Taking Apart Health Costs, part II

The other week I made some opening remarks.  The next thing I want to do is look at the different kinds of health care costs.  I think costs can be divided into three different categories:

-Well Visits / Routine Care

-Minor mishaps

-Major events

Cost-wise,  each of three works differently.  From an insurance point of view, the funding of each category of costs ought to work differently.  Today I’ll look at the first type of health care cost, routine care.  Then I’ll take on the other two categories in turn, in subsequent posts.

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“Well Visits” or Routine Care

This kind of health care is what you do to keep yourself healthy.  The periodic physical or well-child visit, vaccines as appropriate, routine screenings like getting your cholesterol checks, or having the dermatologist look for suspicious moles.

As with all health care, exactly who needs what and when is debatable.   One real challenge for managing a nation’s health care needs is deciding what those needs are. If you happen to agree with the manager of your health care plan, you are going to be fairly happy.  If you find that your health care plan covers — even insists — on care you don’t want, and will not cover the care you do want, you won’t be so happy.

–> Fondness for nationalized health care plans, or for company-sponsored plans, often divides based on that question.  Any just health care system will find the right balance between protecting a legitimate amount of disagreement, while neither blindly funding true quack treatments, nor refusing care that could reasonably be needed.  No easy task.  I am leery of anyone who claims this is easily determined, and that the rest of us should just go along.

A second point to remember is that our current models for administering routine care — and thus the costs associated with that care — are not set in stone.  Some of the tasks of well-care could be done by the individual — such as tracking your own family’s weight and height.   Where a health care professional is required, models for economic delivery of routine care should not be dismissed.  There is much to be said for the corner pharmacy running flu-shot clinics, or the local hospital dispatching a team of cholesterol-checkers for a one-day-blitz at the company cafeteria.

–> When we look at health care reform, we should be willing to think outside the box about ways to reduce costs, but also allow that some patients really do need a level of closer monitoring and hand-holding.

The good news is that patients won’t generally double-dip if there are multiple venues for the same kind of care — no one gets a flu shot at Walgreens *and* from the doctor’s office, just because both are available.  What we sometimes think of as ‘scattershot’, really is not.  A patient will reliably avoid excess poking and prodding, and given multiple choices for receiving routine care, will usually pick the one most suited to his situation.

On the topic of routine care, we should go ahead and acknowledge that some elements of well-care are most important as compensation for poor behavior.  A good health care system will combat these problems at the source.  In other words, a good health care system might involve making it possible for kids to walk to school and play outside more.

–> No no! I am *not* suggesting the Department of Transportation become an office of a National Health Bureau!  What I am suggesting is that ‘health care reform’ is much more than creating a national insurance program.  By their nature, the nations’ health concerns need to be attacked from multiple angles.  One element of managing routine health care costs is to be looking for ways to reduce the need for preventative care.

Try not to squirm as I observe: we should not overlook our nation’s moral climate when trying to find ways to reduce health care costs.   I don’t say leave people hanging out to dry because of their past mistakes; but by all means, do help avert disaster and instruct on avoiding more problems in the future.  A legitimate part of routine care is education and assistance in adopting healthy behaviors.

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After all this attacking of health care costs from without and within, we are still left us with some routine well-care that is useful and well worth our while.  Having acknowledged that your list of the right and good may be different from mine, assume for the rest of this article that when I talk about ‘routine care’ I am referring to those well-care practices that you happen to think are money well spent.  Here are some observations specifically about the nature of these types of costs:

The payoff is not immediate. Break your leg, and you have no doubt that the services of a good bonesetter are well worth your while.  Spending $120 for your physician to tell you your toddler looks normal?  Might make you feel good, but when money is tight, you are going to be tempted to just look around at the local playgroup and be content your kid looks okay and seems normal enough.  If you haven’t dropped dead yet, what’s another month or two before going in for that physical . . .

. . . And frankly, most people who go in for routine care didn’t end up “needing it”.   For every baby saved from disaster by a routine a well-visit, there are plenty that could have skipped the appointment and been the none the worse.  At the height of the polio epidemics, most people managed just fine without the vaccine.  Trouble is, if you’re the one who did need the care, you would have been sunk without it.

–> So when we look at the benefits of routine care, we have to acknowledge that we are checking all in the hope of saving some.  Well worth it.  As a result, we have to overcome our natural stinginess — towards ourselves and towards others.

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Currently, there are three ways to pay for well-care in the United States.  One is to have the care paid for by an employer-sponsored health care plan.  The second is to qualify for a government-run program.  The third is to pay for it yourself (or persuade a loving friend or relative to pay it for you).  Each of these is valid.

Employers have a legitimate interest in ensuring employees and their dependents receive routine care.  The expense up front can pay for itself by saved sick days and avoiding more expensive treatments down the road.  It is not unreasonable to continue to allow employers to subsidize health care costs.

The government likewise benefits from a healthy populace, for the same reason.  Healthy citizens are productive citizens who can contribute to wider society.  Two obvious cautions:

1) The US government does not have a perfect track record in its management of other efforts.  We would be unwise to assume it will be able to manage a national health care system any better than it can manage any other department.

