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Cathy Schoen, Sara R. Collins, Jennifer L. Kriss, and Michelle M. Doty How Many Are Underinsured? Trends Among U.S. Adults, 2003 And 2007 Health Affairs, July/August 2008; 27(4): w298-w309. [Abstract] [Full Text] [PDF] [PBS Interview with Susan Dentzer & Cathy Schoen] [Reprints & Permissions]

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High Deductible Plans: A New Benchmark

William R. Boyles   ( 11 June 2008 )

Another Trap For The Underinsured

Raymond Heimbecker   ( 12 June 2008 )

Just Another Attack on Consumer Empowerment

Greg Scandlen   ( 13 June 2008 )

The Burden of Health Insurance

John A. Nyman   ( 19 June 2008 )

High Deductible Plans: A New Benchmark 11 June 2008
William R. Boyles, Publisher Consumer Driven Market Report Send comment to journal: Re: High Deductible Plans: A New Benchmark consumerdriven{at}starpower.net William R. Boyles	I wish to commend the Commonwealth Fund on discovering the prevalence of "underinsurance" in U.S. health insurance markets in this new study. High-deductible plans have been growing in popularity since the mid-90s when the Blue Cross Blue Shield PPO option was first offered to federal workers in response to Medical Savings Accounts. To many people's surprise, the level of deductible selected by federal employees was significantly higher than believed possible, and a decade later millions now select higher out-of-pocket cost options, often as a necessity more than a choice due to the overpriced medical system under which we all suffer. The downside of this shift is that across a broader population, health benefits are indeed a hidden form of income transfer, so that plan designs that increase OOP costs do impact lower-income groups more. Therefore, the use of the Rand benchmark of 5% of income in the new Commonwealth study is an important public policy metric. Denying that the arrival of high-deductible plans causes a rise in risk for low-income populations is not wise, and companies selling the plans should acknowledge this fact. It would indeed be nice if this 5% threshold were used industrywide to red-flag the maximum acceptable level of deductible risk, such as using the metric in predictive modeling Web sites and financial risk data provided to consumers when they are selecting various deductible levels, or using the metric when employers ask plans for premium quotes. I doubt that will happen, but this study is a good start and provides a needed push in this direction.
Another Trap For The Underinsured 12 June 2008
Raymond Heimbecker, Airline Pilot Send comment to journal: Re: Another Trap For The Underinsured 320pilot{at}earthlink.net Raymond Heimbecker	One other way that individual policyholders can face large, out-of-pocket expenses can occur when a non-group insurer has not "contracted" with a local hospital. In a personal example, I discovered that I would likely be charged the full rack rates at my local hospital for a back surgery procedure I required. My private, nongroup insurer on the other hand would only cover "reasonable and customary charges" for this procedure. Rather than expose myself to considerable financial risk, I went to Montreal for a second opinion. There, at a world-class neurosurgery teaching hospital affiliated with McGill University, I was given a quote based simply on days of confinement. This Canadian hospital provided me with a written breakdown of all charges, in advance (something the U.S. hospital refused to do, even after I provided the Medicare codes), with only a separate fee for the neurosurgeon. My insurer agreed to pay in full all charges from this Canadian hospital, less my annual deductible. Best of all, I have had a full recovery and did not have to deal with collection letters or phone calls when the U.S. hospital would attempt to collect the "rack rates."
Just Another Attack on Consumer Empowerment 13 June 2008
Greg Scandlen, Director Consumers for Health Care Choices Send comment to journal: Re: Just Another Attack on Consumer Empowerment greg{at}chcchoices.org Greg Scandlen	A new article by Cathy Schoen and colleagues at the Commonwealth Fund is another direct attack on HSAs and all forms of consumer empowerment. The article tries to raise the “problem” of underinsurance to the same level of concern used for people with no insurance at all. It studies the trend from 2003 to 2007 and finds that deductibles are rising (horrors!). It says that the numbers of underinsured rose 60% from 2003, and that 42% of the under-65 population has either no insurance or “inadequate” insurance. They go on to break all this down by income group, race, gender, and all the other things you would expect. There is so much wrong with this study, it is hard to know where to start. I know! Let’s start with one of their most blatant distortions. They say, “The United States already stands out internationally for high per person out-of-pocket spending.” In fact, the United States has one of the lowest rates of out-of-pocket spending of all the OECD countries. According to the OECD, Americans spend only 13% of total national spending out of pocket, while the OECD average is 20%. Even Canadians spend more out of pocket than we do at 15%. See http://www.oecd.org/dataoecd/52/32/38976612.pdf Next let’s consider their definition of “underinsured.” They include anyone who spends 10% or more of their annual income on medical expenses, 5% for those at 200% of poverty or lower, and anyone who has a deductible equal to 5% of their income. There is no rationale for this standard, other than “it is the level most commonly used in studies of financial stress and studies of the underinsured.” They do not take into account premium payments or taxes devoted to health care. It is somehow not stressful to pay large amounts of one’s income on insurance premiums or taxes, but just awful to reduce those payments and pay cash for health care instead. It is curious as well that these authors confine their examination to the population under age 65, since their boss, Commonwealth Fund president Karen Davis, testified to Congress in 2001 that the average Medicare beneficiary pays 21.7% of their income on out-of-pocket medical expenses and she expected that to rise to 29.9% by 2025. If “underinsurance” is a problem, the most egregious offender is the Medicare program. But never mind all that. The sole purpose of this strange little exercise is to undermine the growing trend of consumers taking control of their own health care by taking control of the money they spend. Lower-income people obviously need additional assistance, but they will need that help whether they pay directly for services or indirectly for premiums.
