Consumerism - The real way to control health care costs

In every facet of our purchasing lives we act as normal consumers.  When we go to the grocery store, we will choose one brand over another because of a matter of cents.  When we need car repairs we will search countless repair shops to get the best price and value.  In almost every purchasing decision we are engaged consumers.  However, when it comes to health care we are the furthest thing from an engaged consumer, we are anti-consumers.

Why is this?

Health insurance coverage has become something it is not and should not be.  Health insurance has began covering predictable expenses. With too low of deductibles and office co-pays the consumer became disengaged.  For just a $10 co-pay you can go to the doctor for a mere cough and the doctor will tell you to take cough medicine.  Was this visit really needed?  Now, the true costs of that office visit is not $10, it is whatever the doctor charges.  Why would the consumer care what this doctor actually charges if all they have to pay is the $10 co-pay and then the insurance picks up the tab?  The consumer usually has no idea what the real cost is, to them it is $10.  This is a major disconnection. 

Remember, the insurance has to cover the rest of the actual costs of this office visit. That cost has to be reflected somewhere.  The misuse of office visits, emergency rooms and pointless medical tests are reflected in rising health insurance premiums.  There is no incentive to be an actual consumer, so why would anyone?

Along with co-pays we have a lot of low deductible plans still in the market today. Where is the incentive in a deductible that is $250, $500?  If I know that the insurance will begin to pay after I hit this cost to me, I understand that I do not have much risk here.  I still have no incentive to shop around like I would with any other purchasing decision, especially one has major as health care.

Now, I can already hear objections to what I am saying.  Many will tell me my solution is to dig into the consumers pocket even more with higher deductibles.  Thus, hurting the consumer and their ability to pay the  bills and feed their families.  This would be true if I was simply saying to move to a high deductible plan, end of story.  What I am saying is to engage the consumer.  Make purchasing health care real again.  Consumers need to see the real costs.  This can be done without hurting the consumer or their checkbooks.  High deductible plans are the answer, but they have to be coupled with a personal care accounts such as a Health Reimbursement Arrangements (HRA).

An HRA, is a promise from an employer to reimburse the employee for health care expenses.  If the employer gives the employee $1,500 in an HRA , the employee can use this money for eligible health care expenses.  Now, employers are not actually handing over this money to the employee, they are simply promising to pay for any future medical expenses incurred. The easiest way to administrate an HRA is on a debit card based system.  The employee will receive a debit card with the amount of funds the employer is willing to give, loaded onto it.  The employee can then use this debit card to pay for any eligible medical expenses.

For example, let's take Company A.
Company A buys a health plan with a deductible of $3,000.  Now if Company A was to say to it's employees this is your plan, you have to pay the first $3,000 before the insurance kicks in, the employees might not be able to afford that.  However, if Company A was to give them a $3,000 deductible along with an HRA in the amount of $1500 then this would certainly lessen the blow.  Now the employee has what feels like first dollar coverage, the first $1,500 incurred they can use the HRA for.  For 85% of people this will be enough money for the year.  Imagine 85% of people will see $0 in out of pocket expenses. 

We have now created an engaged consumer.  Why?  These employees have to live on a budget and their decisions are driven by this budget.   They understand if they spend all $1,500 in their HRA, they will now have to pay out of pocket until the deductible is met.  They also understand that if they are unfortunate and need serious medical procedures their out of pocket is not extreme.

When employees are driven by this budget, they see the real cost of health care because they are paying the actual bills.  These plans do not have co-pays, the bill the consumer receives is the actual bill and they learn quick the true costs.  It leads to better purchasing decisions.  For example, let's say you hurt your ankle late at night and your doctor's office is closed.  Is it hurt bad enough to warrant an emergency room trip?  Can it wait until the morning?  Should I elevate, ice it and then see how it is tomorrow before deciding what to do?  These are questions many will not even think to consider if they are just simply paying a co-pay to go the the emergency room.  These plans cut out waste because the consumer weighs the value of their own health care.  If they truly need to go to the ER, they will.  If not, then why not wait and take the less expensive option?

Far too many times, people misuse their health plans.  This leads to waste, which leads to higher costs.  Creating an engaged consumer is vital to controlling costs.  Imagine going to the store and purchasing a product without knowing what it just cost.  That makes little to no sense for almost everyone.  Yet, for some reason this is how we purchase health care.  This needs to change, it has to change.

