On Monday, the AP reported that, as part of its health reform efforts, the federal government would require states to establish online shopping services that would ostensibly make it easier for consumers to research and purchase health insurance. The AP reported: “The new marketplaces are supposed to work like an Amazon.com for health insurance, providing consumers with one-stop shopping for competitively priced coverage.” As she has before, Secretary of Health and Human Services Kathleen Sebelius argued that “more competition will drive down costs and exchanges will give individuals and small businesses the same purchasing power big businesses have today.” The AP didn’t say how that would happen, nor did it mention that up to half of the governing board for these shopping services could be composed of industry reps, creating the potential for fox-in-the-hen-house regulation. At least one consumer rep must be on the board.
The AP story brought to mind a piece I have been waiting to comment on—a fine story by WBUR’s Martha Bebinger that reporters ought to use as a model when looking for interesting ways to report on a not-so-interesting subject.
Bebinger reported on the shopping experience of Sarah Bechta, a wife, mother, and doctor living in Northborough, Massachusetts. Bechta spent six to eight hours comparing plans, trying to figure out whether one of those newfangled insurance plans with tiers of high, medium, and low-priced docs and hospitals was right for her. Massachusetts is leading the way in creating new insurance products that, in turn, create more headaches for consumers. Insurers are encouraging them to choose low-cost providers; in return, they will give them a price break either on the premium or on their out-of-pocket costs. In effect, they are following a sales strategy that assumes buying insurance is like making a choice at Baskin Robbins.
Dr. Bechta’s experience shows the difficulty of “choosing the best.” Bechta learned that a tiered plan would cut her premium in half, and she would save around $1400 a year, a sum that “made me stop and think,” she said. But then she asked herself the relevant question: Would higher deductibles and copayments gobble up the savings? They might if she could predict what illnesses her family would have during the year. “I could not figure it out,” she said. Of course she couldn’t. If you have a chronic illness, some medical expenses are predictable. But for other people, they are not. Bechta did some rough calculations of the costs she would incur if her daughter came down with appendicitis. If her daughter went to a tier 3, higher cost hospital—such as Children’s, which her doctor might recommend—the premium savings would be wiped out.
She calculated some more, constructing a table of her family doctors and the tiers in which they had been placed by the various insurance companies. There was no uniformity. All the family’s primary care docs were in different tiers for different health plans. So while Blue Cross might have put one physician in tier 1, Harvard Pilgrim might have put the same doc in tier 2. “There’s no way my pediatrician can be tier 1 for one insurer and tier 3 for another,” said Bechta. “It just makes no sense.”
Bebinger explained that insurers use a complicated formula of quality and cost measures in order to determine a physician’s tier. But those measures vary from insurer to insurer. Even though the state will soon require all insurers to use the same quality criteria, there will still be significant variation in how the measures are weighted and there will still be significant price differences. Like good reporters do, Bebinger placed her story in the larger context. Massachusetts is leading the charge for these arrangements, which the rest of the population will soon have to confront.
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More examples of the "tyranny of choice." Electric power deregulation presents us with the same problem. A consumer's time is limited. His brain is finite.
If reporters, or someone, would do the requisite systems analysis they would soon see the underlying issue. In health care, as in electric power, and probably in many other complex human endeavors, much of the expense is locked in the system to pay managerial expertise. Actuaries, insurance executives, utility executives--they all cost, because only they have the knowledge and ability to operate these unwieldy systems.
In a fully regulated market, the interests of these executives can be more or less aligned with consumers. In an unregulated market, their interests immediately diverge with those of consumers. The executives develop ever more complex marketing systems to entice those consumers, who end up paying full overhead costs for the complex system that is, in large respect, working against their interests.
The payoff? "Choice." "Freedom." And the obligation to become an expert in every field so deregulated.
Somewhere, Ayn Rand smiles.
#1 Posted by Edward Ericson Jr., CJR on Tue 13 Mar 2012 at 03:51 PM
To be frank, this isn't up to Trudy's usual standards. What she completely leaves out is any comparison of buying health insurance through a state health insurance exchange to the current hodge-podge buying situation. It does no good to compare to some ideal; there should be a comparison to the impossible situation for the individual insurance buyer now. Yes, shopping and comparing health plans is difficult under the best of circumstances, but the proposed state health insurance exchanges at least would offer apples-to-apples comparisons on benefits and prices, unlike the current system. Trudy also leaves out that buyers in 2014 won't have to worry about being excluded from benefits based on pre-existing conditions, which hugely complicates buying choices for consumers today. It's misleading to project what the 2014 state exchanges will be like based on the Massachusetts model, because the rules are likely to be different, and are likely to vary state by state. There's no question that it would be better and easier for consumers if there were one standard benefit package, or a limited number of slightly different packages, as Alain Enthoven originally envisioned in his managed competition model. But unfortunately due to political pressure, exchanges will be offering a range of more- to less-generous packages. Still, consumers will be better able to shop and compare under the new exchange system than they are now, knowing they won't be discriminated against based on preexisting conditions and that they'll receive income-related subsidies to make the coverage more affordable. Trudy needs to put this and her other criticisms of the Affordable Care Act into context, comparing what the ACA offers to the current, completely dysfunctional system. It ain't single payer but this is the political reality of 21st century America.
#2 Posted by Harris Meyer, CJR on Tue 13 Mar 2012 at 06:23 PM
Trudy wrote: "Bebinger explained that insurers use a complicated formula of quality and cost measures in order to determine a physician’s tier"... "Most consumers will do the same, taking the easy way out of a task they’ll inevitably hate"
padikiller responds: This is just the latest iteration of the leftist "People are too stupid to buy products on their own" stupidity...
The same screwy lefties who admit (as Trudy does here) that regulation inevitably creates a quagmire of complicated policies, loopholes and pitfalls, also tell us that the answer is always more regulation.
These pundits would have us believe that while the average American far, far too stupid to be entrusted with buying health insurance on his own, or to be permitted to buy a home or a car without the Gubmint looking after him... These same hapless dupes should collectively be entrusted with a greater voice in government and private enterprise.
SUCH is the state of liberal madness.
#3 Posted by padikiller, CJR on Wed 14 Mar 2012 at 10:17 AM