Earlier this summer my son was injured in a backyard football game. After hearing a loud crack we were worried he broke his ankle, so we hurried him to an emergency room.
We took him to Connecticut Children’s Medical Center, where he received excellent care. Fortunately, it was just a sprain.
A couple of months later we got the bill. We have a high deductible health plan with a health savings account (HSA), so we now see — and pay — most of our health care costs directly.
The emergency room visit was over $1,600, including the X-rays. After an insurance adjustment, we ended up paying almost $1,200.
While emergency room visits are notoriously expensive, I still experienced sticker shock.
But maybe that isn’t such a bad thing?
Most of these health plans require you to pay health providers several thousand dollars, money you can save tax free in an HSA, before the insurance kicks in. They are also substantially less expensive than other health plans, so theoretically a consumer can use the difference in price to save some money in their HSA.
Some of the benefits of high deductible plans include greater transparency, and there’s a self-rationing effect — you don’t go to the doctor unless you really feel like you need to. Studies, including one done by the National Bureau of Economic Research, show that these kinds of health plans lead to reduced health care spending. The NBER study showed a 15-percent reduction in spending.
Critics say the plans shift too much of the cost of health care onto the consumer, who may then avoid getting necessary medical care. This argument troubles me — because it assumes that a person does not know what’s best for him or herself. There is some risk that the people who choose high deductible plans can’t afford to put money in an HSA — but then, they probably can’t afford more costly health insurance either. What a high deductible plan does give them is a cushion in case of catastrophic circumstances.
And placing the responsibility on a consumer should lead them to making smarter choices — like, “I only have a cold, there’s probably nothing the doctor can do, so I’m going to stay home.” Or, “My ears are killing me, so I better go to the doctor to see if I have an ear infection.”
Alongside the growth in high deductible plans, there is also a growth in cheaper more accessible health care. For example “Minute Clinics” have sprung up in CVS stores across the nation, where you can see a doctor quickly and usually for less than $100 a visit. Telemedicine is another example of a health care innovation that is making it cheaper and easier to see a doctor for a routine problem.
Because high deductible plans also offer a lot of consumer choice — typically you don’t have to get a referral to see a specialist — the flexibility appeals to people who want to see specific doctors.
There is some discipline involved if you have a high deductible plan. You need to be smart about saving money every month in your HSA, but the point of a high deductible plan is to cover you when you have larger health problems that you can’t afford to pay for yourself.
As columnists in the Wall Street Journal put it recently, this kind of insurance “restores the fundamental purpose of health insurance: to reduce the financial risk of large and unanticipated medical expenses.”
The acceleration of the use of these plans is a natural byproduct of the Affordable Care Act (ACA or “Obamacare”). When insurance costs increased after the passage of the ACA, many employers started offering high deductible plans, first as a less expensive option, then — for many — the only option.
But the increased use of high deductible plans also shines a spotlight on a problem in health care: The price of health care is still largely a mystery.
You can ask hospitals for their “chargemaster,” basically their price list. Steven Brill somewhat famously did this for a Time magazine cover story that ran 26,000 words. (Well worth the read, just set aside a good chunk of time.)
Brill compared chargemasters from hospitals in Bridgeport and Stamford and found substantial differences in price for the same procedures.
We don’t talk much about the cost of health care. Most of us don’t understand how hospitals come up with their prices — and it turns out they don’t necessarily understand that either.
A hospital CEO at the University of Utah recently started a project to determine what the goods and services provided by her hospital actually cost — and this was considered a radical move.
Prices vary dramatically from one health care provider to the next — but there is little way to know this.
A friend of mine — I’ll call him Jim — ran into this problem when his son broke his arm. On the advice of his health insurance provider, Jim took his son for a follow-up visit to see a doctor at Connecticut Children’s (I’m not trying to pick on them, it’s just where he ended up). When he received the bill he called around to other doctors and realized he could have paid much less if he had gone to a different provider.
When Jim contacted his insurance company about this and asked them to provide a list of negotiated rates for health providers in his area, he was told they would give him the rates but first he needed to get the Tax ID number of the providers, and the medical code for the procedure. He contacted the health care provider and asked them for the information, but, he said:
“I was told that they couldn’t give me the codes before any service because assigning codes was a lengthy process requiring a coding specialist. I then asked them for their Tax ID number which they refused to provide and I was then informed that many providers can have more than 20 different Tax ID numbers. So, although it may be technically possible to shop around before receiving a medical service, the inability to get coding information or Tax ID information from the providers make this practically impossible.”
In response to complaints like these, insurers and states have started to develop tools for consumers to see the cost of health care, but at this point they are neither widely accessible nor very accurate.
These are issues the state is going to have to confront since many of the enrollees on the state’s health care exchange are on high deductible plans.
People unfamiliar with how these plans work have contacted the state’s Insurance Department, according to Gerard O’Sullivan, director of the department’s consumer affairs unit, but not necessarily to complain about prices. I spoke with him and Kathy Walsh, principal examiner for consumer affairs, earlier this week.
While their department doesn’t deal with the cost of health care, they do hear from people who have problems with their insurance companies.
The department has received calls from consumers who are confused when they get bills for medical services, since they assumed that because they had health insurance, those costs would be covered.
Given all the new buyers in the market who are unfamiliar with how deductibles work, people have been confused about what their financial responsibilities are, said Walsh.
Hopefully this will change over time, as more people choose high deductible plans because of their cost, and as more employers switch to the plans for the same reason. It’s also likely that eventually these plans will become the norm for public sector employees as well — many public employers, from the town level on up, are starting to offer these plans to their employees.
The health care market is still an absolute mess in this country, and the ACA has done little to change that. Not that everything in the ACA is bad—I’m glad, for instance, that people who were once uninsurable because of pre-existing conditions can now get health care. But, while the ACA increased access to health insurance, it did nothing to address cost, and the roll out was an absolute mess. While it hasn’t been as bad in Connecticut, many people across the country have faced a bureaucratic nightmare in trying to get and keep their coverage.
The health care community — not the government — needs to find ways to make health care more affordable and easier to access and understand. Greater transparency and greater consumer engagement might be just the right prescription to change things for the better.
Suzanne Bates is the policy director for the Yankee Institute for Public Policy. She lives in South Windsor with her family. Follow her on Twitter @suzebates.
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