Tag Archive: health savings accounts

First step toward bending medical utilization cost curve is not equating medical care with health care

The Republicans’ primary strategy is to shift more expense to individuals through high-deductible plans and Health Savings Accounts. They hope people will seek services less often if they have to pay more for it. That’s a prescription for illness.

Source: Partisan battles shouldn’t afflict good health care | The Sacramento Bee

This assumes medical care is subject to the economic principle of price elasticity that holds demand for a product or service moves inversely to its price. But medical care isn’t a commodity like food, clothing and shelter. It’s not consumed on a regular basis throughout life. People generally use it only when they need it, not because they want to buy it at the mall. In addition, the vast majority of people tend toward health with healthy lifestyles and don’t require preventative care.

To begin bending the medical utilization cost curve, the first step is to not regard it as a consumer commodity. The goal is to avoid having to need medical care in the first place by taking good care of our health. That’s truly preventative care. Medical care isn’t a substitute for health care — something only people can give to themselves. Reducing its cost or making it more accessible won’t automatically translate to lower overall spending on medical care.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Do You Speak Health Insurance? It’s Not Easy : Shots – Health News : NPR

“We’ve created a monster, and it’s not surprising to me that there’s literacy issues,” says Kathleen Call, a professor in the University of Minnesota School of Public Health. “I’ve studied this stuff, and sometimes I make mistakes.”Call has grown increasingly concerned that the complexity of insurance could compromise public health by keeping people away from the doctor.”People are treating it more like car insurance: You don’t use it until something happens,” she says. “You have an accident, then you use it. Otherwise you’re trying not to use it. And that’s not the way we want health insurance to be used.”

Source: Do You Speak Health Insurance? It’s Not Easy : Shots – Health News : NPR

Call’s comment concerning people not wanting to use their health insurance coverage touches upon a deep philosophical split over what it should be in the Affordable Care Act era. In the age of the health maintenance organization that came about in the 1970s and 1980s, HMOs were a hybrid product consisting pre-paid primary care and protection for high cost care such as major accidents and medical events. Before the HMO, there was major medical coverage that covered only the latter with the patient paying out of pocket for the former.

Today, the United States is shifting back to pre-HMO days. Instead of major medical coverage as it was called in the 1950s and 1960s, we now have high deductible or consumer driven plans. With rising health care costs, the all inclusive HMO plans with little in the way of out of pocket costs are no longer feasible. The problem is people still remember these rich HMO plans of the recent past and see high deductible plans as a poor value by comparison — or even valueless as they were described in a recent New York Times story.

The NPR item featured here makes the case for a simplified high deductible policy resembling the major medical coverage of the past, with a flat deductible of say $2,500 and a 20 percent coinsurance level. And automatically health savings account compatible.

That would be a true insurance product since it would cover large, unexpected medical expenses. Since patients would be responsible for care costs incurred below the deductible, these plans would reduce health plan issuer administrative costs involved in processing reimbursements for lower cost care events and the burden of keeping practitioner directories updated. It also dovetails with the consumer trend of convenience-oriented primary care delivered at retail and employer-sponsored clinics, online and through pre-paid arrangements.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Debate over future of ACA shifts to adequacy and affordability of coverage

Henry J. Aaron of the Brookings Institution has boiled down the future policy debate around the Patient Protection and Affordable Care Act. Now that the law is firmly in place – at least for the near term – and is meeting a primary policy goal of reducing the number of medically uninsured Americans, the next debate will be over the adequacy and affordability of coverage. Specifically, whether it’s too much, too little or just about right.

Conservatives, Aaron writes, prefer increasing the financial exposure of patients when they buy insurance and when they use care. By comparison, those of a more liberal bent prefer no insurance whatsoever to protect against financial exposure to medical bills but rather Canadian-style “single payer” where a government monopsony pays the nation’s collective health care bill.

Likely to fuel the debate are reports like this recent Kaiser Health News item. It reported that even with advance tax credit premium subsidies for coverage sold on state health benefit exchanges, premiums alone for some moderate income households approach nearly a tenth of their gross incomes and can really add up when out of pocket costs are included:

For instance, families of three earning $73,000 have to pay nearly $7,000 on premiums despite also receiving subsidies They still face deductibles, which this year averaged around $2,500 for the most common types of insurance plans, known as silver tiers. If a family required extensive medical care and reached the maximum they would be held responsible for—$13,200 this year—their total health care-related bills, including premiums, would exceed $20,000, or 28 percent of their gross incomes. “Even some of those who are eligible for financial assistance are still finding the coverage not to be affordable for them,” said Linda Blumberg, a senior fellow at the Urban Institute, Washington think tank.

