The rest of the world likes to say that everything in America is big: the cars, the CO2 emissions, the buildings, even the hamburgers. The farce at the U.S. government’s website for enrollment in health insurance under the so-called Affordable Care Act (ACA) shows that we also supersize our transaction costs.
In a news report from NPR, Alaska Public Radio Network, and Kaiser Health News, even a computer programmer who had also created websites needed many attempts over many weeks to use the site to enroll for health insurance. And she still awaits the enrollment confirmation (with luck in the new year, said the radio version of the report). If it arrives, she gets affordable health insurance ($110 instead of $1200 per month), but then still has the joy of dealing with an insurance company and the claim paperwork. Read More »
Writing for the Wall Street Journal, Jeffrey Singer describes a patient who came in for a “simple outpatient surgical procedure” and discovered it was cheaper to just ignore his “low-cost ‘indemnity’ type of health insurance policy.” The patient’s estimated costs had he used his health insurance plan: approximately $20,000 (out of the estimated hospital charge of $23,000). After speaking to the patient, Singer realized that he wasn’t bound by a “preferred provider” contractual arrangement and offered the patient a solution that saved him $17,000:
I explained that just because he had health insurance didn’t mean he had to use it in every situation. After all, when people have a minor fender-bender, they often settle it privately rather than file an insurance claim. Because of the nature of this man’s policy, he could do the same thing for his medical procedure. However, had I been bound by a preferred-provider contract or by Medicare, I wouldn’t have been able to enlighten him….
Most people are unaware that if they don’t use insurance, they can negotiate upfront cash prices with hospitals and providers substantially below the “list” price. Doctors are happy to do this. We get paid promptly, without paying office staff to wade through the insurance-payment morass.
So we canceled the surgery and started the scheduling process all over again, this time classifying my patient as a “self-pay” (or uninsured) patient. I quoted him a reasonable upfront cash price, as did the anesthesiologist. We contacted a different hospital and they quoted him a reasonable upfront cash price for the outpatient surgical/nursing services. He underwent his operation the very next day, with a total bill of just a little over $3,000, including doctor and hospital fees. He ended up saving $17,000 by not using insurance.
(HT: Jason Hirschhorn)
What happens when a firm starts a “dependent verification” program designed to make sure that its employees are carrying only legitimate dependents on their health insurance? The economists Michael Geruso and Harvey Rosen ask that question in a new working paper called “Fraud in the Workplace? Evidence from a Dependent Verification Program” (abstract; PDF). A few key sections are bolded below:
In recent years many employers, both in the private and public sectors, have implemented dependent verification (DV) programs, which aim to reduce employee benefits costs by ensuring that ineligible persons are not enrolled in their health plan as dependents. However, little is known about their efficacy. In this paper, we evaluate a DV program using a panel of health plan enrollment data from a large, single-site employer who implemented it several years ago. We find that relative to all other years, dependents were 2.7 percentage points less likely to be reenrolled in the year that DV was introduced, indicating that this fraction of dependents was ineligibly enrolled prior to the program’s introduction. These disenrollment effects were especially large for same-sex partners and older children. We show that the program did not induce employees to leave the employer’s plan and (say) put themselves and their dependents on the spouse’s plan. We also show that disenrollment occurred because dependents were actually ineligible, not because of compliance costs that might be associated with providing documentation. The DV program saved about $46 per enrolled employee. A considerable fraction of these cost savings came from removing older children who didn’t meet additional criteria. Therefore, the dependent coverage provision of the Affordable Care Act of 2010, which essentially renders all children up to age 26 eligible in all employer health plans, will substantially limit the future cost saving potential of such programs. Hence, as the state governments and private employers that have implemented DV programs adapt to the new regulatory environment, the popularity of dependent verification programs may well diminish.
The next time you’re counting up all the reasons why employer-based healthcare insurance is a bad idea, you can include this one, too.
That is the question asked in a New England Journal of Medicine column by Harald Schmidt, Kristin Voigt, and Ezekiel J. Emanuel:
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Finding employment is becoming increasingly difficult for smokers. Twenty-nine U.S. states have passed legislation prohibiting employers from refusing to hire job candidates because they smoke, but 21 states have no such restrictions. Many health care organizations, such as the Cleveland Clinic and Baylor Health Care System, and some large non–health care employers, including Scotts Miracle-Gro, Union Pacific Railroad, and Alaska Airlines, now have a policy of not hiring smokers — a practice opposed by 65% of Americans, according to a 2012 poll by Harris International.
A new paper in the American Economic Review (abstract; PDF), summarized here, finds that Americans aren’t very consistent when thinking about financial risk. Liran Einav, Amy Finkelstein, Iuliana Pascu, and Mark R. Cullen, analyzing how people choose health insurance and 401(k) plans, found that “at most 30 percent of us make consistent decisions about financial risk across a variety of areas.” Their data set includes 13,000 Alcoa employees:
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Because employees were making decisions in both the health-care and retirement domains, the researchers had the opportunity to see how the same individuals handled different types of choices. Or, as Finkelstein puts it, the economists could ask: “Does someone who’s willing to pay extra money to get comprehensive health insurance, who doesn’t seem willing to bear much financial exposure in a medical domain, also tend to be the one who, relative to their peers, invests more of their 401(k) in [safer] bonds rather than stocks?”
Health care reformers often argue that increasing patients’ access to doctors (especially primary care doctors) can actually lower health care costs in the long run, as these doctors can help diagnose and manage conditions before they lead to more expensive treatments and hospitalizations. But a new paper by economists Robert Kaestner and Anthony T. Lo Sasso disputes that theory. Here’s the abstract:
By exploiting a unique health insurance benefit design, we provide novel evidence on the causal association between outpatient and inpatient care. Our results indicate that greater outpatient spending was associated with more hospital admissions: a $100 increase in outpatient spending was associated with a 2.7% increase in the probability of having an inpatient event and a 4.6% increase in inpatient spending among enrollees in our sample. Moreover, we present evidence that the increase in hospital admissions associated with greater outpatient spending was for conditions in which it is plausible to argue that the physician and patient could exercise discretion.
The authors further conclude that “the implication of these findings is that expanding health insurance, as recent federal reform (Patient Protection and Affordable Care Act) proposes, will be cost increasing.”