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HEALTH PLANS/POLICY: CDHPs, HSAs, and what’s wrong with employer-provided insurance? With contribution from Atlas

The LA Times has an article about CDHPs which is called more choice, at a cost. This article baffles me. A pregnant couple is wondering what services (such as pre-natal ultrasounds) to buy and what not to buy. They need to get a clue. Within say six to nine months (and my sources tell me that it’s unlikely to take much longer!) they are going to bust out of their deductible (and probably also their out-of-pocket) payments for the year, so it doesn’t matter whether they save money on an unnecessary ultrasound or not–their total bill for care will be the same.

CDHPs only puts the onus on saving money on those people who aren’t going to spend beyond their deductible, or in other words those who don’t need much care. Of course in health care overall 80% of the money is spent on people (like the couple in the story) for whom it’s the dollars over $10,000 a year that matter, from which their catastrophic insurance completely inoculates them.

But I can say that until I’m blue in the face and no one pays any attention. It is a little different when someone else from the right side of the political spectrum notices and new-ish contributor Atlas does. He understands that there are some people who are going to cost much more than others, and he has a suggested solution–turbo charging the largely dormant state based risk-pools. It’s not my preferred solution but at least it acknowleges what’s been completely ignored in the CDHP and individual insurance market debates–some people are going to need expensive care and how we organize that care is going to impact how much it costs. Here’s Atlas:

Seekers of the truth have always been challenged by the healthcare field, as healthcare is used as a lever to power by public and private sector players alike. But it seems to me that the employer based model has some flaws that need to be addressed. In today’s world, loss of job often means loss of health insurance, which even to the libertarians among us may be too high a price to pay. In an attempt to aid a few friends in such straits, I have found that there are somewhat affordable policies available for those who don’t qualify for public assistance. But individual underwriting is a challenging barrier to access. Some sort of public pool seems to be the solution to that problem. I believe it exists in several states but a well publicized federal solution has merit.

Which leads to the next thought–the hypocrisy of public officials who write checks which they can’t cash for programs like Medicaid are the cruelest sort of joke on people who understandably don’t have a sense of humor. Those in the throes of poverty exacerbated by illness are least equipped to cope with misinformation, disinformation, and Kafkaesque demand deflators. If we’re going to have programs for the poor, they should be adequately funded and pro-actively promoted.

The overarching problem, though, is cost. My understanding of the economic rationale of consumer directed health plans is to force those happy, company insured campers to feel the pain of rising costs so as to exert market forces upon them as close as possible to the real world consumer pressure that has given us $25 bicycles at Wal-Mart. The high deductibles prevent the excesses of pure market dynamics–e.g., you can’t run up so much healthcare debt you declare bankruptcy because you have catastrophic coverage. Yet you get socked hard enough with the high deductible that you start to complain, which triggers the providers to respond by easing the sting.

If this contributes to overall cost reduction, I think it is positive for most if not all parties involved, even the uninsured. Lower premiums resulting from lower overall costs may make insurance more accessible to those in the uninsured zone–above the threshold for Medicaid coverage and yet not wealthy or wise enough to buy coverage.

The “if” which starts the last paragraph is of course the $1.7 trillion dollar question. Whether CDHPs will have anything to do with saving overall costs I find to be most doubtful. But at least Atlas has some concept that throwing people onto the individual market with no way of ensuring access to insurance for those less-than-desirable risks is not good public policy.

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