Friday, July 24, 2009

One of the proposals is to, in effect, make people start buying their own health insurance in hopes that they "will be more sensitive to the price of care, more willing to shop around, and less willing to spend on unneeded treatments".

Great in theory, fantasy in real life.

There are three components to the costs of health insurance: the upfront premiums, the co-pay for treatment, and the extent to which heavy claims lead to an increase in the next year's premiums.

Looking at them in order:

The upfront premium could be an influence but only if the individual was able to choose from plans with sliding coverages. An individual could choose a plan without coverage for X or Y and, all other things being equal, the premiums would be less than if such coverage was included. So, in theory, an individual would balance coverage versus cost and could possibly choose a less expensive plan than what they're now receiving through their employer-provided coverage. But... why should anyone believe such plans with a reduced level of coverage would be available? Who thinks Congress (or the new health insurance commission) would allow plans without coverage, for example, abortions, maternity care or mental health care? They don't allow those plans now, employers have very little flexibility in picking a non-gold plated insurance plan, so why should we think that with all the money flowing to Congress from interest groups determined to retain such coverage, that Congress will do anything that is different from what they're doing now?

As for co-pays, individuals now have to decide whether they want to pay $20 or $50 or whatever in co-pays to go see a doctor for whatever is bothering them at the time... and they lay out the money anytime they are worried enough to justify in their minds the cost. So why assume that individuals would be any less likely to seek medical care, the dynamics are going to be the same: is it worth $20 to go to my doctor to find out if my cough is just a cough or a symptom of something more serious? I score this as no different whether I am getting coverage from my employer or buying it myself.

And as far as whether someone facing higher premiums would seek to minimize their doctor visits, this could work to lower health costs... but for the fact that Congress will never allow an insurance company to hit an individual for their heavy usage. Congress will insist that these individual plans are pooled together with millions of other individually purchased plans, with the net effect that each person's usage - whether heavy or light - will be offset by everybody else in the plan. There may be some benefit to someone who doesn't use the system and there may be some hit to someone who uses it a lot, but the changes will be nowhere near the actual impact of their usage. As a result, people would know that they're not going to pay a real price if they go to a doctor all the time just as people would know they wouldn't get much of a price break if they hold off... so they'd revert back to deciding to go or not go based on whether they thought the issue was severe enough to warrant spending the co-pay.

All in all, no difference between what is now going on and what will go on if Congress de-links insurance from employers.... so why bother?