Health Care, Wal-Mart, HSAs, CDH plans, and the future of benefits in this nation.

Written by pete

Topics: Uncategorized

I read blogs from time to time. One of my favorites is A VC. I first started reading this blog when I was doing research on Radio’s Changing Business Model.

Today, there’s an interesting discussion going on over there about whether Wal-Mart might be doing us a favor by offering crappy Health Insurance benefits. I do some work in Health Insurance, so I was intrigued by this.

Having worked in consulting for a few health care payors, I have a pretty strong opinion about waste, overhead, and misplaced priorities among insurance companies. I agree with Fred’s post that in order for things to change for the better, we may need to change the insurance model, and employer paid insurance as we know it may have to change.

I can’t agree with Chad’s comment, though. Chad believes pretty strongly in the creation of a single-payor healthcare system in the US. A lot of people do, in fact. It’s not without its strong points. I think that as a matter of politics, it’s good to get that discussion going. But although my politics tend to be liberal, a single payor system like he describes is too ripe for inefficiency of a different kind.

While it’s true that Medicare’s administrative overhead is about 1.4% vs. an industry figure closer to 8 or 9%, there’s something missing in all of the single payor solutions that I have heard about. That is, there is no incentive to provide quality or timely service in a single payor system. Forming a monopoly, whether administered by the government or someone else, will have a chilling effect on medical and pharmaceutical innovation, service levels, and adequate care. The rich will pay private doctors, and the poor will be stuck filling out a dozen forms to get Medicare to pay for an emergency room visit. Meanwhile the overhead that the single-payor consumes will probably rise from the reasonable 1.4% that Medicare uses, to a much higher amount when we start to see that the Medicare model doesn’t scale well past its original design intentions.

The reason health insurance sucks in the US isn’t because we don’t have socialized medicine, or because drug companies overcharge and advertise on TV too much (though as a policy, I think it’s poor medicine to have patients asking for specific medications). It’s because the market is broken: the consumer who uses healthcare is not the same person as the customer who buys the health insurance offering. To make matters worse, we’ve got a marketplace full of consumers that have a low level of expertise. And who outside the industry can really read and understand an Explanation of Benefits for a complex but common procedure like childbirth? Even if you could understand the EOB, would you care that your insurance company was overcharged for something and report it?

I think that the shift toward Consumer-Directed-Health plans (high deductible insurance plans coupled with an HSA or HRA to cover the deductible) are a major step in the right direction. Under these plans, you are issued a debit card with $2500 on it, and an insurance policy with a $2500 deductible. If you don’t use all $2500, you get to roll the money over to the next year tax-free. Did I mention that an HSA is the ONLY type of account in this country where the money goes in tax free, then also comes out tax free? Or that you can invest the contents of your HSA in mutualk funds if you’re bold? Over time, a young person could build up a sizeable account for health care needs in retirement. If we start to offer economic incentives to people that reward them for using healthcare intelligently, learning more about treatment options, and exercising preventive care, we’ll end up being better off in the long run.

The problem is getting the information to healthcare consumers, and getting them to read it. Healthcare is still one of the areas where the information is not readily available in a compiled, free, consistent, accessible easy-to-understand format.

It’s far easier to have an insurance card that you just present at the doctor to pay for whatever services you decided you needed. But if you can make users of healthcare take a stake in their choices, you’re on the way to a better market for care.