[Article] Catastrophic Health Insurance

[Wraith]

Discussion of health insurance has shown up on this forum again recently, specifically in regards to US government policy and social benefits. Mostly people are divided into two camps, those who think that the government should pay all health benefits for everyone, damn the costs, and those who think that the costs for such a plan are too high, damn the benefits.

Population vs. Uninsured numbers. Source: US Census Bureau

If I can be forgiven for using the dirty ‘c’ word, I’d like to propose a compromise that has not seen much play around here. Instead of pushing for full government coverage for everyone, why not try for government funded catastrophic health insurance for everyone?

In case anyone doesn’t know, catastrophic health insurance is a type of plan that has a very high annual deductible, but covers everything or nearly everything after that. The plan holder is responsible for the first bunch of costs accrued in a year, and then the insurance provider takes over payment. Essentially, it only covers serious medical problems, and doesn’t do really anything for the day-to-day ailments.

Such a plan would seem to meet most of the stated requirements for both camps. For those who oppose government run healthcare, a government catastrophic insurance plan would have much lower costs, and would not significantly increase the demands on our already overburdened health system. Because the government insurance doesn’t kick in until costs are already high, people won’t be running to their doctor for free full body MRIs every time they get a case of the sniffles; people still have a financial motivator to remain responsible about their utilization of health care resources. We’ll get to keep what motivators we have for the health care providers to compete on costs and services. We’re at greatly reduced risks of facing health care rationing. Such a plan would also not cost nearly as much as a full coverage government plan – the actual amount depending on where we set the point for government payments to kick in, of course.

Health care costs. Many of these costs would likely increase with a full public option. Source: The Economist

For those who supported government run healthcare, you also get most of what you want. It’s going to be a lot harder to go bankrupt from medical bills even when uninsured, since the government will take over payment after a certain point. Additionally, since the government is covering costs after a certain point, private insurers have a known limit to how much they could possibly have to pay out in a given year, which will help drive private insurance costs way down for everybody. It’ll be a lot cheaper and easier to get insurance to cover everything before the government pay out kicks in.

I’m sure there’ll be resistance to that idea, since neither side gets everything they want. This is still another expense for the government, and it still means an expansion of the bureaucracy. People will still have to plan for some of their own health expenses in some way, and the private insurance industry will survive. However, a plan like this would get everyone almost all of what they want – much lower individual costs at a societal cost not too much higher. Beyond an unwillingness to ever do anything as uncomfortable as compromising with one’s ideological adversaries, is there any reason this doesn’t bear further pursuit?

[wiggin]

I've suggested pushing a private version of this for some time - they're called HDHP plans in the US. Coupled with an HSA (which allows you to roll over tax-free money earmarked for healthcare from year to year), it allows for people to economize on their own healthcare and keep premiums very low, since rarely does the deductible get breached. It's a nice idea, but there are a few problems:

First off, this somewhat addresses the access problem, but not very much. Poor people still won't be able to afford the deductible so they're up a creek, unless we give them X dollars to spend on healthcare in an income-determined manner (not the worst idea). A much bigger problem is that this incentivizes people to skimp on preventative care (since they have to pay for 100% of it) and just wait until things get really bad, after which most of the bill is picked up by the government. You'd have to structure the system in such a way so that preventative care (well child checkups, OB/GYN exams, annual physicals, etc.) is essentially exempted from the deductible and the government picks up the tab on that as well. Once you've done that, you're really funding the vast majority of medical procedures - both the preventative stuff and the big ticket items (and, for poor people, everything in between), which begs the question: why bother having private insurance at all for the small slice that remains?

Realistically, the cost issue isn't going to be primarily addressed by causing consumers to adopt economizing behavior (though it will certainly help). The big savings are going to be found through changing the incentive structure for providers, essentially eliminating the fee-for-service model. Throw in some administrative savings and tort reform, and you're probably starting to get somewhere.

Access can be addressed a lot of ways, but your method will only help on the extreme end (i.e. the medical bankruptcy kind of stuff), but won't address the real problems: day-to-day access to medical care to keep our poor population relatively healthy. I have a lot of friends working in ERs and clinics in Baltimore city, and a huge proportion of the people they see have problems that could be more easily and more cheaply dealt with by having decent (and cheap) primary care available to them.

