May 24, 2005
The Impossible Has Happened
I've found an HSA plan I like:
Oshkosh Truck Corp. (OSK ), for example, has veered away from the old -- and costly -- health maintenance organization it used for its 4,500 nonunion employees. The plan's low copayments encouraged doctor visits and contributed to the double-digit annual growth in Oshkosh's health-care bill.
So in January, 2004, the company switched to what's known as a consumer-driven plan. Under the new plan, annual physicals and other preventive tests such as mammograms and prostate cancer screenings are fully covered. After that, workers and their families receive a $1,000 annual health-care account. Any unspent portion can be rolled into the following year. But once that account is tapped out, workers are responsible for the next $1,500 of medical expenses. If expenses go beyond that, the company steps back in and will pick up 90% of expenses. Oshkosh is betting that the gap will discourage wasteful spending while still ensuring workers are covered for serious illness.
That's a pretty interesting structure. By fully covering the first $1,000 of costs, you destroy the disincentives for seeking basic care. By fully covering a variety of tests, screenings, and procedures, you ensure workers won't skimp on necessary diagnostics. By limiting the worker portion to the space between $1,001 and $2,500, you ensure that a family with a variety of high health costs but nothing catastrophic doesn't find themselves overwhelmed by the charges. And you retain the good part of HSA's, making consumers more aware of their health care decisions.
The general problem with HSA's is that all care, until the deductible is surpassed, comes out of your pocket. That often stops folks from seeking basic care, which is not only bad for them but bad for health care costs generally as untreated, unnoticed conditions balloon. Osh Kosh's system, conversely, pays for all care up to $1,000, and only then does your deductible start. That means folks will get basic care, and then those who have ailments that force them above $1,000 will have to pay for the next $1,500 of treatment out of pocket -- but crucially, you will get treatment, because you actually have a condition that needs to be treated. This, in my eyes, a supportable consumer-driven structure.
By the way, this all comes from a Business Week article on strategies corporations are using to lower their costs. It's easily the most interesting thing I've read on health care lately, so I strongly encourage you all to take a look. Pay particular attention to PepsiCo's portion at the bottom: each employee is offered $100 to fill out a comprehensive health questionnaire, their risks are then evaluated by health consultants and they're able to work with a health coach -- for free! -- to learn how to better care for themselves and lower their risk. That's a great, great idea, both on the employer side (lowers costs) and the worker's side (makes them healthier). 16% of PepsiCo's 50,000 employees are currently using the program. That's the sort of incentive-driven preventive care we need much more of.
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Tracked on May 25, 2005 2:08:46 PM
I'd never fill out the Pepsi questionnaire. If my insurance paid for a health coach, I'd take them up on it, but I wouldn't want anything in my personnel file.
Posted by: Abby | May 24, 2005 5:04:55 PM
I wonder is it possible for employees to contribute some of their own money to the Oshkosh HSA cover the gap? I'm not that fond of risk when it comes to paying for health expenses.
And I'm with Abby on the privacy issue. Coincidentaly my wife just went off today about filling out a health disclosure for employer group life insurance that's vetted by Medical Information Bureau Group in Boston. She said "it's none of their fucking business". It's scary to think they maintain a database about every health realted claim you've ever made to use against you when you need coverage later. I'll bet the info PepsiCo collects ends up there or somplace similar. Gives you that creepy "big brother is watching you" feeling. All the more reason for a real Patient Privacy law that isn't written by shills for the insurance industry.
Posted by: Sonny | May 24, 2005 7:27:24 PM
Employers really shouldn't have ANY information (except perhaps seizure or diabetic coma info that the patient thinks it is proper to give for the patient's own protection) about the health of employees - it will turn into, inevitably, a screen for employees to keep or discard.
One of the worse current privacy abuses is the Medical Information Bureau. Who knows what is in their own file? How is the info used? Who has access? I've never heard any answer to these questions answered but I have heard that a person would be more successful getting info on themselves from the NSA or CIA than from the MIB.
