Tuesday, June 23, 2009

Personal travails with health insurance, and thoughts on health insurance

Kaiser accepted me for the high-deductible individual policy I applied for. During the application, they asked about all my health conditions stretching 10 years back. It was a bit of a relief to be accepted, since I had a bout of depression related to a head injury 5 years ago. The depression hasn't recurred. I haven't worked in the insurance industry, but I can see some of the more aggressive companies turning me down on those grounds alone.

The deductible is $8,000. This means I will pay full freight for every service until I spend $8,000. I have a $15 copay for generic drugs, meaning that I pay $15 every time the doctor prescribes me a generic - but that only applies after I hit the deductible. I believe the nasal spray I used may cost around $45 a pop.

Health policy people always refer to the RAND health insurance experiment. Basically, the experiment found that zero cost sharing (i.e. no deductibles, copays or coinsurance) promotes utilization, including unnecessary utilization. It also found that cost sharing is a blunt tool - it deters all types of utilization, including necessary utilization. In today's economy, we're already hearing about a lot of people skipping their medicine or taking less than they should because of cost.

Conservatives have been saying that people need to have 'skin in the game'. They've endorsed these high deductible health plans because they think they'll help reduce excess utilization. That is certainly true.

However, remember, cost sharing is a blunt instrument. Additionally, poor people who get catastrophically ill will find it very hard to afford the full deductible. They're likely to excessively control their spending until they're at the deductible, after which they're presumably covered. People up to as much as 200% of the official US poverty line have significantly worse health than others, so these plans are a bad idea for them. For people under the poverty line, cost sharing should be zero. For people up to 200% or so of poverty, I would like to see cost sharing be nominal.

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