2) As with employers, the utilitarian interest is limited.  The government benefits greatly from cultivating intelligent, hard-working, highly-capable individuals.  There is a temptation to limit care only to those who show promise, and discretely push aside those who don’t offer sufficient promise for future contributions.   The current rate of abortion for children diagnosed with Down Syndrome is telling.  There is already a strong tendency in our country to consider life itself as really only appropriate for those who offer the rest of us more perceived “benefit” than cost.  There is no reason to think that government-run health care will be anything other than a reflection of wider society’s values.

Individuals and their immediate relations are the obvious primary beneficiaries of routine care.  Well it is reasonable for the government or employers to fund routine care when individuals might otherwise neglect it, the cost of routine care properly belongs to the individual. The most effective health care system, in my opinion, will help individuals make wise decisions on which routine care is needed, and provide a convenient means of setting aside funding for that care.

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What about Insurance?

Health “insurance” for routine care is a misnomer.  There is no ‘insurance’ to it.  Insurance is the pooling of risk.  I pay homeowner’s insurance so that in the unlikely event that my house catches fire, I can benefit from the my neighbors’ contributions to the insurance program,  and thus receive money to rebuild my home.  With true insurance, all participants contribute a share of the cost of one person’s disaster.  If I’m lucky, I’ve ‘thrown my money away’ — I’ll never collect.  If I’m unlucky, I can be rescued from an emergency I never could have saved for on my own.

Routine care, in contrast, is an expected cost.   It’s not a question of ‘whether I will want a tetanus shot’.  I want one.  Someone has to pay for it.  Likewise there is no magical cost savings by having 100% of newborn babies get their well-visits paid for by the insurance company.  In a perfectly run nationalized health care system, the cost of routine care is exactly the same as if each of us just paid out of our own pocket.

In the case of routine care, all that an insurance program does is act as a middle man.  Now there can be benefits to middle men.  My insurance program (Blue Cross Blue Shield) regularly pays a lower rate than the retail price on my medical bills.  Even when my insurance “doesn’t cover” a particular service, I only have to pay the ‘negotiated rate’, effectively cutting my cost in half over the list price.  Kind of a Sam’s Club for health care.

–> To the extent that an insurance program is providing an effective tool for matching health care consumers and providers, it is a worthy organization.  Just like your local grocery stores is ‘merely a middleman’ that makes it a lot easier and more efficient to feed your family.  But insurance is no more the means of getting health care than the grocery store produces food.

Now one advantage of an insurance program is that it forces you to set aside the cash.  If you are a poor saver, purchasing an insurance policy that bundles routine care with your other health care needs is a way of tricking yourself into saving for routine care. Indeed, the company selling you an insurance policy for non-routine care has an interest in motivating you through low co-pays to get to the doctor early and often, in the hopes of warding off a more expensive condition down the road.  Kind of like your home insurance company benefits if you install a sprinkler system (to put out house fires), and replace that old wiring before it catches fire.

–> But all the same, the routine care you need is not an insurable risk, it is a regularly scheduled expense.  For this reason, if ordinary workers cannot afford to pay routine medical costs out of pocket, the problem lies elsewhere than a lack of insurance.  Maybe costs are too high.  Maybe the workers aren’t earning a living wage.  Maybe workers are lousy at managing their money.  Insurance programs may or may not turn out to be the easiest way to compensate for the underlying problem.  But lack of “insurance” coverage for routine care is not, in itself, the problem, and more than lack of food insurance is the reason people are malnourished, or lack of clothing insurance is the reason I dress so shoddily.

Keep in mind: There will always be people who cannot pay their ordinary expenses.  People who cannot, for whatever reason, pay their own food and housing bills, likewise will need assistance paying for even routine preventative medical care.  “The poor will always be with us” and all that.   We should distinguish these ought-to-be-exceptional cases from the needs of ordinary citizens.   There is a place for soup kitchens and food stamps; there is a place for charitable health clinics and health-care stamps.  But we shouldn’t therefore assume that the whole country needs to sign up for charitable relief.

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All that rambling to summarize just a few points:

Routine Care costs can be reduced, but not eliminated. We will get a lot of bang for our health care efforts by working to find ways to reduce our need for routine care, and to delivery efficiently what care is needed.

Routine Care costs go to 100% of citizens. By its definition.  There is no risk to be pooled. What we think of as “insurance coverage” for routine care is actually just a means of either forcing ourselves to pay for the care, or getting someone else to pay for it instead.

There are multiple beneficiaries to routine care. The primary beneficiary is the individual receiving the care, and a just health care system makes makes it simple and convenient for the individual to access affordable routine care.  But there are times in places when others benefit, and it is reasonable to allow those others to pay for that care.

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So what do I think about “Insurance” Programs for routine care? I think they have their place, as part of a multi-faceted approach to providing health care.  But we should recognize them for what they are — savings plans, middle men, and cost-shifters.  We should consider whether other changes that facilitate individual health-care savings would be more effective.

And what do I think is the number one thing-we-haven’t-tried-yet that is worth exploring? Price lists.  Publicly posted.  Not just the ‘list price’ but the agreed-on prices for different classes of consumers.  I think we kid ourselves about ‘managing health care costs’ when virtually nobody even knows what those costs really are.