For example:
Cancer is low probability, high impact.
The common cold is high probability, low impact.
High deductibles basically cover the first (Cancer) and make you pay for the second (common cold).
Low deductibles basically cover both, but make you pay for it up front in higher premiums.
Therefore, every time someone gets health care and says to themselves, "Go ahead and do X, my insurance will pay for it", what they are really saying is "Go ahead and do X, all the people with low deductibles already paid for it". This increases demand and results in higher costs.
Additionally, when you use your insurance, health care costs more because the insurance company charges additional fees.
The best deal is high deductible insurance: you're not paying the insurance company for your low risk care AND you're not paying for all the frivolous low risk care that everyone else is getting.
Whole Foods' approach is to have a high deductible ($2500), which greatly reduces cost, and then put the savings in an individual employees account which they manage themselves.
The employees then decide how best to use the limited resources of their spending account using free market principles.
1 comment:
I would be happy with FSAs under some circumstances. But some stuff would have to happen first:
(1) "Real" pricing by medical providers. Example: a couple of members of my family have had substantial procedures done lately. When we get the first bill, the cost is enormous. By the time the second bill comes, the insurance company discount (not payment) has been applied, and the cost has been reduced by, on average, 75%. What's the real cost of the service? How can a health care consumer determine how much to pay?
(2) Prescription drugs. If you or family members have chronic conditions, prescription drug costs can bankrupt you if there's no workable generic. Some of the best psychotropic medications can cost upwards of $25 per pill; that's pushing $10,000 per year just for one medication for one person. If you have to cover Rx costs out of your FSA, it is no longer cost-effective. But Rx costs are one of the worst examples of something to be covered by insurance: it's not a risk, it's a fixed cost like rent. I personally have no clue how to address Rx costs sensibly.
I'm very much a free market person, but health care is fundamentally different psychologically: it is extremely difficult to be a rational actor when it's your spouse's or child's health on the line. That said, I am quite certain that the solution is NOT to invent a new "right to health care"; the demand for such a right will be infinite. The bureaucracies will be subject to Pournelle's Iron Law: http://www.jerrypournelle.com/reports/jerryp/iron.html
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