Sunday, March 15, 2020

Limit Americans' out-of-pocket exposure for Coronavirus treatment

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The bill passed by the House yesterday to ease the economic impact of the coronavirus pandemic, H.R. 6201, purports to make coronavirus testing available at no cost to all Americans. That includes office visits, urgent care center visits, and emergency room visits that lead to an order for testing.* It does not, however, include treatment for those who become seriously ill.

David Anderson and Nicholas Bagley are calling for Congress to rise to the crisis by protecting Americans against balance billing -- either by passing comprehensive consumer protection that's been stalled since last fall or, at a minimum, passing a bill to limit out-of-network billing for Coronavirus treatment.

That's vital. I've worried since late February that fear of balance billing would inhibit some Americans from seeking treatment. I've also noted a closely related problem: Americans' huge exposure to out-of-pocket costs for in-network care:
In employer-sponsored insurance, the average single-person deductible in 2019 was $1,655, according to the Kaiser Family Foundation. 28% of covered workers had a single -person deductible over $2,000. The median annual maximum out-of-pocket (MOOP) limit (after which the plan pays 100% of covered expenses) was $4,000 (the maximum allowable is $8,100). About two thirds of employer plans require coinsurance for inpatient hospital stays, averaging 20%.
Meanwhile, an ICU stay with a ventilator cost an estimated $11,000 per day back in 2005 [see update below]. Many people with high deductibles and MOOP are afraid to seek treatment. Half of U.S. adults say they or a family member put off or skipped some sort of health care or dental care or relied on an alternative treatment in the past year because of the cost, according to 2019 polling by the Kaiser Family Foundation.

Fear of huge expense may deter people from getting tested even if the test itself is free, as well as deterring people from seeking treatment if symptoms intensify. Along with a balance billing ban, a key measure to reduce that inhibition would be to limit individuals' maximum out-of-pocket spending for coronavirus treatment to, say, $2,000, and limit insurers' exposure by providing federal reinsurance for out-of-pocket costs above that limit.  To hold insurers to their responsibilities, the reinsurance would only cover the difference between the $2,000 cap and the plan's existing MOOP.

Perhaps there's a better way to limit individuals' out-of-pocket exposure. Perhaps $2,000 isn't the right threshold. It would get awfully complicated if the benefit were income-adjusted, though the cap reduction might not be offered at all for people above a certain income threshold.  But limiting Americans' enormous contractual exposure to out-of-pocket costs, in tandem with choking off their exposure to limitless and unpredictable balance billing, would help limit the disease's spread and save lives.

Like all emergency healthcare measures proposed to limit the ravages of the coronavirus, capping MOOP for the treatment of one disease highlights dysfunctionality in Americans'  healthcare norms.  People shouldn't be uninsured. If insured, they shouldn't be exposed to in-network costs up to about $8,000, or to unforeseeable out-of-network costs that are effectively unlimited.  Permanent fixes are in order for all of these exposures.  But crisis-specific patches may help stave off hundreds of thousands of deaths and economic paralysis.

UPDATE, 3/16/20: A bill has been introduced in the New Jersey legislature that would order property insurers to honor small business's claims for business interruption losses stemming from the coronavirus, even if the insurance policies in question exclude coverage for infectious disease. The state would then reimburse those claims. That's a kind of analogue to the federally backstopped MOOP reduction for individuals proposed above. The bill, A3844, is not yet published.
      I would think, BTW, that the state would only reimburse the insurer if the claims were otherwise excluded -- not all policies exclude losses from infectious disease; some, in fact, exclude bacterial but not viral contamination. But that's not spelled out as far as I can see.

UPDATE 2, 3/19/20: I have been basing my estimate for the costs coronavirus patients may face, first sketched out in an update to this post,  on a) an estimate of $11,000 per day for an ICU stay as of a 2005 study, cited by the WSJ's Stephanie Amour, and b) The Incidental Economist's rough-and-ready estimate of $62,000 for a coronavirus hospitalization.  This week, however, the Kaiser Family Foundation estimated likely average costs of a hospital stay for pneumonia much lower, ranging from about $10,000 for a stay without complications to about $20,000 for a stay with major complications. Kaiser estimated average out-of-pocket costs for the patient at roughly the size of the average deductible in employer-sponsored insurance, $1,464. Today Kaiser CEO Drew Altman, in a column calling on the federal government to pick up those costs, calls that estimate conservative. It is based on "a sample of the IBM MarketScan Commercial Claims and Encounters claims database, which includes claims from 18 million people enrolled in large employer plans in 2018.

UPDATE 3, 3/28/20: Kaiser has updated its cost estimates for pneumonia treatment, estimating the average cost of ventilator treatment for 96 hours or more at $88,114. CDC estimates from some weeks ago indicate that 20% of patients hospitalized for COVID-19 require ventilators. Patients who receive extended ventilator treatment would almost certainly hit their out--of-pocket maximum.

* Wording amended for clarity here.

1 comment:

  1. Thanks for an important post.
    In my recent article on medical debt, I proposed that all emergency treatments be covered by insurers without a deductible or co-payments.
    When writing this, I had in mind car accidents and broken legs, but coronavirus would certainly qualify.
    Let's say that 5 million persons are eventually hospitalized for this illness.
    At least half of them will be on Medicare or Medicaid. That leaves us with perhaps 2 million claims to pay without a deductible from private insurers.
    2 million times $8,000 each is only $16 billion in new federal reinsurance.
    That is not much in federal spending terms.