High Deductibles & Patient Behaviors----Is There a Clear Benefit to the US Health Care System?

-----By Anna Shepherd, Health & Personal Finance Professional

As health care reform enters into its next year, many employees will notice that a side-effect of reform has made their employer shift a bigger portion of costs to them. Is that a good thing or a bad thing, in general?  See the linked article:  http://www.statesman.com/news/business/higher-health-insurance-deductibles-giving-workers/nhnB4/

It may depend on the employee or consumer himself and the motivations that cause human beings to do some things and avoid doing others. This high deductible scheme works ideally with an educated populace. I am a vociferous proponent of free market reforms in health care; certainly high deductible plans are step in the right direction. However, if there isn’t also an affordable intermediary such as a personal health-advisor, the result will inevitably be higher costs for more acute episodes. 

The old adage holds true that an ounce of prevention is worth a pound of cure.

Working in health care, it is sometimes difficult to remember that many people have little to no working knowledge of the industry or even basic human anatomy and health. I constantly have to remind myself that someone coming into my facility with a family member may know as much about healthcare as I know about carburetors! It will take time, possibly time this current system doesn’t have, for the patient population to become proactive and assume responsibility for knowledge of their health.

Maybe there is a bright side in that the younger, cash-strapped generation that demands information/services be accessible online and at low or no cost, can use sites like WebMD to avoid unnecessary trips to the doctor or ER. Over time, I’m optimistic that enough of a portion of the US population will invest the time to learn about their health needs and act as rational consumers, to provide a net gain to the system. The downside is that there is also a significant portion of the population who lack the ability to meaningfully use health resources by themselves. Further, this cohort is usually sicker and costlier to the system.

This brings me to my overall impression of the transition to high-deductible plans: it will ultimately be very burdensome to the system because there is effectively no market providing affordable and meaningful health consulting services to the populations that will most need them.  It will take too long to implement such services. Meanwhile those higher-risk people forego preventive services to save their money, costing the system more in the long run.

Anna is a health care and finance professional, working on the health care provider side in an administrative capacity. 

Overall Healthcare Spending Only Slated to Rise 7.5%

---Anna Shepherd, Health & Personal Finance Professional - Cambria Health Advisory Professionals


The following is an interesting press release of a recent research effort by the Health Research Institute of Price Waterhouse Cooper. It predicts 2013 healthcare spending based on recent trends and finds interestingly enough that overall spending is only slated to rise 7.5%. (Still above the posted rate for inflation, but not as bad as some had predicted.)  http://www.marketwatch.com/story/historically-low-growth-in-healthcare-spending-expected-in-2013-projects-pwc-health-research-institute-2012-05-31

The reasons for this slowed growth are quite heartening for the cause of business like Cambria Health Advisory Professionals, which holds as its mission the right of the individual to make his own health care decisions.  PWC’s article cites that in recent years, employers and industry professionals have made sincere efforts to reduce their own cost burdens; examples include such strategies as employees shouldering more of their medical costs, blockbuster drugs coming off patent, cost transparency, and employee participation in employer-sponsored wellness programs. Combined, this means that lowered costs could potentially be sustainable.

We continue to experience upward cost pressures stemming from the need for increased hiring and more sophisticated technology. With the baby-boom generation seeking retirement and getting ever-older, the healthcare industry is going to necessarily experience continued growth in costs due to greater utilization; the key will be assuring that resources are properly allocated (“not wasted”) to avoid negative impacts on the overall economy.

Certainly, Americans are demonstrating their interest in taking control over these decisions. For example, average enrollment in high deductible plans coupled with a Health Reimbursement Account has increased to 43.2 percent in 2012 from 34.2 percent in 2010.

The information showcased in this article represents, in my opinion, a great success for the free-market and individual decision-making. It legitimates a RAND study from the 1980’s that I frequently reference; the study demonstrated that people consume less health care when forced to pay higher co-pays. Numerous studies involving health savings accounts have corroborated what economists have always known: the more insulated people are from having to pay for something, the more of that thing they are willing to consume.

It seems to follow simple logic: if something is coming out of your pocket, you tend to pay attention. Obvious, right?

But allow me to make 2 additional points that this article brings to mind.

