It’s the time now when people are asked to choose their benefits packages for the upcoming year, which means many more will likely be railroaded into the so-called consumer-driven health-care plans, which do little for consumers except drive them to avoid using medical care. They save employers and insurance companies money though by forcing employees to pick up more of their expenses if they happen to be unfortunate enough to get sick. The idea behind is to give customers incentives to scrimp on health-care-system usage, to start wondering if they really need that CT scan or that endoscopy, and to bargain shop for cheaper services—because there’s one thing we all want to do and that’s go to the bargain doctors. Right after we get bargain brakes for our car and get bargain child care from the daycare center.
These plans, which have cheaper premiums, are nice if you are invulnerable, but they punish those who happen to be subject to illness. They way it was sold to me was that preventive care was completely covered. What that really means, though, is you are punished for becoming sick. And this encourages you to try to goad your doctor into recording a visit as preventive even if you, say, slipped and broke your arm. “Hi, doctor, just a routine physical—what? My shoulder’s dislocated? I hadn’t even noticed! Good thing I came in for this preventive checkup!” The consumer-driven plan tries to dump on customers some of the insurance company’s own thorny and dubious decisions—it forces the customer to try to game the system and misreport things and shop around and pressure doctors into more inexpensive care choices and medicines rather than the insurance companies gaming doctors, and vice versa, as was typical under old-fashioned coverages. Rather than the insurance company tell your doctor not to prescribe brand-name drugs, it forces you to have the conversation. It short, it makes everything about being sick that much more stressful and upsetting, and it sets you even more at odds with your doctor than you might already be, making it more obvious that you are at cross-purposes economically: The doctor profits from your illness, you suffer and pay.
The last insult about this system is the “health-care savings account” which allows you to spend tax-free dollars on your health-care needs. Not only is this system a bureaucratic boondoggle, impossible to understand and burdensome with the various claims that the consumer must file to get her own money, but you lose the money you don’t spend. So, unless I haven’t understood it properly (and considering how byzantine medical insurance is in the US, the chances are high) there are incentives to discourage you from spending it by those tasked with facilitating your medical coverage. And what’s so great about spending money tax free on something that once cost the customer nothing at all? You don’t have to pay taxes on it, because the government is reneging on responsibilities it once needed tax income for. Tax-free spending accounts are simply the government’s way of offloading what it once served to regulate onto you, to fend for yourself amongst the predators who feed on the weak, the ill.
As Jonathan Cohn points out in a recent New Republic article, HSAs are meant to allow the healthy to keep more of their money while those unfortunate enough to become sick end up in deep debt. It’s only fair, right?
Follow-up (11/22/2005): Economist Tyler Cohen has an interesting analysis of the defective health care market here.