Senate to Vote on Health Care Reform Saturday Night

The Senate will debate their health care reform bill all day Saturday and hope to vote at 8pm that same night.  There are many who do not think this bill will get the 60 votes needed to pass.  The public option in this bill seems to be the main reason it might not get the 60 votes.  Lieberman has swore he will not vote for this bill, so that means the democrats will need to pick up a single republican vote in order to pass. 

Stay tuned......

Not To Be Outdone by the House.... here comes the Senate Bill!

The Senate has finally came out with their bill on health care reform, all 2074 pages of it.  Yes, 2074.  As no one has been able to read it yet, all facts are not out on exactly what is in the bill.  However we do know that there is Government run option in this bill.  Which leads many to wonder if this bill can get the 60 votes needed to get out of the Senate.  Remember, Senator Lieberman ( I ) has said he will never vote for a bill that includes a public option.  He could be the deciding vote in this debate.  Senator Olympia Snowe ( R ) from Maine has said she will also not vote for a public option, unless it is attached to a "trigger."  So, unless the democrats entice one of them to vote yes, it seems unlikely to get this to pass the Senate. 

There is one other major issue going on inside of congress that could make passing this difficult.  This is the Stupak Amendment in the House bill.  This is the amendment that does not allow  funds to be used for abortion coverage.  The House bill only passed because this amendment was added, there are said to be around 40 pro-life democrats who would have voted no without this amendment.  Now that it has passed and the House is awaiting the Senate to pass theirs, there is serious discussion that this amendment will be taken out.  If so, all of the pro-life democrats in the House will take this bill down.

It will be very interesting over the next few weeks to see the developments.  

The Role of Competition in Health Care Reform

One of the biggest issues concerning the rising health care costs is competition, or the lack there of.  Many states only have a few carriers.  This is a problem in many states and the consumer has suffered because of it.  Now, one option is to let the government come in and compete with these carriers.  The argument here is that the government will be able to undercut these carriers on price and force these carriers to lower theirs. 

There are problems with this.  Many do not realize that these insurance carriers only operate on a 1-4% profit margin as it is now.  If they are forced to lower their price they will be run out of business or cut jobs.  So they will not lower their price too significantly, they cannot.  The next problem is if government is paying these costs under their plan they will reimburse doctors and hospitals the way they do with Medicare.  On average they pay two-thirds of the actual medical bills.  This is why many doctors have stopped taking medicare patients.  These bills still have to be paid, where will this cost get shifted to?  The only logical answer has to be private insurance.  Which means these carriers will have no choice but to raise their premiums. 

It is hard to understand the argument that a government option would lead to the best competition.  The next argument is to allow cross-state purchasing of health insurance, the thought here is that this would get rid of the problem in states where consumers only have one or two choices.  While this is a better idea, there is still potentially a problem with this.  As it works right now, in most states there are one or two major carriers that get all of the business.  These top carriers get very lucrative discounts from their "network" hospitals and doctors in their state (usually somewhere from 25-45%).  These discounts have a dramatic effect on premiums.  If new carriers were to come into the market they would more than likely not see these same discounts.  Therefore it would be difficult for new carriers to compete. 

While the latter of the two seems to make more sense, it still needs work.  There has to be a way to make the playing field fair for all that are competing in an area. 

Ways to improve our health care system before complete reform

There are some logical steps that we can first address in regards to health care and costs.

• Elimination of Medicare Fraud and Waste:  According to an October Thompson Reuters reports the health care system wastes between 500 and 800 billion dollars a year! 200 billion of that are fraudulent claims.  Now that is some profitable illegal activity.  
• TORT Reform:  No one seems to be talking about this and it is a huge part in why health care costs are so high.  Doctors malpractice insurance is through the roof.  Guess where that costs ends up getting shifted to? You got it, THE CONSUMER!  
• Upgrade our systems:  We need to update to an electronic base system, there is so much waste and miscommunication in our current paper based system.
• Reward the healthy!:  It seems too logical to have a health-based health care system doesn't it?  Include health assessments in with plans, reward wellness.  

These things are already included in the reform bills (except for TORT reform).  Again, almost all agree on these reforms.  Why does everything have to be crammed together?

