations for doctors. When these payments were higher, utilization became an issue, but reducing payment, curiously to some, exagerated the problem. Eventually, low payments will result in doctor shortages, just like we learned in college, by forcing doctors into practices with a “better” payer mix.
Specalists in NY may be able to take medicare patients, because there are lots of “money driven” hypochondriac New Yorkers who will pay more. Also, many people, doctors or not, prefer to live in NY, even if they make less money or have higher costs.
In the hinderlands, doctors need to work very hard, and see a lot of patients to keep the doors open on medicare. To do that they need staff, which raises overhead.
Also, don’t pre-judge the effectiveness research before it is in. The proposed team is almost all non pracicing internists, or non-doctors but I think the data is going to surprise them. (Below are my guesses, so please don’t yell at me. )
Primary care, a reform favorite will not lower costs. (Maggie is one of the few that gets this low hanging fruit..) Studies that show effecitveness of primary care are written by primary care doctors and will suffer from the same intended or unintended bias as drug studies done by drug companies.
Primary Care is not going to cut ER visits very much. Tort reform tied to guidelines would, but out trial lawyer masters would rather see the country bankrupt.
The more young doctors and non-doctor test ordering is done (by PA’s and NPs), the higher utilization of silly tests is going to be.
Lots of specialist services dramatically improve quality of life. Gluing your spine after a fracture works wonders on the elderly.
Testing and treatment excesses will be hard to curb in high litigation areas…see Dartmouth map..these are likely the high litigation areas as well.
Paying for this will not be confined to the rich.
States with high medicare rates and high utilization are going to push for across the board cuts which will make the unwise spending problem worse.
EMR is going to be very expensive, buggy, quirky, reduce efficiency, and increase costs.
Pay for performance will simply punish those idealistic enough to care for the poor. Asigning the locus for the bad outcome will be crude, and doctors will respond by shunning high risk for bad outcome patients. These are largely the poor, and the result will be contrary to the proported purpose. As with “No child left behind” the doctors will “teach” or pracitce to the test, and be distracted from overall patient care.
There is bright side, prices for needless cosmetic or vanity procedures paid for in cash will plumet.
C George, Your very cynical guesses could turn out to be quite accurate.
1)Primary care saving money. I too am skeptical about this, and I’m a primary care doc. Better PC has the potential to improve quality with similar nation-wide costs, but the experiment has not been done. The experiment has been done elsewhere, but extrapolation is the bugbear of the statistically naive. Getting docs into health systems might (or might not) save money, but lots of us will resist this. Why go through 11 years or more of training to become a corporate cog? Harder to ride herd on docs than it looks on paper.
2) EHRs at current technology level are clunky, productivity-destroying money-losers, as you correctly state. Will they get better? Time will tell.
3) Will more PCPs cut ER visits? I’m a bit more hopeful on this one, but only if we can get people to actually do primary care. I’m not hopeful about that prospect, but will be happy if I turn out to be wrong.
4) Your comment about docs shunning hard cases is very astute. In a group I worked in in southern Oregon, we had pts fill out an application. If they were too sick, they didn’t make it in. The poor pts thought that if they played up their problems, we would take pity on them and let them in. It was just the opposite. Our group was in survival mode. The thriving groups in town were even worse. Old sickies were told to go to the community health center, where they saw a different marginally competent doc each time. I have a neurology buddy in Eureka CA. The humanitarian Family Med group there went belly up; the no-Medi-cal, no-Medicare group is still (barely) standing.
Maggie:
You wrote about how satisfied the participants are with Medicare, and how physicians are happy with the ease of payments.
That being the case, it looks to be there are advantages to the program.
Remember, though, Medicare is an insurer. How would an insurer invest the premiums to assure payments in the future?
Here is an excerpt from the testimony of H. Walter Forster, of Towers, Perrin, Forster and Crosby in the deliberations on Social Security before it was passed.
He was speaking about annuities, but a similar outlook can be used for health insurance.
“The funds are always set up outside the corporation’s control and are kept either in life insurance companies or by trustees.”
Senator Couzens. “There is no danger of having the funds dissipated?”
Mr. Forster “No, sir. I know of 200 or more cases where the employer has no right whatsoever to this reserve except as it is paid out in pensions to his employees. He cannot recapture the fund. That is essential.”
Can the same be said of our payroll taxes, and the huge reserves they have built?
Have they been invested, or have they been used to pay for current governmental expenses?
Don Levit
We talked about this article in our marketing meeting for our individual plans. It’s a good concept but like a lot of McKinsey articles, it’s good in theory but short in practical applications.
