There will be more Americans who pay directly for more of their health care. The ACA is projected by the Congressional Budget Office to leave 30 million people uninsured, and tens of millions more will get high-deductible plans through exchanges or their employers. These self-pay patients will demand price transparency and discounts for paying in full at the time of treatment, and innovative entrepreneurs will step up to cater to them while ignoring the traditional third-party payment system.Many have pointed out the irony of Republicans excoriating the ACA for offering high-deductible plans, which conservatives have long touted as a means to promote patient responsibility and cost control. Some reforms intended to make patients weigh costs could be effective if they include the information required to make an informed choice -- e.g., incentives to choose providers with high performance ratings and transparent pricing -- or reference pricing, where the use of a plan-preferred specialist is fully covered, while patients pay the difference if they want a more expensive provider.
But I'm troubled by the high deductibles and high coinsurance in ACA plans. Bronze plans average a $5000 deductible for an individual; many pay for nothing before the deductible is reached, though some offer partial coverage for doctor visits or low prices for generic drugs pre-deductible. The silver plans I looked at for my wife and I had per-person deductibles in the $1350--$2500 range, and coinsurance as high as 50% for many services. These are very high costs for moderate-income people. Lower-income buyers, who get heavy premium subsidies and additional subsidies for out-of-pocket costs, fare better.
The truth is, as the ACA kicks off American healthcare is starting from a bad place, with per capita costs 50-100% higher than in other wealthy countries and per-procedure costs often double, triple or more. As Dean Baker is fond of pointing out, health insurance is expensive for all Americans, if only semi-visible: the average employer-sponsored family plan cost $16,351, according to the Kaiser Family Foundation. It's good that the ACA mandates that insurers must spend 80-85% of premiums on costs, and that they're under competitive pressure to keep prices down, but the ACA is launching from an unaffordable base, only partly mitigated by taxpayer-financed subsidies.
To Austin Frakt, these facts signify that the national focus should be on getting costs down, regardless of payment system. I wonder, though, how much progress we can make without implementing the chief cost control mechanism employed in one way or another by every other wealthy country: effective government control over pricing (which a strong public option suing Medicare pricing might have catalyzed). Countries enjoying such a healthcare monopsony are also struggling with rising costs and experimenting with competition and fee-for-service alternatives -- but their experiments start from a more affordable base than ours.
In the absence of government-controlled pricing, another plan feature prevalent in ACA plans is the so-called "narrow network," in which choice of physician and hospital in a given area is limited compared to what's often on offer in employer-sponsored-insurance. On Monday, the Wall Street Journal highlighted a McKinsey study finding that 70% of silver plans offered on the ACA exchanges are "narrow" or "ultranarrow" as defined by the study: offering access to fewer than 14 hospitals. Perhaps, as Austin Frakt recently tweeted, "this is what bending the cost curve looks like." In U.S. healthcare, again, the providers have undue pricing power, because the buyers are fragmented. If insurers can claw back some leverage by excluding the most expensive hospitals and doctors, that may help control costs. As a healthcare consumer, though, I find narrow networks troubling.
In a roundtable hosted by Modern Healthcare editor Merrrill Goozner, various health plan administrators made narrow networks sound like a complement to accountable care organizations, or rather to accountable care -- suggesting 1) that providers are chosen by quality measures more than by cost, and 2) if care is to be coordinated, the provider pool should be limited:
Dr. Craig Samitt (president of HealthCare Partners, a division of DaVita): I'm going to offer the provider perspective (and) use the term high-performing network instead of narrow network because it really is more characteristic of the environment that we're in.Maybe in some cases. In many others, I suspect that cost will be king. And as I intimated above, as a once and future patient, I am not personally prepared to accept narrow networks with no escape hatch. I know this, because I just recently decided to pay for such an escape hatch. I think it's a fair deal, and everyone should have access to a version of it.
The open network does not work. One of the key problems is that our incentive system rewards open networks, rewards fragmentation of care, rewards silo-based thinking. That is (the) imperative for a high-performance network.
Not only are we seeing results in high-performing networks, but we can predict that payers, whether it's Harvard Pilgrim Health Care or Aetna or the CMS or any other payers, will seek over time to reward high-performing networks that can demonstrate higher quality and lower cost. (They) will steer patients to high-performing networks with the presumption being that the more we can make it worth the beneficiary or the member's while to be part of a high-performing network, the more everyone wins: better outcomes, lower cost, higher performance than the industry overall.
My wife works for a hospital in a multi-hospital system with a self-funded health plan. For fifteen years, we paid a very moderate premium for in-network-only coverage. This year, we're paying extra for access to out-of-network coverage. After a deductible -- I think $1k or $2k each -- the plan purports to pay 70% of out-of-network costs. I know that's not true -- they pay 70% of the"allowable amount" for any given visit or procedure, which is likely to be 40-50% of what's actually billed. But. Our out-of-pocket costs are capped, I think at $10,000 each per year. To me, that's an acceptable cost if one of has a heart attack or gets cancer, and we determine that the best specialist or surgeon for our condition is out-of-network. In effect, it's catastrophic out-of-network coverage.
I think that's fair. Going out of network should exact a significant price, but not a ruinous one. Perhaps if U.S. healthcare weren't so overpriced -- and so radically differentially priced -- a version of this escape hatch could be available to everyone -- as it is, on perhaps overgenerous terms, to anyone with Medigap insurance. But it won't be available to most on the exchanges.
How we pay for care gets all of the attention, not how we deliver care. And delivery is a mess, as Dr. Carroll reminds his readers often. But regarding the high deductibles/co-pays, what's missing from the discussion is an accurate assessment of risk. What's driving the crisis in health care spending is the explosion in the number of people with chronic illness. Yet, people assume that their risk is to suffer a curable injury or illness. For someone with a chronic illness, high deductibles/co-pays mean financial ruin because the out of pocket costs never end; unlike the income of someone with a chronic illness, which may well end, or at the least drop significantly. ACA does not address the chronic illness crisis. Sure, a healthy person can buy a high deductible bronze plan and then during the next open enrollment period upgrade to a low deductible platinum plan if she suffers a chronic illness, but what's the future of platinum plans if they attract all those people with chronic illnesses. This comment isn't a criticism of ACA, but an observation of the unfinished work to be done.
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