POLICY: Can the real HSA fan, please stand, please stand up?

Greg Scandlen commented on the Grace-Marie Turner article, and as he’s a big player in the HSA wars, I thought I’d reply back in the main blog rather than in the comments. Greg and his ex-AMA buddies have their nice little "consumer" organization — you did realize that a consumer organization should be founded by ex-insurers and doctors, don’t you? After all they are the people with consumers’ best interests at heart! (Stop singgering in the back there…)

Greg seems to think that I believe that "every dollar currently spent on health benefits was necessary and efficient." Not quite sure that he’s been following this blog closely, such as some of my "criticisms" of physicians, that caused a minor fuss over my use of the term “waste motion” to describe 30% of the healthcare system’s behavior. I of course fervently believe that there’s huge waste in our system, but only a small small fraction of it is in the admin back and forth that happens between insurers and physician offices. That is the part of the “waste” that he thinks HDHPs and HSAs are going to drive out of the system. He is of course wrong, and if he had ever used a HDHP from a major insurer, he’d know.

Unfortunately for the physicians living in their HSA dreamworld, the way that high deductible plans actually work is simply to change who is paying the first few thousand dollars from being the insurer to being the consumer. The fact is that the PPO network and the pricing set up by the insurer is going to continue to be the main vehicle by which assessments against the consumer’s deductible are counted. So the hopes and aspirations of doctors to charge consumers directly without having to submit a claim to the insurer are going to be dashed, unless the consumer is dumb enough to pay up front, and try to get it back from the insurer later. Greg says that “Using an insurance mechanism to pay for routine care is hugely inefficient. It involves massive administrative costs from both the insurer and the provider” and he’s right (Hint: capitation or salaried physician systems don’t have that problem!) But HDHPs are just going to mean that the providers have to come after the consumers instead of the insurers for their money. Unless he really believes that a) consumers are happy to forgo the PPO deals the insurer has cut and pay larger amounts out of pocket, or b) insurers are going to happily count whatever charges providers can get away with against the insured consumer’s deductible, and then be happy to pay any amount above that.  No way that’s going to happen….insurers are not that dumb.  And if you look in Sunday’s Miami Herald, you see a great example of how this works in practice. And the provider in that case, believe it or not, has it somewhat right:

During the conversation, the billing person mentioned that if Stamm was uninsured and paid in cash at the time of her visit, she would have been charged $125. ”So why can’t you just give me the walk-in rate?” Stamm asked. That wasn’t possible, she was told, since they had to go to the trouble of billing her and attempting to collect.

So what are the consumer’s choices? Go out of network, and have the full amount counted against some mythical huge deductible that they’ll never reach. Go out of network and pre-negotiate the cash rate, which won’t be counted against a deductible at all. Or go in-network and take the pre-negotiated PPO rate which they learn from their EOB.  The provider will not know whether or not the deductible has been reached without filing a claim with the insurer, and they’ll go through the same bullshit they do now with the insurer deciding to allow the claim or not, and deciding what the patient should pay. Then eventually the provider will have to come after the consumer for their share. So essentially all this movement does for  providers is give them the added role of collection agents. Come to think of that, collections is probably a good business to get into!

The alternative is that the insurer will sell a high deductible policy, pay every dollar after the deductible, and just take it on faith that providers and consumers/patients will only send them the post-deductible bill, and that they’ll be scrupulously honest about the bill they’ve run up below the deductible at usual, customary and of course totally reasonable rates. Get real, people. The insurer has to count up to the deductible somehow! And that means administrative waste!

Meanwhile the rest of Greg’s comments are, I’m afraid, as equally muddled.

And first dollar coverage encourages needless spending. This needless spending can be curbed by rationing, or by demand-side behaviors. We tried rationing with managed care, and it works pretty well to hold down costs, but it was pretty unpopular. So now we’re trying to affect the demand side — getting people to make their own trade-offs.