To be honest, I've always felt the cost issue was the bigger problem. If costs can be brought down, access will automatically improve as more people can afford care. Fixing some idiosyncrasies with insurance companies and changing the way Medicaid works would probably help plug most of the remaining gaps.

[Wraith]

I've suggested pushing a private version of this for some time - they're called HDHP plans in the US. Coupled with an HSA (which allows you to roll over tax-free money earmarked for healthcare from year to year), it allows for people to economize on their own healthcare and keep premiums very low, since rarely does the deductible get breached. It's a nice idea, but there are a few problems:

First off, this somewhat addresses the access problem, but not very much. Poor people still won't be able to afford the deductible so they're up a creek, unless we give them X dollars to spend on healthcare in an income-determined manner (not the worst idea).

This is true for private catastrophic insurance, but with the liability caps that a government provided plan would cause, and the reality that the cost will be primarily borne by the wealthier, this should significantly lower the cost of getting private insurance, and help the access problem a lot. How much depends on where exactly we stick the point where government payment kicks in. It won't completely solve the problem, you'll probably still be able to find people who can't/won't get insurance to cover the remainder, but it will help.

To be honest, I've always felt the cost issue was the bigger problem. If costs can be brought down, access will automatically improve as more people can afford care. Fixing some idiosyncrasies with insurance companies and changing the way Medicaid works would probably help plug most of the remaining gaps.

Admittedly, this plan does nothing to really help the cost issue. The main point of it is that it solves some of the problems without making the cost issue significantly worse, which is something that a full coverage government plan can't do. There are still other things that should be done, like tort reform and some of the other things you suggested.

[wiggin]

This is true for private catastrophic insurance, but with the liability caps that a government provided plan would cause, and the reality that the cost will be primarily borne by the wealthier, this should significantly lower the cost of getting private insurance, and help the access problem a lot. How much depends on where exactly we stick the point where government payment kicks in. It won't completely solve the problem, you'll probably still be able to find people who can't/won't get insurance to cover the remainder, but it will help.

I think you're assuming our poorest will buy insurance if the premiums drop enough. I doubt this is the case, but in general I get the point - some people on the edge will be able to afford 'gap' insurance who wouldn't have been able to beforehand.

Admittedly, this plan does nothing to really help the cost issue. The main point of it is that it solves some of the problems without making the cost issue significantly worse, which is something that a full coverage government plan can't do. There are still other things that should be done, like tort reform and some of the other things you suggested.

Honestly, cost is the bigger problem - as you yourself mention, as costs go down for the individual, access improves. Yet neither Democratic nor Republican issues address this - Democrats improve access, while Republicans reduce the public cost but do little for overall healthcare spending. I think getting rid of fee-for-service is by far the best thing we can do to improve cost and access - with the added benefit that an integrated care system would further reduce some waste. This is doable under any number of insurance structures, so I'm not really opposed to your idea; I just don't think it will significantly solve our main problems. It's a good start, though.

[Flixy]

Why don't you guys have GPs as a sort of triage? E.g. before people get unnecessary scans as mentioned in the OP, a short visit to the GP. A lot cheaper, and they can refer to the hospital if needed. Over here you can't really show up at the hospital or ER without a referral from a GP. Plus, they don't get paid more if you use more scans, so there's no bad incentives there. And they can directly prescribe drugs to treat 'small' things, without using the more expensive ER. And because GP visits are always fully deductable (though what they prescribe is not always), visiting the GP has a low threshold so preventive care is not obstructed.

[Loki]

But that means far more visits to the GP (many of them unnecessary)...

[wiggin]

Why don't you guys have GPs as a sort of triage? E.g. before people get unnecessary scans as mentioned in the OP, a short visit to the GP. A lot cheaper, and they can refer to the hospital if needed. Over here you can't really show up at the hospital or ER without a referral from a GP. Plus, they don't get paid more if you use more scans, so there's no bad incentives there. And they can directly prescribe drugs to treat 'small' things, without using the more expensive ER. And because GP visits are always fully deductable (though what they prescribe is not always), visiting the GP has a low threshold so preventive care is not obstructed.

The way Medicaid works (that's government provided healthcare for the poor), emergency room visits are often covered, but routine visits to a GP/PCP are not.

In most private insurance schemes, you have to go through your primary care physician before getting other treatment/diagnostics (or at the least you need a referral from them to go to a specialist). ER visits, of course, are covered either way in that they are emergencies (are you sure you can't show up at the ER without a referral in NL? Seems odd).

