Consumers saving less in HSAs
April 05, 2015
At DocSpot, our mission is to connect people with the right health care by helping them navigate publicly available information. We believe the first step of that mission is to help connect people with an appropriate medical provider, and we look forward to helping people navigate other aspects of their care as the opportunities arise. We are just at the start of that mission, so we hope you will come back often to see how things are developing.
An underlying philosophy of our work is that right care means different things to different people. We also recognize that doctors are multidimensional people. So, instead of trying to determine which doctors are "better" than others, we offer a variety of filter options that individuals can apply to more quickly discover providers that fit their needs.
April 05, 2015
Kaiser Health News reported on a study showing that consumers now put less into their Health Savings Account (HSA). While the reasons are unclear, the article relayed that HSAs have been around for a while and as a result, people may have built up sufficient balances in their accounts.
If people do not use the funds before they retire, they can withdraw the funds after retirement (similar to a IRA). If people primarily intend to use HSAs as a way of saving on taxes for medical expenses, then it does make sense that some people will be contributing less (for example, once they have enough to cover a year or so of their deductible). One of the benefits of HSAs has been that the deposited money does not expire like a Flexible Savings Account (FSA). So, if consumers generally don't use their insurance plan, pairing a high-deductible insurance plan (which presumably comes with a lower insurance) with contributions to a HSA allows consumers to pocket the savings in their premiums. Even if people end up paying their entire deductible every few years (somewhat related to last week's post), they can still end up saving over the years using a HSA.
March 28, 2015
Earlier this year, The Seattle Times ran an article about patients being surprised by the out-of-pocket costs associated with a high-deductible plan. The article starts off with the story of a family that initially rejoiced over a low monthly premium of around $240 (compared to the earlier $800 monthly premium that they had been paying). The story takes an unfortunate turn when a family member becomes unexpectedly ill and needs to pay out-of-pocket until the deductible and out-of-pocket limit are reached. The article implies that the family was surprised, and includes some people's disapproval of high-deductible health plans.
A low initial price (in terms of monthly premium) will undoubtedly seem attractive to many families. Still, a 70% drop in price (from $800 to $240) should highlight that the insurance product is not going to be the same. Fortunately for this family, the math seems to work out so they don't come far behind by going with the high-deductible plan. The difference in monthly premiums is $560, so the total annual savings would be $6,720. That amount is greater than the out-of-pocket maximum of $6,600. That is, even if this family paid the entire out-of-pocket limit for the unexpected care, they still end up paying less than what they would have if they just purchased their previous more expensive insurance. This won't be true for all families; in particular, the difference in premiums for this family is likely higher than what many other families would experience. However, families with high-deductible plans also qualify for a health savings account, which saves on taxes.
All in all, there remains a transition for many families who will realize that whatever plan they are on might not be the best one for their circumstances. Some of it might just be learning about the insurance offerings themselves (e.g. concepts such as deductibles and out-of-pocket maximums); some of it will be related to understanding tax consequences. Unfortunately, some of it will also be patients finding out how much certain procedures or medications cost because those numbers were not readily available earlier. As noted at the end of the article, though, high-deductible plans will continue to be popular because of their cost.
March 21, 2015
An American doctor summarized some drama surrounding the American Board of Internal Medicine (ABIM) over at BMJ Blogs. Essentially, doctors have been chafing at ABIM's growing requirements for certification (board certification can be a requirement for employment at certain institutions, such as hospitals). Part of the backlash has been about the financial cost, and in one debate, Dr. Charles Cutler highlights a culture of luxury within the leadership of ABIM (as well as detachment from the practicing physician).
