During the health care reform debate, we wrote that most people’s attitudes to it were “confused, conflicted, clueless and cranky.” A major reason was that the American health care “system” is fiendishly complicated and few people really understand it. As a result hardly anyone knows much about what is actually in the reform bill (but that does not prevent them from having strong opinions about it). Sadly, the reforms, whatever their merits, will make the system even more complicated, the administration more Byzantine and the regulatory burden more onerous.
The American healthcare system is already by far the most complex and bureaucratic in the world. We were once asked to spend ninety minutes explaining American health care to a group of foreign health care executives. Ninety minutes? We probably needed a few weeks. Most other countries have relatively simple systems, whether insurance coverage is provided by a government plan or by private insurance or some combination of these. But in the United States insurance coverage, for those who have it, may be provided by Medicare Parts A, B, C, and D, 50 different state Medicaid programs (or MediCal in California), Medicare Advantage, Medigap plans, the Children’s Health Insurance Plan, the Women, Infants and Children Program, the Veterans Administration, the Federal Employees Health Benefits Program, the military, the hundreds of thousands of employer-provided plans and their insurance companies, or by the individual insurance market. This insurance may be paid for by the federal or state governments, by employers, labor unions or individuals. Some employers’ plans cover retirees, others do not. The result is that the system is pluralistic, mysterious, capricious and impossible for most patients and providers to understand.
The administrative complexity is amplified by the multiplicity of insurance plans. About half of all Americans with private health insurance are covered by self-insured plans, each with its own plan design. Employers customize their plan documents, led by consultants who make a good living designing their plans and tailoring their contracts. As one prominent consultant told us recently, if all the self-insured plan documents were piled on a table they would not just exceed the 2,700 pages of Obamacare, they would probably reach the moon. For the rest of the commercially insured population, health plans may be traditional indemnity plans, Preferred Provider Organizations or Health Maintenance Organizations.
The coverage provided by different plans varies dramatically. They may or may not include large or small deductibles, co-pays or co-insurance. Beneficiaries may pay a large, small or no part of their health insurance premiums. Some plans cover dependent family members and children, others do not. The Medicare Part D pharmaceutical benefit plan involves a “doughnut hole,” which will disappear as health reforms are implemented. Surveys have found that few people fully understand their own insurance plans let alone the bigger picture. While health reform takes some steps toward standardization of insurance offerings and improving transparency, overall it is likely to increase complexity.Continue reading…