Also, you're making an assumption there about PCPs not getting paid more for added services/testing. A number of PCPs get a chunk of any lab/etc. testing they do, especially if they have on-site facilities to do it. Obviously not the case for the bigger procedures like MRIs, though. Furthermore, there's normally some sort of copay or coinsurance associated with a PCP visit in the US.

[Wraith]

Why don't you guys have GPs as a sort of triage? E.g. before people get unnecessary scans as mentioned in the OP, a short visit to the GP. A lot cheaper, and they can refer to the hospital if needed. Over here you can't really show up at the hospital or ER without a referral from a GP. Plus, they don't get paid more if you use more scans, so there's no bad incentives there. And they can directly prescribe drugs to treat 'small' things, without using the more expensive ER. And because GP visits are always fully deductable (though what they prescribe is not always), visiting the GP has a low threshold so preventive care is not obstructed.

GPs are often pushovers since people will doctor shop if they don't get what they want, and malpractice is a threat constantly looming over them. If they start asking for unneccesary tests, they'll probably get them. The doctor who denies them risks getting their ass sued for malpractice if there's any sort of problem that a lawyer can convince a judge the unneccesary tests could have found. Doctors denying patients unneccesary tests is high consequence, no reward for the doctors involved. Tort reform would help this out by lowering the consequences.

[Flixy]

But that means far more visits to the GP (many of them unnecessary)...

As much as you have too many unnecessary ER and specialist visits, and GPs are cheaper (and better suited for that role).

The way Medicaid works (that's government provided healthcare for the poor), emergency room visits are often covered, but routine visits to a GP/PCP are not.

In most private insurance schemes, you have to go through your primary care physician before getting other treatment/diagnostics (or at the least you need a referral from them to go to a specialist). ER visits, of course, are covered either way in that they are emergencies (are you sure you can't show up at the ER without a referral in NL? Seems odd).

Also, you're making an assumption there about PCPs not getting paid more for added services/testing. A number of PCPs get a chunk of any lab/etc. testing they do, especially if they have on-site facilities to do it. Obviously not the case for the bigger procedures like MRIs, though. Furthermore, there's normally some sort of copay or coinsurance associated with a PCP visit in the US.

Regarding PCPs (odd term, makes me think of the drugs ), I was talking about the Dutch situation. And I'm not exactly sure about the situation with ERs and GP referrals, but it's at least recommended to call a GP before coming to the ER, or outside office hours to call a general GP post. ERs are for 'immediate specialist medical treatment', and for things like 'small accidents, or complaints like pain or fever' you're supposed to call your GP or the GP post.

GPs are often pushovers since people will doctor shop if they don't get what they want, and malpractice is a threat constantly looming over them. If they start asking for unneccesary tests, they'll probably get them. The doctor who denies them risks getting their ass sued for malpractice if there's any sort of problem that a lawyer can convince a judge the unneccesary tests could have found. Doctors denying patients unneccesary tests is high consequence, no reward for the doctors involved. Tort reform would help this out by lowering the consequences.

Triage is pretty much undermined if you still give patients what they want instead of what they need...

[Loki]

As much as you have too many unnecessary ER and specialist visits, and GPs are cheaper (and better suited for that role).

We're talking about a vastly different scale here. Every single person who wants to visit a specialist would need an extra doctor's visit, every day they need to see that specialist...

[Flixy]

Only for the first referral, obviously, after that you make new appointments. How does it work now in the US, people call specialists directly to get an appointment for a vague complaint without any referral?

[Loki]

It depends on the insurance plan.

[Flixy]

Wiggin mentioned private insurance tend to require a referral from a GP, so that should tell you that it's probably cheaper, them being capitalist companies and all.

[Loki]

I've seen both alternatives. And the healthcare industry here is about as free market as China's.

[Aimless]

Every single person who wants to visit a specialist would need an extra doctor's visit, every day they need to see that specialist...

[Aimless]

Btw Flixy PCPs seem to be even more influenced by the fee-for-service model than hospital specialists. Moreover, they can at times score sweet deals like getting a commission for every patient they refer, or get a cut of the profits generated by referring them to a particular hospital. It's sneaky

[Khendraja'aro]

Catastrophic health insurance has the problem that it does not cover preventative measures. People will still wait until they absolutely have to go to the doctor - at which point it may be either too late or more expensive. Or both.