1. We try to use the “we’ll take care of you so you won’t have to worry” emotional approach which is the other side of fear. We also do a lot of “low cost affordable” ads which are usually the most successful.
2. From talking to individuals who buy our insurance, about half just wished they could buy 1 unit of health insurance but half really understand how to buy it.
2a. Those who understand the purchasing process tend to buy our richer, lower deductible plans. The comments on our surveys really indicate that they did their research. Those who buy our cheaper, higher deductible plans tend to just buy it because they heard of our name or they had our insurance before. The emotions would probably be more effective with this group. The other purchase is HSA’s which need an agent to explain them. No one really understands HSA 🙂
3. Humana’s individual website has a great visual tool to make health care purchasing easy. That’s what we’re shooting for. Telling an insurance company to pursue traditional channels like agents is like telling an athlete about drinking gatorade. Web 2.0 is also not ready for discussions about insurance as you would have too many angry commenters. However, it wouldn’t be a bad idea for a way to try to help and debate but certainly would not be a selling channel.
McKinsey has consistently seen those who could afford individual insurance but don’t purchase it as a great untapped market. It is, but it doesn’t seem like they have any ideas on how to reach it.
Don Grunt, Don L. J Rossi,
Christopher–
Dnn Grunt– What you say is very interesting. You
point out that people who actually undersatnd purchasing insurance buy the richer, low-deductible plans.
This makes sense to me. The high-deductible low-cost plans seem designed for people who either a) are very poor and can’t afford anything else (but also can’t afford the high deductible so won’t use he plan when they need to) and b) young people who think they are immortal and dont’ understand that they, too, could wind up in an accdient.
As a matter of public policiy, do you think these low-cost high-deductible plans make sense? In other words, if, under universal coverage, the government provides subsidies for those who cannt afford coverage do you think it should insist that all of the plans on the market should be fairly rich, comprehensive plans with reasonably low deductibles?
I know Kaiser wasn’t happy about introducing high deduttible plans, but when its rivals did, Kaiser felt it had to.
Btw, I agree: the McKinsey report doesn’t seem to say much that insurers don’t already know.
J Rossi– the experiment on
what happens when you have more primary care has been done –throughout the developed world.
Outcmes are better.
You say that when you worked with a group in Oregon, you turned away the sickest patients because they would be too difficult to treat. (You might lose money–or at least not make money.)
Did it occur to you that you were violating your Hippocratic Oath?
Don-L. – We don’t want to “invest” Medicare reserves in anything except Treasuries held to maturity.
Christopher:
I’m surprised that you know so little about Medicare.
I reccomend that your read the MedPac reports from March and June of the past 3 years .They’re each a couple hundred pages long, but at the end of the process you’ll be well-informed.
Maggie:
When you wrote that we should should invest only in Treasury securities, I assume you have concerns with bonds and stocks available in the private sector.
There are risks, for sure, but those need to be comnpared with the long-term risks of Treasury obligations, which have to be paid in the future.
In the GAO paper entitled “Federal Trust and other Earmarked Funds,” it states on page 26 “Trust fund balances are really bookkeeping credits – the actual cash is commingled with other collections. Accumulated balances do not increase the Government’s ability to buy future resources to meet long term commitments.
If a trust fund’s surplus is matched by a corresponding reduction in publicly held debt, then the government’s financial position is improved.
Don Levit
Maggie, 1) Extrapolation is the bugbear of the statistically naive.
2) Perhaps you should re-familiarize yourself with the Hippocratic Oath.
J. Rossi–
Here is the relevant portion of the Oath: “I will treat without exception all who seek my ministrations, so long as the treatment of others is not compromised thereby.”
You indicated that your practice in Oregon turned away what you referred to as “the sickies” (very sick patients) becuase it would be too expensive
to treat them.
As for extrapolation, as numberous articles in peer-reviewed journals as well as Pat S. and I have explained, experiments throughut the developed world provide very useful models for reform in the U.S.
Use of comparative effectiveness reserach adn evidence-based medicine does lead to better outcomes.
Maggie, That’s one of the modern versions of the oath. I never took it, and I suspect many other doctors never did, either. Please see the original version of the oath on Wikipedia. There is no requirement to ignore economic considerations in the oath I took.
J Rossi–
Interesting– about modern and original versions of the oath.
Apparently most people now do take the modern version: “Today, most graduating medical-school students swear to some form of the oath, usually a modernized version. Indeed, oath-taking in recent decades has risen to near uniformity, with just 24 percent of U.S. medical schools administering the oath in 1928 to nearly 100 percent today.” http://www.pbs.org/wgbh/nova/doctors/oath.html
I’d be intersted to hear what other doctors think about the oath.
