Saturday, July 14, 2007

Health Insurance Limitations

Someone remarked the other day that if not for the war in Iraq, health care would be topic number one in the presidential race. That might well be true.

How will we devise a system to stop insurance from creating unlimited demand for health care services, creating a non-ending escalation of costs? Somehow we will have to give consumers incentive to limit their demand for services. This is tough, because when you are sick, or a loved one is sick, it is really tough to say that you cannot get treated.

Yet this has been the norm in all other important areas, such as housing, education, transportation, and food. Prices in these cases serve their normal role of inducing people to make choices to go without certain services, or at least to choose lower cost services. Many people routinely choose cheaper schools for their children, less expensive and less safe cars for themselves, and take jobs that are riskier to life and limb but pay more (e.g., fire fighters). Also, throughout history, unlimited health care has not been the norm.

Other countries are to a great extent using some kind of nonprice rationing such as waiting for service. In the US today, we have some rationing due to geography: living close to a major medical center will get you more, and more expensive, health care.

I have always felt that a part of the answer will lie in medical insurance being differentiated by degree of coverage. Some plans will not cover certain services, such as expensive transplants, or will at least have high co-pays for certain services, such as mental health.

The new Massachusetts regime requiring everyone to have medical insurance is moving in this direction. The Blue Cross Blue Shield website for the state lists several different plans at different prices and with different coverages.

What I was not able to find in the online descriptions of the plans is a key feature: lifetime maximum benefit. I think this will be critical. There should be some plans that are cheaper but have lower lifetime maximums, or in some way put a limit on what will be covered in certain situations (heart transplant, long term hospital stays, hip transplants past a certain age, etc). It is interesting that the lifetime maximum is not prominent in the plan descriptions -- indeed it is hidden. I am pretty sure there are lifetime maximums, and that they differ across plans. What will BS BS do with patients who hit that max and still want more coverage? Will our dear friend M. Moore have yet more fodder for another movie?


Michael Savitz, Bridge '06 said...

Dr. Hansen,

I read this in the New Yorker and thought of you.

Aesop's Fables

The Hawk and the Mouse

A clever mouse is sunning himself in Battery Park, when a hawk swoops down and seizes him in her talons. Whistling through the air, the mouse warns the hawk not to eat him. “Why shouldn’t I?” says the hawk. “Don’t you know,” says the mouse, “that mice are loaded with trans fats?” Alarmed, the hawk releases the mouse and flies away. Several days later, the hawk happens upon an old owl devouring a less fortunate mouse. “Stop!” cries the hawk. “Don’t you know those things are loaded with trans fats?” The owl stops eating and says, “What are you, an idiot?”

Moral: You just can’t argue with libertarians.

Dyanne said...

Good words.