November 02, 2014

Brave New World of High Deductible Health Plans

I’m about to enter the brave new world of high deductible health plans. Not because I want to, but because that’s all my employer offers. The truth is that these plans basically make all health care coverage “catastrophic insurance” in that they don’t pay for much of anything until you’ve racked up a bill of upwards of $1500 per person (as much as $10,000 in some plans). There’s a growing literature on the consequences—good and bad, planned and unintended—of these plans, some of it by my own colleagues, who’ve shown, for example, that poor people are far less likely to go to the Emergency Room, even for a genuine emergency, once they switch from a conventional to a high deductible health plan.  Remarkably, given that 20% of all health plans are now of the high deductible variety, according to a recent Kaiser report (and 80% of plans have some kind of deductible, amounting on average to $1217), we don’t know the effects of this kind of coverage on health outcomes (things like control of diabetes and survival from cancer), we don’t know the effects on the use of life-saving  procedures, and we don’t know the full range of consequences for vulnerable populations. These big picture issues are critically important. But some of the more bizarre features of high deductible health plans are seldom discussed. They are what I’m calling the sickness penalty, the prevention perversion, and the wealth benefit.

The Sickness Penalty
A “well visit,” otherwise known as a “checkup,” is free with a high deductible health plan. Incidentally, there is absolutely no evidence that comprehensive physical examinations for well adults are beneficial. A “sick visit,” by contrast, which is useful, is paid out of pocket until the deductible has been met. The underlying message, it seems to me, is that if I’m sick, it’s my fault and I have to pay. Literally. Now the official justification for making patients pay for care when they get sick is that if they have "skin in the game," they will not over-use health care services. They will only go to the doctor if they are really sick--a policy that might make some sense if patients could be relied on to know when they are really sick. But if this were the only reason for paying for checkups but not for sick visits, why not require a screening phone call before a visit, whether to the doctor's office or the emergency room? Why pay for checkups, which have not been shown to be beneficial and refuse to pay for sick visits, which have? It seems to me that the underlying reason harkens harkens back to the quintessentially nineteenth century view of the “worthy poor” and the “undeserving poor.” Widows and orphans were regarded as justifiably poor—and therefore deserving of charity care. Unskilled foreigners who had on-the-job accidents were less worthy of our compassion, and alcoholics and syphilitics were completely undeserving. The sickness penalty in today’s high deductible health plans likewise takes the idea of individual responsibility to new heights—ignoring genetics and indifferent to chance, it simplistically and preposterously assumes that sickness is the patient’s fault. 

The Prevention Perversion
Checkups are sanctioned by high deductible health plans because the person going for a checkup is not sick. But more than that, the purpose of a checkup is prevention, and preventive care is good. But it turns out that the main type of preventive care that is meritorious (i.e. free) is what epidemiologists call “primary prevention,” doing something now, when you are entirely well, to prevent the onset of illness later. Immunizations—things like flu shots—are an example of primary prevention. Exercise (if it’s to fend off the development of heart disease, but not if it’s to make a sore back better) and diet (if it’s to prevent the occurrence of cancer but not if it’s to treat diabetes) are forms of primary prevention. But suppose that during the course of my check up (ostensibly free), I mention that I’ve had occasional rectal bleeding. I really didn’t think anything of it and I feel fine; I figure I have a hemorrhoid. This prompts my doctor to order a colonoscopic exam, which in principle can detect colon cancer early and allow surgeons to cut it out before it causes any symptoms. As soon as I mention bleeding during my check up, that visit is transformed into a sick visit and is subject to the deductible. If I don't say anything and hope my doctor will discover the blood when performing a rectal exam, then the visit is still free since early detection of occult disease counts as "secondary prevention," which is the other type of prevention for which health insurance will pay.

The Wealth Benefit
There’s another aspect of high deductible health plans that I haven’t heard discussed, and that’s the wealth benefit. Patients can open a health savings account to help pay off the deductible. This involves putting before-tax dollars into a special fund for all those nasty health care costs that you will have to pay for out of pocket. In many cases, employers contribute to the account, which can be supplemented by the employee. So if you set up one of these health savings accounts (HSA) and use the money to defray the deductible, the insurance company can claim that premiums are low when in fact your contribution to the HSA is actually a premium by another name. But what’s diabolical about this is that you don’t pay taxes on the money you deposit into your HSA. This means the cost to you of a $1000 contribution to your HSA if you are in a 40% tax bracket is really only $600. If, by contrast, you are in a 10% tax bracket, the cost to you of that contribution is $900. The richer you are, the less you pay. That’s called a regressive tax, even more regressive than a flat sales tax.

So far, high deductible health plans are mainly for those under 65. The strategy of high deductible health plans for Medicare beneficiaries hasn’t gotten much traction. There are some, with “Medical Savings Accounts” to accompany them. Before we go any further down this path, we need to take a hard look at the assumptions underlying the latest attempt to improve health care quality and lower costs with a market policy.

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