By Robert Nelson
Much attention lately in healthcare reform circles has been focused on the notion of the “functionally uninsured.”
This precarious situation arises when a low income worker, say $15 – $18 per hour, has a typical employer-sponsored PPO health insurance plan with a high deductible which is significantly above their savings and/or their HSA balance. So essentially, they have “good insurance”, but can’t afford to use it.
The reaction to this dilemma has resulted in an understandable backlash to, and often a vehement condemnation of, deductibles as a strategy to hold down premium costs, because of the regressive and punitive consequences that deductibles can have on lower income workers. People who put off needed medical care often do so because of price more so than lack of access. To add financial insult to injury, it is very hard to find prices ahead of the provision of medical care; and when we do know them those prices are vastly inflated to match the prices (billed price) that a provider lists to an insurance carrier as a starting point in reimbursement negotiations.
But consider the fact that while sometimes it is true that high deductibles raise costs, that statement is both true on one level and absurd on another!
Any deductible, regardless of its magnitude, only impacts someone financially IF they have a claim against the indemnification tool which carries the deductible; and (as is the rub in healthcare) the deductible must be affordable in order to benefit the subscriber.
However, we have chosen to misuse insurance in healthcare; instead of a financial risk mitigating tool, it actually has become a risk-concentrating tool and a perpetual payout fund.
In sane markets with normally behaving prices and calculable risk, over time high deductibles save on premium expenses over the long term horizon.
I bring this up and frame it this way to emphasize that the dysfunction in healthcare starts proximate to any discussion about deductibles. And deductibles are not the problem, they are a symptom, which in turn, gets in the way of care and complicates reform by turning the emphasis on deductibles, rather than the price of care.
1) Deductibles must be affordable to make financial sense when deciding risk tolerance
2) There must be a competitive value-based market in which to spend those deductible dollars
3) It is #2 that is lacking in healthcare…due to contractual CPT billing sent through insurance-mandated protocols. This has suppressed the role prices would normally play in the marketplace.