Even his fellow travelers at Cato admit that most of the “needless spending” happens well past the deductible, (not that they have a solution for it). But apparently we’re only going to get at that with by impacting the demand on the first few thousand dollars of an individual’s spending, even though the literature and common sense show that there’s no market mechanism for that, that the reduction in services received is equally for necessary as well as unnecessary services, and that of course this disproportionately impacts those with lower incomes. But hey let’s do that anyway. It won’t make much difference overall. And while Greg thinks that we may have tried rationing via managed care, we didn’t try it properly (perhaps he missed Enthoven’s rants on the subject), and the insurance industry has shown in the last 5 years that it’s much better at risk-selection and raising prices than doing care management. (I’m in favor of rational versus irrational rationing, but that’s a different discussion).

Meanwhile, I’m still fascinated to discover what the HSA promoters really do believe, beyond those in their number who like making money off heavily underwritten, high-margin HDHPs. In her interview with me Grace Marie was going on about all kinds of non-HDHP related activities. Greg says:

HSAs are not the be-all-and-end-all of health care reform. But they are an enormous step in the right direction, and they will help bring about other changes like a demand for reliable information from consumers, greater accountability on the part of providers, and new more efficient ways of delivering care.

And he wants to promote HSAs in Medicare too! The first part of his plan, which is to convert Part B premiums and the deductible for Part A to one larger deductible, may not be too bad an idea, so long as there is continued help for those for whom the increase in deductible would be a real hardship (those with lower incomes but not dual eligible). After all that concerns private spending on Medicare recipients.

It’s the public spending on Medicare recipients that I’m concerned about. As far as I understand the plan, if a Medicare recipient who chooses to moves to a HDHP gets the difference between what they spend and the average, put as cash into their private account.Any savings to the Medicare program would be converted into a cash deposit to the beneficiaries’ HSA account.” It’s bad enough HDHPs destroying what’s left of the community-rated risk pool in the individual market, and giving employers an excuse to get out of providing health benefits. But that process was well underway anyway, so honestly it’s not that big a deal — not that I’m going to stop calling its advocates on it.

But now Greg wants to remove money from the Medicare risk pool to give it to healthier than average Medicare beneficiaries. 

The per capita premium and deposit would need to be risk-adjusted at least for age and geography, much as CMS currently does for Medicare Advantage plans.

Well here as a tax payer I must object. Every time Medicare has split its risk pool so far, it’s basically handed over more money than “sickness” to the private sector plans. And don’t take my word for it (although common sense and the retreat of private plans from the Medicare program when payments were cut in the late 1990s should be proof enough) because the GAO has said so twice. (Read down here for the details). And now Greg wants us to allow the healthy people to pull out actual cash, leaving proportionately more sick people, more demand, and less money in the traditional program for the taxpayer (or as the current Administration’s accounting would have it, the taxpayer’s children and grandchildren) to pay for. Thanks.

Funnily enough Greg’s being hanging out with Grover Norquist lately (Apr 4 entry here).  That whole notion about drowning the Federal Government in a bath tub must be catching. This goes to the whole notion of deliberately destroying a risk pool, except that unlike in the case of the private insurance market where the poor uninsurable sucker gets stuck with the problem of having to deal with the extra costs, this is one that the taxpayer will pick up. I thought these “conservatives” were in favor of lower taxpayer spending! (OK, I know in real life they just are in favor of lower taxes for the very, very wealthy…but that is their rhetoric).

I would still love Greg, Grace-Marie or anyone to take the challenge of explaining how I’ve got my math wrong (read down in this example) when I say that handing out cash into private accounts from a common insurance pool means that someone else has to pay in to the pool to provide care. It’s an explanation we commies have been waiting for, and we’re still waiting. Just because the private market doesn’t really have large community rated pools any more doesn’t make the theory wrong, and when they want to do this to Medicare, they are talking about a large community rated pool.

And if they don’t really believe that HSAs/HDHPs are the “the be-all-and-end-all of health care reform” what the hell do they believe? They don’t seem to talk about much else. Don’t they have an overall policy solution for the market. Their rivals in the single payer and the managed competition crowd do. At least those two groups are having a rational disagreement about how to cure the same problem, and have been saying the same thing since the 1980s. Of course, in our bizzarro world they never get any attention, and the pro-HSA crowd is ruling our political rhetoric.

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