1. All of this progress can be undone if the Affordable Care Act is upheld as Constitutional. In our discussions on this blog, we try not to be too political in our commentary, but the fact remains that this piece of legislation is likely to fundamentally transform a sector of the economy that accounts for 17% of GDP. As employers unload employees onto government plans (which appears probable if recent polling is to be believed), the efficiency that we’ve seen when patients are accountable is likely to be erased. This was, and continues to be, my biggest objection to the legislation.
2. On a lighter note, if recent cost-controls keep pace, we’re on a better road. I believe that in addition to having consumption tied to the patient’s own wallet, the patient needs to be knowledgeable about their options and treatment courses. This will allow them to make more effective decisions, not simply financial ones. Instead of foregoing their yearly check-up just to save money, they may decide to forego an expensive drug and consider a generic instead. These types of informed trade-offs will add up for the industry as a whole as well as the individual patient.

The key may be helping the market find ways to create and attract more informed consumers who make more rational purchasing and health care usage decisions.

A Perspective on Waste in Healthcare: A Tale of Two Articles

---------By Anna Shepherd, Health and Personal Finance Professional

Two recent headlines tell a tale of two stories but offer me an opportunity to comment on a couple of interesting challenges we face in our health care system, across the country.

1. The first article lauds a $1.1 million federal grant awarded to a Berkeley clinic as part of the Affordable Care Act (http://www.mercurynews.com/breaking-news/ci_20713200/berkeley-clinic-lands-1-million-grant-educate-abouthttp://www.bellinghamherald.com/2012/05/23/2535431/feds-struggle-with-getting-elderly.html)  The funds were from a pool of $122 million in Health Care Innovation Awards given out recently to 26 recipients. The "Over 60 Health Clinic" of LifeLong Medical Care will hire 60 new employees as part of the grant. The goal? Educate patients and reduce costs associated with urgent care, while improving outcomes through the use of “Peer Educators”.
2. The second article (by Kaiser Health News) details the disappointing results of another federally funded program started in 2007: “Money Follows The Person” which anticipated saving significant Medicaid and assistance dollars, by moving elderly people out of nursing homes and back into community.  See (http://www.bellinghamherald.com/2012/05/23/2535431/feds-struggle-with-getting-elderly.html) 

The Berkeley clinic article seems to be an appropriate start to patient-based cost control. It cites that educating 750,000 patients about compliance and the nature of their disease could save the system $250 million. The cost of the program itself: $122 million. My immediate concerns have to do with the information available in the article and the nature of the problem itself.

This article doesn’t go into depth about what type of backgrounds the peer-educators have, which to me is really what the whole program hinges on. If these people are former clinicians, nurses, or medical psychologists, I could foresee a high success rate (though costly).  

However, if they are case workers, which is likely, I could see an outcome similar to the second article about the Money Follows the Person program; it has been promised $4 billion, received $1 billion, and performed it’s duties for 36% fewer people than promised.  

In California alone, the health agency responsible for implementation has to work with two dozen other local placement agencies and is finding the barriers significant. This is the type of waste endemic in trying to fix problems whose origins are misunderstood or even unattainable.  

I want to explore why these types of programs are ineffective. Is it just government bureaucracy run amok? Is the populace in question more at-risk than average, leading to skewed results? Are the advocates being employed the ones best-suited to help?  

The fact that much of the US population needs advice concerning their health is not in question; but who is providing it certainly is. Suggesting that former healthcare professionals need to be central to patient counseling is not intended to demean the role of social workers; they are a necessary resource to many who have limited options and means. However, I think that the people advising patients on issues of compliance and decision-making need to be steeped in the industry; someone who’s seen and treated it all can be an invaluable advocate.  

However, let it be clear that they must also be entirely uninvolved when it

comes to diagnosing or treating the patient once they turn the page on being a provider and become an advisor. Current payment schemes’ create inherent conflicts of interest for the provider and are certainly a contributor to waste and fraud. In my opinion, patients would also be much likelier to heed the words of an impartial professional, leading to increased success rates.

In regards to efficacy and cost of the counseling, the biggest obstacle remains patient involvement. Those who have self-selected to be involved in the Berkeley clinic have a higher likelihood of success and will make the program worthwhile (again, given appropriate counsel).  