All individual and small group plans that originated after the enactment of the ACA now basically operate as major medical plans of the pre-HMO days, minus the lifetime limits. They do so by virtue of calendar year maximum out of pocket limits: $6,600 for self-only coverage $13,200 for family coverage for 2015 plans (rising to $6,850 for self-only coverage $13,700 for family coverage for 2016). The annual premium is partly to cover catastrophic risk above these amounts. The amount of the premium paid by individuals and families depends on how much risk short of the calendar year OOP limits they want to assume. If they want less exposure to co-insurance, deductibles and co-pays, the premium is higher. If they’re willing to assume more, the premium is lower and lowest for “bronze” rated plans that cover 60 percent of expected annual medical utilization as well as pure catastrophic plans available to individuals under age 30 or households that would have to spend more than eight percent of their incomes to buy the lowest cost bronze plan offered in their area.

Herein is a primary element of the near term debate over the ACA: whether it provides affordable coverage regardless of whether households assume a high deductible and pay more out of pocket for non-catastrophic care or pay a higher premium in order to pay less out of pocket for these services. In a still fraught economy that has placed particular financial stress on moderate income households falling somewhat below and above the 400 percent of federal poverty cut off for advance tax credit subsidies for coverage sold on state health benefit exchanges – and those that have not or cannot easily afford to set aside money in health savings accounts to defray out of pocket costs — these costs and tradeoffs come into sharp focus.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Proposed California measures would help create framework for direct primary care and high deductible insurance combinations

Starting this tax year, federal income tax law raises the existing deduction for medical expenses from 7.5 percent of adjusted gross income to 10 percent.  California income tax law generally conforms to federal law.  However, proposed California legislation, Assembly Bill 1018, would allow medical expenses to be deductible from income by a yet to be specified amount including the cost of care for elderly dependents.

Two other California bills could establish a framework for what’s known as direct primary care covered directly by consumers and not insurance.  In such a model, consumers pay their own primary care costs and buy high deductible insurance policies to cover major, catastrophic events such as hospitalizations.  Section 1301(a)(3) of the Patient Protection and Affordable Care Act explicitly recognizes direct primary care medical home plans as qualified health plans eligible to be sold on state health benefit exchanges.

Assembly Bill 1028, the Patient Centered Medical Home Act of 2013, would define “medical home” and “patient centered medical home” as a health care delivery model in which a patient establishes an ongoing relationship with a primary care physician.  As defined by the bill, a medical home would be a “physician-led practice team to provide comprehensive, accessible, and continuous evidence-based primary and preventative care, and to coordinate the patient’s health care needs across the health care system in order to improve quality and health outcomes in a cost-effective manner…”

Another bill, Assembly Bill 1129, would conform California law to federal tax law allowing deductions for contributions to health savings accounts used in combination with high deductible health insurance policies.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

PPACA likely to institutionalize “major medical” coverage for individuals, small business employees

The Kaiser Family Foundation has published an excellent primer on the actuarial foundation upon which “qualified health plans” must be based under Section 1301 et seq of the Patient Protection and Affordable Care Act (PPACA).  The plans will be sold through state health benefit exchanges starting Jan. 1, 2014.  The exchanges will serve as marketplaces aggregating purchasing power among the small group and individual markets — the most distressed health insurance market segments where coverage is far less accessible and affordable than large group and government insurance plans.

These plans that cover from 60 percent (bronze) to 90 percent (gold) of an individual’s projected medical costs show the era of health coverage with minimal cost sharing and out of pocket costs has come to an end for individuals and those employed by small businesses.  That new reality that emerged in recent years is now institutionalized as public policy in the PPACA.  That policy is reinforced by tax policy allowing individuals to establish tax deductible Health Savings Accounts, which have been in existence only since 2004.

The bronze plan’s 60 percent coverage level could be equated to “major medical” plans of decades past that covered as the name implies only major expenses such as hospitalizations but not routine doctor visits.  As medical treatment and pharmaceutical costs continue to push up health coverage rates leading up to 2014, it remains to be seen if the higher level silver, gold and platinum (90 percent of projected actuarial costs) will be affordable for individuals and small businesses even with their new purchasing power via the benefit exchanges.  Many could find their budgets can handle only the low end bronze plan, shifting the bulk of these market segments to a major medical level of coverage.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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