Sunday, September 16, 2007

Health Care Costs

You Get The Analogy, Right?

It seems that no matter how many people complain about it, how complete agreement is that the system is broken or how expensive the whole shooting match becomes, nothing ever changes. Costs continue to outstrip inflation, often growing as much as 15% per year in order just to keep benefits to employees flat.

We're starting to look at trying the new HSA plan going into next year, offering as it does an alternative way of doing the same thing, namely covering employees health needs and contributing to the coverage of dependents. However, I'm sceptical that it will ultimately be much different from what we have today. The theory seems to be that by having employers pay a per-employee deductible amount into a self-managed account and paying less to the health care provider because the deductible on their plan is now that much higher, will somehow reduce the overall costs seen across the whole system. I remain sceptical because, at least in the plan details we've seen, the other shift is that drug costs are fully covered once you get past the deductible amount. Get past that initial deductible amount, therefore, and costs to the emplyee actually drop compared with the present scheme.

In order for this to work out to everyone's benefit, therefore, depends upon a lot of actuarial data showing how employees treat health care provision and what affects the decisions they make about what expenses to take, when. Fair enough, at least historically this may well be a good predictor, but the challenge is that even small changes in the plan can cause unknown - and unexpected - shifts in behaviour, changing the whole premise on whihc this scheme is based.

Prediction time: in two years, these new HSA things will look a lot like the existing plans and any real price or benefit differential will be lost.

Further tackling the demand side is pretty much pointless at this point. Instead, a mechanism is required to better control the often wasteful consumption of health care resources on the supply side, putting doctors back in control of the diagnostic process without operating under the continual fear of being sued. In addition, the ability of drug companies to literally drive consumers into demanding the latest TV-advertised drugs, medically justifiable or not, should be outlawed. Simple changes; big rewards.

But don't hold your breath. Following Hilliary's disastrous attempt at health care reform during the early years of Clinton's reign, politicians of all flavours treat this as a potato(e) too hot to handle. Expect, therefore, platitudes a plenty over the next year, but no action whatsoever.

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