The point of this whole website and subsequent venture (see Cambria Health Advisory Professionals at http://www.sharedhealthdecisions.com/ ) is about empowerment of the individual and illness prevention for patients within the private sector. In speaking with outsiders, I have been criticized for not understanding the plight of a poor or disabled patient and the needs they have when they are sick and on their own.  

I respond by saying that I do understand because I work personally with elderly patients on Medicaid. But empathy is not an effective solution, nor is more money or programs.  

What we believe is effective is to catch the individual well before they have entered the Medicare system. If someone is frequenting a health advisor in their 40’s, they can learn about all of their options before the hard decisions must be made and, more importantly, they can plan. Removing these proactive patients from the pool of those in need not only saves vast sums of money but also allows focus to be directed on the patients with a high likelihood of noncompliance or medical neediness, creating a win-win for all.

Waste Avoidance vs. Rationing: In the Eye of the Beholder

--By Anna Shepherd, Health & Personal Finance Professional

After musing over this must-read article written by Dr. Howard Brody, a few things come to mind. I absolutely agree that the type of waste the author describes is the elephant in the room that needs to be addressed before any realistic measures can be taken to rein in healthcare spending in the United States. 

See: Brody, Howard. “From an Ethics of Rationing to an Ethics of Waste Avoidance” NEJM 2012; 366:1949-1951. May 24, 2012. Taken from the URL: www.nejm.org/doi/full/10.1056/NEJMp1203365#t=article

But I also have a few points of contention that are not directly addressed with the article.

1. It’s obvious that in this environment, trimming the health care industry from 17% of GDP to a more manageable number, say 9%, is going to be unpopular from a policy standpoint due to the sheer size of the health care industry itself (read jobs). However, this would not be disastrous as the more efficient allocation of resources in a free market would be a net benefit in the long term. However, the political will can only exist if the electorate is also willing, a political rant I will forego right now.
2. It does bring me to my next point however; I think the author asks too much of the average physician without bringing in the most important component of the equation: the patient. Patient education is the only way to really solve the waste problem, in my opinion. Unfortunately, the path to an informed and enlightened patient takes time and effort. Physicians are already inundated with large numbers of patients, ever lower reimbursement rates, malpractice threats and the cost of practicing defensive medicine, not to mention the stresses of simply running a practice. I’m not a physician, nor an expert in these matters, but it seems naïve to me to expect physicians to take on this extra task. So, there must be a better way to get the patient to make better decisions and reduce wasted resources.
3. The final issue I have with the physician-driven nature of this article is a moral one. The decision to ‘ration’ cannot come from “without”. Because the rationing we are talking about is often going to involve foregoing costly procedures, we arrive at a very gray area in which the care-taking physician must try to be an objective advisor. They are far too financially involved, as the author mentions, in the outcomes of the patient’s decisions to truly be the trusted source for advice.

Posing questions about the ethics of rationing is a great place to start the conversation. And physicians are a crucial gate-keeping mechanism to avoid waste. But I think the author may be trying to solve a problem by creating a more complex system instead of the solution I see as painfully obvious throughout the health care system. It goes to a fundamental component of economic efficiency: a system is efficient if each actor is allowed to maximize their individual utility.

Simply put: the answers need to come from the patients themselves. We need to create an environment in which patients can seek the answers and information that allow them to make efficient decisions without feeling that care has been rationed away from them. They need to own the decision.

The Squeeze on State Budgets Means Health Care Reform (As Is) Is Infeasible

By Anna Shepherd, Health & Personal Finance Professional

The impetus for this post was the news of a small community in Washington losing state funding for health clinics due to budget problems. I think it typifies conditions throughout the country. States are already facing crippling budget crises that force them to seek federal monies to help pay for programs like Medicaid. When we consider the fact that health care spending is going to keep increasing (now at 17% of GDP—see WSJ article below) we can safely assume that states are not going to suddenly be able to pay more into Medicaid and related programs. So, the burden will fall to the Feds. However, at a time where we will inevitably (amidst much pandering to the contrary) have to raise the debt ceiling again, it only stands to reason that the money is simply not going to be there for a costly overhaul—on the state or Federal side.

