• Priceless: Preface (2)

    I’m blogging my way through Priceless: Curing the Healthcare Crisis, by John Goodman. All posts in the series will be found under the Priceless tag. This post pertains to the book’s preface. Since it’s just the preface, I won’t read too deeply into where John is going. (I could guess, of course.) Let me just flag a few things.

    When we expand a government insurance plan for low-income patients, we are spending billions of dollars in a way that doesn’t increase their access to care.

    This is not what has been found in the Oregon Health Study, and it is very hard to argue with the methods of that study.

    Under John’s proposal,

    When you enter a new health plan, you and your previous insurer would pay a premium that fully reflects the expected costs you bring to that plan.

    I’ll  keep thinking about this idea as John discuss it further in his book, but my reflex is to like it. I can see how it could solve some big problems. I can also see how it is not that different from risk adjustment funded by a consortium of insurers. On average, across all insurers, it is cost-neutral. If it works perfectly, there won’t be any winners and losers. Perfectly is important. (More later.)

    It’s obvious the general direction of John’s ideas are toward more consumer driven (consumer paid) health care. I’ll be interested to see where comparative effectiveness research and shared decision making fit into his scheme. As a consumer who pays relatively little out of pocket at the point of care, I already want more of both. I don’t see how paying even more out of pocket would decrease my interest.

    I also want to flag the skewed distribution of health spending, as well as the persistence of it. Over the span of time relevant to the deductible (usually a year), if a small minority of patients account for the vast majority of spending, much of it above the deductible, then the deductible isn’t that relevant. It is certainly not relevant for spending above it. It is potentially not relevant for spending below it, to the extent patients know their spending will eventually exceed it. Persistence is a proxy for how well they might be able to predict this fact, but it is not a perfect proxy. Watch for these issues. Don’t be distracted by the degree of persistence. It’s not the whole issue.

    My next post on the book is scheduled for Sunday, and it will cover Chapter 1. For the next couple of weeks, I’ll post on three chapters per week.

    @afrakt

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    • Austin: on the first quoted passage you omitted the reference to this study: http://www.hschange.org/CONTENT/1273/1273.pdf

      It found that enrolling children in CHIP does not increase thier care. However, paying doctors higher fees does increase their care. Unfortunately, we make it illegal for families to add to CHIP’s fee and pay the same rate that others pay.

      Contrast this with Foodstamps. The 50 million people who have them, can walk into any supermarket, buy almost anything you and I can buy and pay the same price you and I pay — by adding cash to their Foodstamps, if necessary. As a result, we never hear of an access to grocery store problem among poor people. (unless it’s distance)

      Yet these same 50 million people are not allowed to buy health care the way they buy food. In Dallas, Mediicaid pays half of the charges at MinuteClinic. As a result, Medicaid patients must wait hours at community health centers or the emergency rooms of safety net hospitals for care they could have received for less money (overall) at the drop of a hat.

    • Much too much is made of the distribution of health spending. There is far less persistence than we are led to believe. That’s why risk adjustment works so poorly. Consider:

      In 2008, 1% of the population accounted for about one-fifth of all health care spending. Yet the following year, 80% of these patients dropped out of the top 1% category.

      The top 5% of the population accounted for nearly half of all health care spending. Yet 62% of these patients dropped out of this category the following year.

      At the other end of the spectrum, the bottom half of the population spent only 3% of health care dollars. Yet one of every four of these patients moved to the top half the following year.

      See HR Q study here: http://meps.ahrq.gov/mepsweb/data_files/publications/st354/stat354.pdf

      • You guys will need to make clear why persistence is an issue. I think a lack of persistence makes deductibles just as irrelevant. All significant procedures will go over the kinds of deductibles we usually discuss, unless we are putting them in the range of $15k-$20k. Especially when you add in the costs of the tests that get you to the procedure, the MRIs, CT scans, bone scans, etc., and rehab costs, you go way over the deductible. A rational consumer will not even look at the deductible and concentrate on quality and convenience.

        I have not finished John’s book yet, but I hope he gives us an idea of where he thinks these deductible limits should be set, and what percentage of medical care would apply within those limits.

        Query- Do we have too narrow a focus on costs? John’s ideas about time price made me think about something I have frequently noted. There are costs involved for family and friends in medical care. Even with relatively minor procedures and tests, another person or persons may need to accompany the patient. For prolonged stays, transportation costs, time away from work, child care, pet care (dont laugh, I have had patients refuse to go to other facilities because the spouse would not be able to make it home to care for the dog), etc.

        Steve

    • Like a VAT tax for sick people, premium step ups for sicker folks will solve the transfer of risk and expense as they age out and move from product to product. The italicized citation note contributions from both insurer and insured, and like Romney’s recent statement–a presumption that someone is continually insured.

      As you ponder, as I have no doubt you are doing, consider subsidies in this scheme–if at all–and who is responsible for what portion of the premium payment. Moreover, does this model requires an all in approach (individual mandate)?

      On the latter, if it does not, what is the answer for those not participating in the system–and who is responsible for their bills if they incur a catastrophic expense.

      Brad

    • It seems to me that movement of insureds, particularly those with low claims, would not be beneficial for the prior pool.
      In fact, what is primary is to keep these low claimants in their original pool, for as long as possible.
      The reason being that the insurance concept works better, for pooling purposes, when the pool is made up with a vast majority of low or no claimants.My particular design accomplishes that primary purpose, not by providing cash value, which one can move from insurer to insurer. Rather, it provides instead, a paid-up value, which no new insurer could provide.
      By maintaining the cash and the reserves, with the insurer, it can afford to provide paid-up coverages , over time , between $25,000-$50,000, saving 60-80% off of traditional premiums, and maintaining the integrity of the pool, indefinitely.
      Don Levit

    • I also have read ahead a bit. I see echoes of Michael Porter and Elizabeth Teisberg’s 2006 discussion and of a McKinsey taxonomy of health spending (I could look it up) and its relationship to traditional notions of insurance, both of which may well have been informed by John’s thinking. I too want to see where this goes. … What incentives for prevention look reasonable when one determines that coverage for low dollar, fixed frequency purchases is unacceptably distorting? How are subsidies managed to ensure (or not) consumption of efficacious preventive services for people who have pressing immediate economic concerns? If medical tourism is the model for the market for elective care, what’s the model for high cost, no-time-to-shop emergency care and care — like much cancer care — that is delivered in multiple contacts over an extended period of time to debilitated patients? I’m intrigued.

      • Agreed. My initial impression is that John has a plan for young, mobile, well educated affluent people. My older, less well informed and not as mobile patients will have trouble with some of this I think.

        Steve

        • Interesting. Doesn’t that kind of seem to be picking at low-hanging fruit (ie, people who aren’t likely responsible for much health care spending)? I’m not saying there couldn’t be real savings achieved in this population, but doesn’t that approach do little to address the biggest drivers of health care spending.

    • Eric:
      I am not sure if you are addressing me or not.
      But, here goes my reply.
      Yes, it does not address the biggest drivers of health care spending.
      Everyone is paying catastrophic premiums at fully community-rated premiums.
      People can have different levels of catastrophic coverage.
      The coverage would be more comprehensive if the vast majority of expenses occurred within one year.
      That addresses the coverage question, but not the use of coverage, which stimulates increased costs.
      The hope of forming a 501(c)(4) insurer, is to drive home the importance of community, for its very existence from a tax-exempt standpoint depends on benefiting the community with unique products and services (not commercially available).
      If people can begin to start thinking about how their use of services may impact the community, and the catastrophic premiums, they may use more discretion in what medical expenses are actually incurred.
      Don Levit