It may get rid of bankruptcy. It won't increase general health in any way. In short: It's a bandaid which tries to cover up the real problem. It only adresses an effect, not the actual cause.

We're talking about a vastly different scale here. Every single person who wants to visit a specialist would need an extra doctor's visit, every day they need to see that specialist...

Totally unrealistic notion.

[earthJoker]

But that means far more visits to the GP (many of them unnecessary)...

Seems you calculate better than my insurance company. Since I switched to an insurance plan where I always visit my GP fists (for each illness not for each treatment!) I have to pay over CHF 50 less per month. On a second though, I think my insurance company has several employees that are highly paid to do this calculation, so I think they might be right.

[Steely Glint]

I'd like to challenge the idea that, if not sternly held in check, people will be constantly at the doctors/hospital wanting all kinds of expensive and random tests. My experience has always been that people usually need to be pushed by those around them to go to the doctor even when they quite clearly are sick. It's not like having an MMR or visiting a your GP is some kind of thrilling experience people would want to go through just for the hell of it.

[Loki]

You have a different mentality in Britain. You are grateful for receiving service, believing that you're being done a favor (since it's "free"). Americans think they're customers and want as much attention as possible.

[Nessus]

You have a different mentality in Britain. You are grateful for receiving service, believing that you're being done a favor (since it's "free"). Americans think they're customers and want as much attention as possible.

I like how the perceived mentalities are implicitly graded here.

[GGT]

Catastrophic health insurance has the problem that it does not cover preventative measures. People will still wait until they absolutely have to go to the doctor - at which point it may be either too late or more expensive. Or both.

It may get rid of bankruptcy. It won't increase general health in any way. In short: It's a bandaid which tries to cover up the real problem. It only adresses an effect, not the actual cause.

Very true. Having government subsidies for catastrophic care insurance would only work if costs of primary care (GP visits) were reduced and steadied. Right now there are too many special and/or large groups getting low rates/distorted rates/co-pays from their employers, who have preferential group bargaining powers with insurers. Covering office visits.

Physicians are participating in this scheme. They are now partners in PPOs owned by insurance groups, and know how to code visits according to the carrier or payer for highest reimbursement. Fee for service is killing the system.

Case in point: a child seeing a pediatrician for extensive poison oak. Using an insurance plan with a co-pay of $15.00 (for every visit, regardless of difficulty level) MD codes it "Extensive" and charges the carrier $117.00. He may be reimbursed 80%-100% of that, plus the $15.00 cash. Contact Dermatitis, but he listens to the heart and lungs and chats a while. Evaluation takes 5 minutes, he charges for 15 minutes, and checks off "extensive" for using his stethoscope.

If arriving as self-pay/non-insured he could have coded it basic or nominal @ $35.00, intermediate @ $80.00, extensive @ $117.00. Not many people would pay $117.00 cash out-of-pocket for a 5/15 minute visit for poison oak, but apparently some insurance carriers will.

[LittleFuzzy]

It may get rid of bankruptcy. It won't increase general health in any way. In short: It's a bandaid which tries to cover up the real problem. It only adresses an effect, not the actual cause.

Which makes sense since it's a compromise between two opposing political pushes which are themselves bandaids trying to cover up the real problem.

[wiggin]

Only for the first referral, obviously, after that you make new appointments. How does it work now in the US, people call specialists directly to get an appointment for a vague complaint without any referral?

As Loki mentioned, it depends. Many plans require a referral, but some allow you to go directly to a specialist. This isn't so unreasonable - if you need to see a dermatologist, it's not rocket science to figure that out, and you're wasting everyone's time and money by going to a PCP first. Ditto for a number of other complaints. That being said, the PCP 'gatekeeper' can be very useful to explore earlier parts of the differential diagnosis tree before going to a specialist for a more complex (or unclear) complaint.

Btw Flixy PCPs seem to be even more influenced by the fee-for-service model than hospital specialists. Moreover, they can at times score sweet deals like getting a commission for every patient they refer, or get a cut of the profits generated by referring them to a particular hospital. It's sneaky

I'm not sure that's a fair statement to make. Sometimes this is true, and sometimes it's not. Furthermore, hospital specialists can range anywhere from salaried employees to private businessmen effectively paying 'rent' to the hospital. The former obviously have little incentive to push for unnecessary services (though I know a number of physicians in this position who are pushed to see more patients, at least, though not directly to bill more services per patient), while the latter have every incentive to do so.