The Burden of Health Insurance 19 June 2008
John A. Nyman, Professor University of Minnesota Send comment to journal: Re: The Burden of Health Insurance nyman001{at}umn.edu John A. Nyman	This study, summarized in Health Affairs, documented the large number of Americans who, although insured, faced health care bills that challenged their ability to pay. To many people, the idea behind insurance is to make certain that we have the additional resources necessary to pay for the care we need if we were to become ill. How did we in the U.S. come to adopt an insurance system that strays so far from its access function? The U.S. system is different from those of other countries (which better recognize this access function of insurance) because it reflects the theories that U.S. economists have been promoting since the late 1960s. Before this time, insurance theorists viewed health insurance as providing certainty of expenditures. Consumers, they reasoned, liked the certainty of paying a predictable premium year after year, rather than putting up with the uncertainty that some year, an illness would strike and they might be saddled with large health care bills that they were not expecting. During this period, health insurance generally was regarded as making consumers better off, even though the function of insurance in providing access to otherwise unaffordable care was largely ignored. In the late 1960s, however, theorists realized that once the insurance premium was paid, becoming insured was tantamount to health care becoming free. They worried that consumers who faced free health care would purchase more care than they needed, running up health care spending but not receiving much of a health benefit. This theory held that any additional health care consumed because of insurance was inefficient. This “moral hazard” was regarded as the major problem with health insurance. Indeed, studies based on this theory concluded that moral hazard was so prevalent that because of it, health insurance made consumers worse off. To turn this around, it was necessary to impose coinsurance rates and deductibles so that these costly but seemingly low-value health care purchases would not be made. One influential economist suggested that if consumers were forced to pay at least 67 percent of their health care bill, this would choke off enough spending to make health insurance beneficial. The current U.S. system, with its extensive use of cost sharing, is a product of this theory. What U.S. theorists did not recognize was that for many if not most medical procedures, only the ill respond to the low insurance prices. For example, what healthy consumer would purchase a coronary artery bypass graft procedure just because it was free? Because only the ill would respond to reductions of the prices of serious procedures, the price reduction is the vehicle by which insurance transfers income from those who purchase insurance and remain healthy, to those who purchase insurance and become ill. Any additional care purchased because of the income transfer (that is. brought about by the price reduction) is efficient. If the insurer had instead made a cash payment (equal in amount to the insurance expenditures), that ill person could spend on anything of his or her choosing, the importance of health probably would motivate the consumer to purchase much of the same health care as with regular insurance--especially the expensive, life-saving procedures that otherwise would be unaffordable. From a theoretical perspective, this means that this additional health care is efficient. The access that health insurance provides to additional efficient care is a benefit that those who recommend high coinsurance rates and deductibles for all care have overlooked. The Commonwealth Fund report shows the extent to which the U.S. insurance system has gone off course, by documenting the burden of health insurance to those who are, in all likelihood, seriously ill. Coinsurance and deductibles may eliminate some unnecessary care, and as the Commonwealth Report shows, cost sharing also appears to reduce the care of the ill and especially of the poor. But after these effects are accounted for, cost sharing ends up being primarily a burden on those who are so seriously ill that they are forced to make these additional payments in order to obtain the care they need. Why would we want an insurance system that is designed to impose a financial burden on those who are already burdened by a serious health problem? Instead of applying coinsurance and deductibles to all procedures and treatments across the board, cost sharing should be applied to reduce only the consumption of health care services that are deemed to be frivolous or discretionary, or otherwise not cost-effective. There is little reason to apply cost sharing to those cost-effective procedures that are often risky and almost always painful, and that only those who are seriously ill would ever choose to purchase.