What if we voted on each reform by itself? Would it work to go line by line, item by item, reform by reform and vote on those? I imagine a lot of good reform would pass.  Both parties agree on more topics than they disagree on, although you wouldn't know that from the media.  I don't know a single person that proclaims not to care about the uninsured.  For some reason this seems to be an all or nothing debate, why and how did we end up here?

How will the exchange work

Here is an example of how the health insurance "exchange" proposed in the house health reform bill will work.  How much you pay is based on your household income.  As you can see the middle class will suffer greatly from the way it is currently structured.  A household earning just $73,000 a year will have to pay nearly $8,800 a year!  This model is very troublesome.

* HOUSEHOLD      INCOME	$27,465	$36,620	$54,930	$73,240	$100,000
Plan Status	Family of 4	Family of 4	Family of 4	Family of 4	Family of 4
As % of Poverty Level	125%	167%	249%	332%	453%
Maximum Premium	3% of income	5.5% of income	10% of income	12% of income	n/a
Actual Health Plan Cost	$12,000	$12,000	$12,000	$12,000	$12,000
Gov’t Tax Credit / Subsidy	$11,176	$7,986	$6,507	$3,211	$0
Actual Family Cost	$824	$2,014	$5,493	$8,789	$12,000
Individual Penalty	$600	$1,000	$1,500	$2,000	$2,500
Maximum OOP	3% actuarial value	15% actuarial value	30% actuarial value	N/A	N/A

Do Americans want Pages or Solutions?

Does anyone else wonder why all of these Health reform bills are so long? Why must the house bill be over 2,000 pages? At some point we lost our way in this debate. It has become apparent that these bills are just a collection of a thousand different ideas jammed into a single bill. In fact, there are many times in the bills where they even contradict each other.

Most Americans want the legislators who are voting on this bill to actually read it. I say, how about the ones putting these bills together actually read it. This is the single largest piece of legislation in US history and still not a single person can tell you exactly what is in the bill.

It does not matter what side of the fence you are on in this debate, we should all want a bill that is clear, concise and one that works.

There is much that is lost in this debate. There are plenty that both parties agree on. Everyone knows we need some sort of reform to deal with costs. Both parties know we need elimination of pre-existing conditions. They all agree we need to cover as many Americans as humanly possible, especially the ones who need it most. Those are points we almost all agree on.

The biggest battle is between government running health care vs the private sector running health care. This is a legitimate debate. This should be debated fairly. However it cannot be when you have these bills that are so unclear and so vague. It leaves each side debating over bills that do not make sense.

All three of the bills proposed to congress right now are not even slated to go into action until 2013. Why are we rushing out bills that are this long and this unclear? It is beyond comprehension that a bill of this magnitude is packed into a 2,000 page mess.

I will leave you with an actual paragraph from the House bill.

“(a) Outpatient Hospitals – (1) In General – Section 1833(t)(3)(C)(iv) of the Social Security Act (42 U.S.C. 1395(t)(3)(C)(iv)) is amended – (A) in the first sentence – (i) by inserting “(which is subject to the productivity adjustment described in subclause (II) of such section)” after “1886(b)(3)(B)(iii); and (ii) by inserting “(but not below 0)” after “reduced”; and (B) in the second sentence, by inserting “and which is subject, beginning with 2010 to the productivity adjustment described in section 1886(b)(3)(B)(iii)(II)”.

Excuse me?????

Heath Reform Bill Passes House but is it DOA in Senate?

Late Saturday night The House of Representatives passed their version of the Health Care Reform Bill by a close vote of 220-215, receiving one republican vote from Louisiana Rep. Anh "Joseph" Cao. This was a much closer vote than many had anticipated.

However a new story is developing in the Senate. Many "blue dog" democrats are now vowing to vote down the Senate bill down due to the fact the House version has a "public option." The most notable Senator that has said for days now he will vote this down is CT Senator Joe Lieberman.

However, liberal democrats in the senate see one way out. Olympia Snowe. The republican senator from Maine has said she will vote yes to a bill with a "public option" if it is attached to a "trigger." Meaning, the "public option" will only go into place if a few years down the road health care costs have not been contained. Many liberal democrats are hoping that this "trigger" plan will also ease the worries from the "blue dogs."
But for now, it seems the bill in its current state is DOA.