Big Picture Healthcare Articles

It is that time again, where you get to choose or reconfirm your choice in medical benefits if you are one of the lucky ones that has medical benefits where you work. You get tons of brochures and pitches about why this plan is better for you than that. Employers may offer incentives for the plans they feel will be most cost effective. In the end, you need to choose what works best for your philosophy, budget and overall health history.

Some companies will be talking about consumer-driven healthcare. It sounds like healthcare that consumers really want, right? But for the most part it is healthcare with high deductibles and lower premiums. Knowing what it really is and how it will affect you personally, and if you run a business, professionally is important.

What IS Consumer-Driven Healthcare? It is the label being used by the healthcare and insurance industries to mean the plans, policies and services designed to change consumer behavior of medicine through consumer payment of their own medical bills. Consumer driven plans by design have higher deductibles up front which decrease the cost liabilities of insurers and employers who pay for these plans and provide customers the "opportunity" to choose (and pay) for a much larger proportion of their own health expenditures.

Since healthcare costs have risen 4 times faster than inflation over the past 20 years and rises continue year after year, many healthcare experts believe that consumers do not understand the real cost of the services they consume, so they believe that, when consumers have to pay more up front costs, they will become wiser medical consumers.

Most people with health issues are pretty savvy about treatment options, due to the Internet. However, medical pricing is complex, tied to diagnostic and treatment codes, and tiered with discounts as complex as airline pricing. Most healthcare providers do not tell patients what treatments or procedures will cost until after the treatment has been consumed, so it is not surprising that the average consumer has no way to totally understand these costs. What is hoped is that consumer-driven healthcare will drive providers to educate their patients about this.

Laws allowing tax deduction for monies placed in a Health Savings Account or HSAs (and their predecessor Medical Savings Accounts) are the driver of adoption of these plans. Several million accounts have been opened in the past three years, but 2007 is expected to have major expansion of these accounts and more employers offer more options.

The accounts work like your retirement IRA's or 401Ks. Pre-tax money is deposited in these accounts, that grow tax free to pay for major illnesses. Some monies will be withdrawn for medical expenses over time. These accounts need to be paired with a high deductible major medical type plan, which kicks in after the deductible, which is typically $2,000 to $5,000 of eligible expenses per year. Over time, companies will tend to pay for the high deductible coverage, with the funding of the HSAs tending to become more and more a personal responsibility. If you are healthy, you can accumulate a nice little nest egg. If not you may end up paying more than your current plan.

The "consumer-driven" part of consumer-driven healthcare is that consumers now will have more control over which medical services they choose to spend their money on. HSAs plus high deductible policy results in individuals and families, SELF INSURING the majority of their medical costs. With deductibles this high, statistically, 80-90% of consumers annually will have less than $5,000 in expenses to meet the deductible.

This puts HSA participants in complete control of their healthcare consumption nine years out of ten. This is GREAT NEWS for the following types of medical consumers, all of whom will tend to be attracted to HSAs and high deductible insurance.

HSAs plus High Deductible Medical Plans tend to be a good fit for:

• Healthy consumers and young families with no chronic diseases, who may have a check up or well baby visit, or an occasional scrape or accidental injury, a mammogram or prostate exam.
  
  
• People with high paying jobs or businesses will find the tax benefits attractive. Medical costs will be a smaller percentage of their income, than medical costs are of lower income people. They may choose the approach for the tax benefits alone.
  
  
• Very high income individuals, who when they do see medical professionals, plan to see the best of the best, regardless of who or what is covered by their plan. They pay out of pocket and THEY control what medical services they choose.
  
  
• Chronically ill individuals, who still struggle with their health, for whom conventional approaches have NOT been successful, may find the freedom to choose liberating.
  
  
• People who are dissatisfied with the way their healthcare has been provided in the past. It will include people with negative health outcomes.
  
  
• People who prefer "alternative", complimentary, holistic, preventive care to conventional US medical approaches may have a framework, where as consumers, they can indeed direct their healthcare expenditures to those modalities which match their philosophy the best. This is consumer-driven at its best. How much control they can exercise will depend upon plan design.
  
  With over half the population having made at least one visit to an "alternative" practitioner in the past calendar year, and with expenditures for alternative care equaling expenditures for primary care, internists, pediatricians and OB-gyn practitioners (New England Journal of Medicine Studies 1993, …) it is clear than many US consumers trust these holistic alternatives. This makes the decision about approach cleaner. It will not be about what is or is not covered by insurance; the decision will be about what is the best choice, given your own perspective and healthcare experience and beliefs.

• People with chronic diseases (or adventurous folks who are accident prone), who spend more than $2,000 a year in health costs, year after year. [For those of you who are attempting to count this out, many brand name prescriptions now run approximately $100 a month. Two or more of these would put you in this category with no other expenses. A single emergency room visit for asthma or an injury for example could put you over this amount.] People with conditions which require regular physician visits.
  
  
• People with a family history of major illness or disease.
  
  
• Families who are planning a family and expect trips to birthing center or delivery rooms.
  
  
• Lower income individuals and families, who do not qualify for government provided health insurance such as Medicaid. Health insurance can be as much as 30% of their take home pay. The RISK for these people is inappropriately high, to self-insure.
  
  
• People who have already had a major illness, and while they may be healthy now, will never again qualify for NEW insurance with low deductibles and co-pays, should usually keep what they currently have.
  
  
• People who are covered by COBRA would be wisely advised to keep their coverage to protect insurability as well.

• What are the risks of NOT doing what they recommend?
• What are the alternatives? § What are the comparative costs?

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