HCR -- What's "Affordable" Really Mean?

Checking yesrerday's traffic I see several hits for an early August post, HCR -- Medical Tourism -- This time to Europe, which tells how much less medical care costs in the rest of the world, underscoring the point referencing a joint replacement in Belgium for much less than it would cost in the USA, including the costs of travel and accommodation -- hence the term "medical tourism." Except for a small subset of  people with extremely high-deductible insurance, most Americans have no idea what medical care actually costs. They may be able to tell you what is deducted from their pay if they have company group insurance but they won't know how much the company adds to that amount. If they are in the military or have Medicare the amounts they pay is nowhere close to the actual costs, since those government-funded arrangements are not burdened with advertising, sales commissions, profit-line expectations or executive compensation packages that are typically part of medical care in the private sector. And young, healthy people are not apt to know what healthcare costs, even if they have no insurance, because they are for the most part, in fact, young and healthy. And besides, even without  private insurance we are covered by other insurance we never think about -- auto insurance pays medical bills in the case of accidents, workers comp pays for work related illness or injury,  liability insurance picks up the tab if we get hurt on someone's property or as the result of an accident caused by food, faulty design, negligence, etc.

So that word "affordable" turns out to be something of a bait-and-switch term in the Patient Protection and Affordable Care Act. Yesterday's column by Elisabeth Rosenthal who wrote the column linked in the post above, spells out in plain language what affordable will mean when everybody has insurance. Some will be pleased and others will be surprised to discover how much they will be paying out.  With no sense of editorial irony the headline puts scare quotes around "Affordable Care" but omits them around "Rip-Off." In reality the law is a first step moving the costs from rip-off to just horrendously expensive, thanks mainly to the medical loss ratio provision that restricts what portion of premium revenue can go toward non-medical expenses. Eighty percent of premium dollars must now be applied to medical costs. 

Meantime, a large population of people who have no experience with insurance will encounter something like sticker shock as they discover the economic mine fields of co-pays and deductibles which vary widely in the insurance landscape. 

‘Affordable Care’ or a Rip-Off

“The perception of cost will vary a lot,” said Dan Mendelson, the chief executive of the consulting firm Avalere Health and a former associate director for health at the federal Office of Management and Budget. 

Mr. Mendelson predicted that the plans would be welcomed by people who had wanted to be insured but couldn’t obtain or afford insurance because of pre-existing conditions, for example, and for low-income earners who would qualify for heavy subsidies for premiums. “For some people it will be free, and that is a pretty good value,” he said. 

But the required outlays might seem like a lot of cash to healthy families who previously did without insurance. And they could be downright shocking to patients who last had insurance a decade ago, when health plans tended to require little if any patient payments. 

“More of the cost responsibility is being shifted to patients, and more to patients with serious chronic illness,” Mr. Mendelson said, noting that the silver plans, the second cheapest, are intended to cover only about 70 percent of a patient’s medical costs. “This is different from the concept of insurance we’ve been carrying around for a long time. So people who sign up for insurance thinking all will be covered are in for some surprises.”

Obamacare is a first step in bringing medical care costs into line with what the rest of the world might consider expensive but reasonable. They will always be expensive because in America we pay more for just about everything than elsewhere. We complain about it. But we still pay it. From packaging that costs more than the products being bought to capricious, irrational pricing schemes for everything from airline tickets to sporting events, from new clothes at the start of a season to the identical products on sale to make room for next season's inventory -- Americans seem not to care how much anything costs as long as they have a chance to charge it an make payments.  Where but in America do people pay more by the gallon for water than for gasoline, and complain about the costs of the gas?

Getting back to health care and insurance, the two big changes that are happening are

1. Health insurance is about to become an actual insurance product instead of the illusion of care it has been for two or three generations, a tax-favored scheme to swell the profit lines of companies offering group insurance to their employees as well as the insurance companies that service those policies.  
2. The first steps to uncoupling employment from the delivery of health care, which will have a couple of unpleasant consequences as beneficiaries for the first time must face the realities of what it costs to insure them and meet their real (or perceived) medical needs. Both of these changes will be bitter medicine for many.

Yes, it is bitter medicine we will have to swallow, and the president is wise not to allow political pressures to change his determination to give this new a chance to take effect. Those who argue for repeal or delay are no different from patients who stop taking a full course of antibiotics when they get to feeling better, or worse, are part of that extreme group which eschews antibiotics altogether, along with vaccinations and other science-based solutions to disease and injury.