Tag: Jonathan Oberlander

Why High Deductible Plans Matter

Someone once showed me an analysis that demonstrated that the sum of workers’ salaries and benefits has stayed remarkably constant in real terms over the last two decades.  This means that companies have compensated for the increasing cost of health insurance over time by holding back on wage increases.

You can understand this.  After all, if companies are not able to increase the price of goods and services they sell to the public, they need to hold factor costs relatively constant.  So if it was costing them more and more to provide health insurance to their workers, an offsetting amount would have to be removed from possible wage increases.

This dynamic is still in place, but it is showing up in a different way, by shifting costs to workers in the form of higher deductible health insurance policies.  Deductibles are different from co-pays, where you plunk down $15 or $20 for each appointment or prescription.  With deductibles, you pay the first costs incurred as you and your family make use of the health care system, the entire cost of the office visit or of the prescription, until a preset amount is reached.  After that level is reached, you still pay the co-pays.  A recent story in the Washington Post documented this trend.

Currently, this kind of high-deductible policy is often combined with health saving accounts that are funded by the employer.  These accounts let patients buy medical services and drugs with pretax dollars.   So, although your insurance plan might require you to pay more of a deductible out of your own money, you could still use the HSA to cover those out-of-pocket expenses.

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Deficit And Debt Politics: A Wake-Up Call For The Health Care Industry?

The 2010 Affordable Care Act (ACA) called for significant Medicare savings.  All told, the Congressional Budget Office projected that the law would trim over $400 billion from Medicare spending during 2010-2019, reducing the program’s annual growth rate from 6.8 percent to 5.5 percent.

Those savings were enabled, at least in the case of hospitals, by the promise of expanding insurance coverage that would bring in more insured patients (and thus more revenues to help offset the Medicare cuts).  Yet some observers in the health industry no doubt assumed that the ACA’s payment reductions could be reversed over time.   After all, they had seen Congress repeatedly cancel scheduled payment cuts to Medicare physicians in the annual melodrama surrounding the Sustainable Growth Rate.

Why couldn’t the health care industry similarly expect to evade the ACA’s cost controls?  In coming years, the industry could argue that any payment cuts would jeopardize patients’ access to care.  And given that Medicare’s own actuary cast doubt on how realistic the projected savings were, the odds must have seemed good to hospitals and other providers that they could sooner or later count on SGR-like relief from Washington.  Health reform offered an appealing political and business strategy:  initially accept the projected cuts in the ACA, then gain more paying customers through the implementation of insurance expansion, and, finally, work to reverse the cuts and “unbend” the cost curve.

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