Further recognition that the ACA legislation is not entirely feasible came today, as the Obama administration repealed an aspect of the bill due to start this year that includes end-of-life discussions in a regular physician appointment. When push came to shove, it wasn’t sensible and was repealed. Somehow, I think we’re going to be seeing a lot of that in the next few years. Unfortunately, it comes at a time when governmental action is a precious commodity. A gridlocked Congress already has too much on its plate just considering the budget; unraveling the labyrinth health care law seems like a Herculean effort. Nonetheless, I think we’re beginning to see a reality that was somehow not present last March.

So what’s the solution? Though it is my personal opinion that health care was passed without due diligence and if it had been proposed in segments over a longer term the sensible parts would have passed and the nonsense would have been left behind, we cannot turn back time. However, there are still actions to be taken. The first of them is a serious look at the Rivlin/Ryan proposal: people born after 1956 get a needs-based (adjusted for health risk and age as well) voucher to spend on private health insurance instead of Medicare eligibility (For more on this: http://www.ncpa.org/pub/ba736 ).

This is a start! Furthermore, as in the Forbes article linked below, companies need to take a long, hard, look at what their employees’ health means to the overall health of the company. Creating a scheme similar to 401k contributions, increasing participation in wellness-reward programs, allowing higher contributions to HSAs while funding high-deductible plans, personalized insurance products—all of these are feasible ways to make health care a more manageable part of corporate life. I firmly believe it will fall heavily on the private sector and the actions of individuals to make a difference in the state of health care in this country.

Source articles

• Washington community sees funding for health clinics cut due to budget crisis:    http://www.whidbeyexaminer.com/main.asp?SectionID=1&SubSectionID=1&ArticleID=5055
• Stimulus to states set to end with new Congress:  http://www.google.com/hostednews/ap/article/ALeqM5iSQbSnGouFW-eyk3ElbhWLELr-cA?docId=b9252430d82441d980d86e945f7af254
• Health spending at 17% of GDP http://online.wsj.com/article/SB10001424052748703675904576064173290792358.html
• Solutions for employers http://www.forbes.com/2010/11/29/health-care-reform-employee-retention-leadership-managing-costs.html?boxes=businesschannelsections

Impending FSA Change Rules by IRS Creates Interesting Contradictions in Logic

--By Anna Shepherd, Health & Personal Finance Professional
The government recently published new rules, effective at 2010 year’s end, that change what an FSA (Flex Spending Account) covers at the local pharmacy. They will no longer be permitted to cover over-the-counter medications such as pain relievers or cold medicine. My focus is on an article that involves the coverage of breast pumps and the bigger picture.

The NY Times article (see Link below) explains a strange irony in US tax law that allows acne treatment to be paid for by a pre-tax FSA or HSA, but will not allow breast pumps to be covered. Personally, I don’t understand why it makes fiscal sense to make it MORE difficult to self-fund health care expenses especially in this climate. And why would something so natural and so relevant to health care be explicitly excluded? http://www.nytimes.com/2010/10/27/business/27breast.html?src=busln

Well, I did some research and the best answer I found? Taxes. It can cost upwards of $500 for a pump and accessories and it appears that the IRS is worried about abuse which will reduce tax yield. Furthermore, the people that save the most are the ones in the higher tax brackets, aka the “wealthy”. That’s all, the bottom line.

Now, to avoid going into a rant about the inherent absurdity of letting the IRS decide that something mothers have done for millennia is “not medically necessary”, though I would really love to, I’m going to talk about the greater implications of this story.

To get around this inconvenience and still be able to purchase the soon-to-be excluded items, all you need is a doctor’s note. Not too hard, right? But why does it make sense to make someone have to make, and more importantly pay for, a doctor’s appointment to get an official doctor’s note to save money on aspirin, cough medicine, breast pumps and the like? You know you need these things to stay healthy; a doctor didn’t have to tell you that. Why would you force someone to enter into the system and jump through an extra hoop to get some very basic medical supplies? It is, plain and simple, a waste of time for all involved.

More importantly, I think the biggest implication in these new rules is what it means for the future of FSAs and similar plans. When health care costs per person are increasing at unsustainable rates, why wouldn’t you want to help people, any proportion of society really, help themselves? These accounts make sense! They make health purchases a reality connected to your own bank account rather than some abstract insurer. They force you to plan ahead and think about what is important in your health. BUT, as the Times article said, FSAs are slated to cost the government $68b (in tax revenues) in the next decade. And as I stated before, they are most beneficial to the higher earners. You do the math. I feel like this might just be the beginning.
   