Maggie,
I am surprised and saddened by Dr. Rossi’s attitude towards the Hippocratic Oath. Traditional vs modern–aren’t we just splitting hairs here?
Of course, what makes me more sad is I’ve heard the same thing from other docs: no Medicare, no Medicaid.
So the sick get sicker, wind up in the ER, and cost everyone in the community more because of the lack of preventative care.
It may be legal. But it’s not right.
And it just highlights the need for a single payer system in this country.
Panacea–
You are right the Hippocratic Oath is the Hippocratic Oath and the bottom line is that doctors put their patients’ interests ahead of their own personal and financial interests.
That’s why we call medicine a “profession,” not a business.
But I really don’t see what this has to do with single-payer.
No country in Europe has single-payer. (Single-payer is only in the UK and Canada) But all patients in Europe there get care, regardless of income.
Even if we had single-payer, U.S. doctors who are “money-driven” would find a way to cherry-pick wealthy patients, charge them more for extras, do more unncessary tests and procedures, etc.
They represent a minority of doctors, but the greedy will always be with us.
One way to weed them out is to make medicine a well-paid profession–but not a profession where you can expect to make $800,000 to $2 million or more a year.
When there is too much money on the table, you attract the wrong people. (See Wall Street banking)
I do think we should subidize medical school education, as other developed countires do. (And part of that education should be courses on what “professionalism” means.)
Med students shouldn’t come out of school owing hundreds of thousands of dollars in debt.
If they had no debt, most would not feel that they needed to go into a specialty where they could expect to earn $800,000 a million or more by mid-career.
Medicine is very hard work–and the training is rigorous and exhuasting, physically, emotionally and intellectually.
I do think doctors should be well-paid. But we need doctors who recognize that the emotional rewards also can be huge.
Being in the top 1% of all American workers (earning more than 99% of Americans) should be enough to live well and feel well-compensated.
Pay in some specialites is way out of control.
Finally, if we regulate insurers we could have an excellent hybrid private sector/public sector system–which is what most other developed countires do. We actually have some excellent non-profit insurers out there– I would hate to lose them.
A few are doing a better job than Medicare. (Though I am hopeful Medicare will improve; reform is already beginning.)
Finally, we may well have some for-profit insurers out there that would provide good coverage if they were working in a different, regulated climate (regulated to put patients ahead of profits.)
“I still can’t help but wonder if the high cost of the product has something to do with those flat sales. . . ”
If $100 to $150 for a comprehensive plan with low OOP is to much exactly what do you consider affordable?
In regards to your comments about HDHPs. I’m sure your aware America is lagging other nations in Math skills, that is the sole reason HDHPs are slow in adaption.
if everyone was moved to an HDHP only 10% or so would be worse off then under a low deductible plan. There are three groups of people when analysing risk;
80% of the population have minimial claims and account for 20% of your claims. These people would save more in premium then they have in claims applied to deductible so the plans are a good deal. When these people do have claims it tends to be an isolated episode, like an accident, the premium savings the 4 years they are healthy more then cover the deductible the one year they are sick.
Next group is the chronically and very ill. The OOP for HDHP is usually lower then the OOP on low deductible plans. Once you meet the 5K deductible under the highest HSA plan most cover everything else at 100%. No more co-pays or co-insurance and this includes drugs. THe lower out of pocket and reduced premium make HDHPs a great deal for the very sick.
This leaves a small sliver of people who do not benefit from HDHPs. They are moderate users with 2-5K in claims every year. This group as I stated is a very small portion of the population.
The reason HDHPs work for 90% of the population is basic math, something majority of america sadly can’t do. Insuring small risk or care you know your going to have just increases the cost 20%. If you know your going to have $1,000 in care each year buying a $250 deductible is just inefficient, your paying premiumn tax, broker commission, and carrier profit for no reason.
Nate:
Your fugures point out that HDHPs work for the vast majority of the population.
It seems like most of the people on this blog are primarily concerned about the low income, high claim participants.
While that concern is understandable, it is the low claim participants that make insurance work.
We seem to be sacrificing the 90% to save the 10%.
Don Levit
Nate & Don
Don- High deductible plans, paired with health savings accounts offer the rich a fabulous way to avoid paying taxes. Period.
With deductibles as high as $10,000 (as consumer repports points out) the average family earning somewhere aroudn $58,000 (joint before taxes) cannot afford a $10,000 deductible and more importantly, doesn’t have enough discretionary income to put in a HSA to take advantage of the tax haven.