Clearly fee-for-service is part of the problem, but I don't want to lay blanket blame on doctors or other healthcare providers, either.

I'd like to challenge the idea that, if not sternly held in check, people will be constantly at the doctors/hospital wanting all kinds of expensive and random tests. My experience has always been that people usually need to be pushed by those around them to go to the doctor even when they quite clearly are sick. It's not like having an MMR or visiting a your GP is some kind of thrilling experience people would want to go through just for the hell of it.

I understand what you're saying, but the fact of the matter is that they've found that healthcare utilization does drop when people have a stake in how much they use (i.e. they have to part with their own money for added services). I don't know if it should be considered 'overutilization' in that people won't necessarily go to the doctor for utterly spurious reasons, but it is definitely not a classic case of supply and demand - since people 100% covered by insurance have no price pressures, they have more demand than you'd get at equilibrium in a normal pricing scheme.

The marginal 'returns' in health utility for the patient for that last bit of healthcare is far lower than for services at the equilibrium levels, which means we end up with waste in the system.

There might be cultural differences as well, but I can't speak to them.

[Flixy]

As Loki mentioned, it depends. Many plans require a referral, but some allow you to go directly to a specialist. This isn't so unreasonable - if you need to see a dermatologist, it's not rocket science to figure that out, and you're wasting everyone's time and money by going to a PCP first. Ditto for a number of other complaints. That being said, the PCP 'gatekeeper' can be very useful to explore earlier parts of the differential diagnosis tree before going to a specialist for a more complex (or unclear) complaint.

Isn't it? If people go to the dermatologist for every standard rash or athlete's foot, that's unnecessary too, and wasting everyone's time and money, the GP can also prescribe something for that.

[wiggin]

Isn't it? If people go to the dermatologist for every standard rash or athlete's foot, that's unnecessary too, and wasting everyone's time and money, the GP can also prescribe something for that.

Yes, but I seriously doubt most people would do that. People are more likely to use an OTC treatment rather than either, and if it's bad enough there's a good chance they know their PCP can't help. Obviously this is only true for some cases and some specialties, but it is a reality. I don't know if that makes it worth it to allow sidestepping the PCP entirely, but it's a valid concern.

[Flixy]

Yes, but I seriously doubt most people would do that.

I don't share your faith in that. The small minority that could directly go to a specialist for sure is probably outweighed by the amount of unnecessary specialist visits.

[GGT]

It would help patients if they could access information that helps them triage for themselves. When to call a dermatologist or podiatrist directly, without wasting a GP's time and charges. Whether it's a web site or a phone bank.

If you want a complete skin-mapping and removal of pre-cancerous lesions, that's best done by a dermatologist. If you have an ingrown toenail or are a diabetic with foot issues, a GP would refer you to a podiatrist anyway. But it's often difficult for patients to know where to start, so they end up calling their insurance company first.

*About the diagnostic "tree"---many insurance plans (especially those covering children) mandate using the PCP first, no matter what. Their goal is twofold: eliminate higher costs from unnecessary specialist care, and to keep the reimbursement "tree" within the same preferred network.

[Illusions]

A startlingly large number of Americans think because they're customers and want as much attention as possible that they are entitled to as much of the best care possible, for as little as they believe said service or product should cost.

FTFY

I like how the perceived mentalities are implicitly graded here.

When I worked for a doctors office, we had one occurrence where an old woman reached her cane over the service counter and attempted to hit the employee talking to them, because said employee was unable to give them more free samples of the medication they were on, because we were physically out of them. I mean, how dare we keep her from her medication, and how dare we not have enough free samples?

[Steely Glint]

You have a different mentality in Britain. You are grateful for receiving service, believing that you're being done a favor (since it's "free"). Americans think they're customers and want as much attention as possible.

Yeah, well, maybe that's because they are paying customers? And since the system seems to be out of screw them for as much money as possible in exchange for as little service as possible, it makes a lot of sense for them to push the other way. Doesn't mean the same behavior would still persist if the services suddenly became free any time you needed it.

Not that it matters. If I marched into my GP's tomorrow demanding an MMR they'd tell me to get stuffed. You get these things if the doctor thinks you actually need them.