It'll be interesting to see how this story plays out, but for our purposes, there is a question of what obligation ABIM -- as a non-profit whose mission is to "enhance the quality of health care by certifying internists and subspecialists" -- owes to the general public. One interesting statistic is that somewhere between 95% and 98% of physicians eventually pass the certification exam. The public is only told who is or is not certified; we are not told, for example, how many times a physician had to take an exam in order to pass, nor are we told how well a physician tested. The theory is that any doctor that becomes certified is qualified to treat patients, and therefore patients do not need any further information -- that theory is not very reassuring for patients who have experienced a seemingly wide range of outcomes when visiting different doctors. Given that ABIM goes through all of this trouble to test doctors, it would be helpful for them to parlay the results into some more meaningful signals for patients. A previous chairman, for example, written about releasing actual percentile scores so that they can be combined with other factors to help patients make decisions; alas, transparency within health care moves slowly.
Another question is whether certifying organizations should view the certification data as mostly a revenue channel, or as a public service. Sure, consumers can look up individual doctors on a related website, but that can be rather tedious (versus, for example, doing a specialty search within a geographic area). It's also nice to be able to compare doctors on other metrics, whether that be the incursion of disciplinary actions, patient ratings, or even something as simple as distance from a specific location. When we've inquired about licensing this data, we were surprised by how expensive the data is (cost-prohibitive given where we are as a company). It seems to us that ABIM (and the related ABMS) would actually further their mission of enhancing the quality of health care by freely and publicly releasing board certification lists so that patients can more easily take advantage of decision support tools. But, as Dr. Cutler pointed out in his video debate, financial compensation to ABIM's leadership is pretty high, and that money has to come from somewhere.
March 14, 2015
Last week, I noted how Medicare sets prices for procedures. Fortunately, the U.S. Department of Health & Human Services (HHS) announced earlier this year that they will be overhauling how healthcare providers will be paid. The goal is to move away from fee-for-service, where providers are paid by volume (the more they do, the more they are paid, regardless of whether the patient needed the procedures) and instead move towards "value-based payments" where the patients' outcomes are considered.
This move makes a lot of sense, although hopefully the metrics will be refined as the transition gets underway. HHS announced a goal of tying 90% of hospital payments to quality and value metrics by the end of 2018, which might seem aggressive -- however, hospitals have seen movement towards this model for several years now. It'll be interesting to see how the payment model and quality metrics change for doctors over time.
March 08, 2015
Medicare sets the prices that it will pay providers for specific procedures. These prices consider locality (i.e. procedures performed in certain zip codes will be paid more than in other zip codes, even though the same procedures were performed) and some other factors (e.g. whether the provider is a teaching hospital). For the most part, Medicare pays different providers in the same locality the same price for the same procedure. On one hand, this makes some sense -- why should the same procedure be paid different amounts just because they are performed at different locations? On the other hand, in what other industry are prices set the way that Medicare sets them in health care? Can you imagine being able to go up to any hotel and demanding the same price as the hotel down the street? Even in the airline industry (where customers have largely the same experience), airfares can vary significantly. In large part, Medicare can get away with setting prices because it is the nation's largest payer.
So, what happens when Medicare sets a price for a specific procedure too low? Duke Medicine reported an interesting finding: the frequency of that particular procedure dropped, but the frequency of a more expensive procedure went up. From the article, it's unclear if Medicare's price reduction caused the frequency of the other procedure to rise, but the time periods overlap very nicely. Additionally, the other procedure lacks evidence to demonstrate that it is superior. Therefore, it seems likely that when reimbursement for the original procedure was cut, providers looked around for alternatives and found one that they like more.
Whenever a market has its price set for external reasons, distortions occur. Medicare could additionally regulate a price decrease for the other procedure, but chances are that providers will find another alternative, or not enough people will get the right procedure. In a more classically functioning market, consumers would be exposed to a greater part of the financial cost, they would also know the price of the procedure ahead of time, and they could choose which provider to go to. We might be headed a little closer towards that model (with patients being exposed to higher deductibles and co-insurance) and we might experience plenty of short-term pain (in the absence of meaningful pricing information) before the market becomes healthier.