As Conosumer Reports points out (see below), this scheme serves the wealthiest 10%– while hurting the rest of us.
Nate: Again you are trying to use this blog to spread misinformation.
Consumer Reports is widely known for its unbiased reporting with an eye to what is best for the consumer.
Here is what is says about High Deudictible plans:
“Three million Americans have signed up for high-deductible health plans, which are often paired with tax-advantaged HSAs . . . The reality is that these schemes shift increased financial risk to consumers and will surely weaken our already fragile health-insurance system. HSAs provide little assurance of affordable, quality health care to those with chronic illnesses, families with children, those of moderate incomes, or older Americans with more health-care needs. HSAs do nothing to address the factors that really drive up health costs: care for those with chronic diseases; overuse of technology; hospital care; prescription drugs; and end-of-life care.”
The article continues by asking “Who Benefits
Who benefits, who doesn’t?”
“HSAs may benefit young, healthy workers without dependents, who don’t spend much on medical care. They’re especially advantageous for the wealthy of all ages, since the higher the tax bracket, the more valuable the tax break.
Contributions to HSAs are tax-deductible, the account grows tax-free, and money pulled out for medical expenses is not taxed. After age 65, money saved in the account can be used for any purpose, without a tax penalty. But the income level of the vast majority of uninsured Americans prevents them from reaping those tax benefits.
A recent national survey by the Employee Benefit Research Institute, a nonprofit organization, found those currently in HSA-type plans were significantly more likely to spend a large share of their income on out-of-pocket health-care expenses than those in comprehensive plans. They were also more likely to skip or delay health care because of costs. And though HSAs work on the premise that consumers have access to reliable cost estimates and comparative information about providers, that information all too often does not exist. No surprise that the survey found those enrolled in HSAs far less satisfied than those with traditional, comprehensive coverage.
So, who, besides the wealthy, benefits from HSAs? Employers do, since they are shifting health-care costs to their employees and are more able to predict health-care expenses. And financial institutions offering HSAs are poised to reap billions in profits from the fees they can charge in setting up those accounts.
A health-insurance system can function only if costs and risks are spread among healthy and sick participants. But healthy employees who don’t expect to need much medical care are the ones most likely to abandon traditional plans in favor of low-premium, high-deductible ones.
Those left in traditional plans will be sicker and more risky to insure. That means a greater likelihood of steep premium increases, pricing coverage out of the reach of more workers and adding to the ranks of the uninsured.”
Nate as I am sure you know, half of the families in this country have joint incomeds of less than $60,000 –before taxes.
These are the “moderate income families” which, as Consumer Reports points out, don’t benefit the high-deductible plans.
They buy them because they can’t afford more expensive plans. And then they don’t use them for the regular chare they need because they can’t afford the deductible.
Of the remaining 50% of the nation, some are people over 55, many of whom are chronically ill.
Others are “upper-middle-class”– they have joing income averaging $80,000 a year, but also can’t afford a $10,000 deductible and after paying for housing, food, utlilites, trasnporation, trying to save something for a child’s college education, they don’t have much moneoy left over for a health savings account.
Only the wealthiest 1% to 2% can really use the tax haven that an HSA provides.
And a $10,000 deductible is no obstacle to seeing a doctor when they want to.
When those wealthiest famlies, along with young healthy singles opt out of the comprehensive insurance pool and buy high deductible plans, that means, as Consumer Reprots points out, that premiums are higher for the rest of us.
Finally, Nate, I don’t have time to refuse every false piece of information that you decide to put up on this blog.
I am much more interested in exposing the misinformation that is disseminated on national television networks, in widely read newspapers, and by well-known pundits writing in the blogosphere.
You’re not a well-known pundit who is missleading hunderds of thousands of people.
I’m afraid you’re just a troll, disrupting threads on other people’s blogs as you try to advance your own agenda.
This post–and this thread– is not about high deductible plans.
Maggie:
I agree with you that we do not need plans that divide the healthy from the sick.
The HSA plan design does tend to do that.
Even lower deductibles can, over time, divide the healthy from the sick.
Or, more accurately, insurers have an active hand in this arbitrary separation.
It is interesting that you are so focused on the $10,000 deductible, when you overlook the $12,000 average family premium.
How do we address attracting and keeping the healthy in viable pools?
Is the most effective answer to simply have just one pool with one plan?
Or, do you think the low claimants should not have a say in any of this, even though they, not the higher claimants, make the system work.
Don Levit