PS: http://technorati.com/women/article/irs-refuse-tax-break-on-breast/
I couldn’t resist mentioning this: As this blog on Technorati indicates, the IRS deems baby formula a “necessary expense” for mothers on the WIC program (a USDA nutrition program for Women, Infants and Children). The government spent over $200m in 2009 to subsidize it. Irritating anomaly, no?

The Health Insurance Benefit as Umbilical Cord

--By Anna Shepherd, Health & Personal Finance Professional
We are all aware now that Obamacare has had some positive benefits for the less-than-27 years of age crowd: young adults can stay on their parent's health plan up to age 26. (Read more: http://www.sacbee.com/2010/05/09/2736160/personal-finance-health-care-rules.html#ixzz13b68jp7V )

As someone who is no longer on their parent’s plan, I have mixed feelings about this part of the legislation. It would be much easier to get back on Dad’s health plan, and I would certainly have a greater sense of security as I strike out on my own. But at the same time, as I’m trying to find a dentist for cheap in my new locale, I’m learning a lot and being selective because my bank account is at the forefront of my mind.

Part of the problem with American healthcare is that the true costs are not reflected in the prices (premiums) people pay due to the tax benefits of employer plans as well as the individual idea that “I’m not paying for it, the insurance company is.” I think these types of inclusions in the health care law further exacerbate that type of thinking. It allows young people to sort of write-off an expense onto their parents and not to have to think about the true costs until they smack them in the face later on. Now, people can certainly debate the pros and cons of young people not having to worry about their health care. As the linked article states, they are freer to find work, particularly non-profit social work, because health care coverage doesn’t have to be a prerequisite for a job. However, this also allows them to not have to think critically about planning their health and finances on their own.

Furthermore, we must ask, who is paying for this? The answer is often going to be: companies already cash-strapped and trying to cut costs in their health-plans. This is certainly not the best news for them, especially in this economic climate. These adult-children are not working for the company and increasing output and thus revenue, but they are reaping a reward for the work of others.

In the end, this is another example of inefficient cost-redistribution endemic in our health care system. Unfortunately, I view it as forestalling the inevitable—these kids have to own up sometime, whether it happens at 23, 29 or 35 god-forbid, the bottom line is always there and someone’s going to have to pay for it.

Health Care Perspectives from the Next Generation - Anna Shepherd Inaugural Post

By Anna Shepherd, Health & Personal Finance Professional

I’m a 23 year old college grad with a degree in Personal Finance and Economics. I’ve worked with the elderly continually since high school and am currently working 2 part-time jobs; one as an in-home caregiver, the other as a transition manager—helping someone downsize their home and life.   In these fields, I touch the outskirts of the medical field and see personally how people face and make the decisions related to their own health.

I was asked to write this from the perspective of youth in this country. I think that is a big task, because I believe a lot of youth aren’t paying attention. With the background of finance, I’m terrified at what’s happening in this country in terms of healthcare spending. It’s unfortunate, because I believe in some of the things in HR 3200. For example, I think that it’s necessary to open up insurance markets and allow the resultant competition to do its job. But then I inevitably reference the results of a 1980s RAND study in which people were given a 0%, 25%, 75% or 100% co-pay for their healthcare. Lo and behold, those with no co-pay used the most healthcare resources. In essence, this experiment is going to take hold nationwide in the next decade and I’m not sure how the results will play out. I must state that I have not read the entire bill, though I’m working at it.

I feel like my thoughts are full of conflict as I try to muddle through the right and wrong of entitlements. I work with the elderly and see how worried and scared they are about money, but see Social Security as a burden that I’m never going to be able to count on. I also care for people coming home from questionable and invasive surgeries only to pass away in recovery.

In the end, my personal view on my health: it’s all up to me. I’m the one who has to do everything possible to prevent myself from ever having to enter this industry as a patient. Unfortunate events happen, and I’m glad we have a system of professionals there to help--I’m not advocating for any extreme anti-medical establishment diatribes--I’m just saying that I’m going to take the best care of my body possible because as I’ve come to realize over the last 2 years, my actions are just about the only thing I can control.