These kind of databases won't be outlawed or secured until someone breaks in and puts Bush's, Delay's and Frists info into the public domain -followed by the rest of the Congress.
As to HSA's, if the plans were independently administered (not employer-based), the Oshkosh plan is better than most. I think you too generously discount whether people will folk over the $1500 donut hole if they are sick, but not really sick. Most people in the middle class and below are living paycheck to paycheck, with very large revolving/mortgage debt. They literally don't have $1500 laying around - note the 'savings rate' of the US population and adjust for income at the bottom and there are no savings going on.
If forced to contribute to a HSA, maybe it would work. If voluntary (which is likely), then HSA's would not be more used than they currently are, which is nearly ignored by the non-rich.
Posted by: JimPortlandOR | May 24, 2005 7:50:11 PM
Jim -- the thing in, though, premiums cost more than that now. In any case, we do have to institute some form of cost control for health care in this country. It can't continue as is. I'd actually like to see more on the Osh Kosh plan, though. If it doesn't have premiums, it's too good to be true.
Posted by: Ezra | May 24, 2005 7:59:41 PM
We do need to control costs, but Ezra, you seem to have bought into the idea that we have high costs because of unnecessary use by consumers, a big Republican talking point. That is not the real reason. The main reasons are bureaucratic overhead, the high cost of drugs, and having a huge lower class with no coverage at all, where emergency treatment of last resort is subject to highly inflated costs. All these little tricks you speak so highly of are relatively meaningless.
Posted by: Dick Durata | May 24, 2005 8:22:36 PM
I haven't bought into anything of the sort. High costs come from a variety of sources (some those you mentioned), but one of the major ones is overuse of enormously expensive, and often unnecessary, medical technology. It's not the whole game, but it is a part. And as I'm responding to Jim's concern about consumers ponying up the $1,500 deductible, it's germane to the conversation. COnsumer driven health care, in most every incarnation, is a terrible idea. But it is trying to harness some powerful forces, and if we could aim them through a better gun, we'd be well served to shoot.
Posted by: Ezra | May 24, 2005 8:28:02 PM
"one of the major ones is overuse of enormously expensive, and often unnecessary, medical technology"
I can't argue with that because I don't have the facts and figures. If Ezra or anyone else could point me at some analysis I'd appreciate it, even some examples would be helpful. What enormously expensive unnecessary medical technology is out there?
Posted by: Dick Durata | May 24, 2005 8:51:33 PM
Here's a link showing medical advances is the chief culprit of upward pressure on the MA system. As for unnecessary, they're certainly not unnecessary at all times, but they're often overused. That's the problem with a fee-for-service system where costs go to insurers: doctors have an incentive to overprescribe and patients don't have an incentive to question them.
Posted by: Ezra | May 24, 2005 10:26:33 PM
Ezra's right on overconsumption being part of the problem. However, I think he's pointing at the wrong decisionmaker. While patients seem to play a big role in driving drug choices (thank you, pharma ads!) most unnecessary procedures are physician-driven; the doctor orders too many aggressive tests, invasive procedures, etc. But there is a vicious feedback loop here--patients/families often want the doc to "do something," and our medical system doesn't really help people choose the "do nothing" option...it's a huge systemic problem.
But I think this plan, like all HSAs, vastly overestimates the power of the consumer to direct their own care. I mean, our medical education system pretty much presupposes that healthcare is so difficult that it takes very smart people 7-15 years of intensive education to learn it. And, um, consumers who need medical care are by definition sick people. A reform strategy that expects sick people to buck the system and act as empowered agents of change is not one I have a lot of faith in.
And there's a more fundamental problem with all HSA-type plans: they discriminate against sick people. Sorry, but I don't think I should get an annual bonus in a tax-free account for having been born without asthma! Things are hard enough for sick people; why should we set up a healthcare system that is deliberately designed to reward the healthy and further impoverish the sick?
So, I don't see HSAs improving our healthcare system, although they will make healthcare marginally more affordable for healthy folks. Which is, of course, not exactly the greatest of challenges...
Posted by: theorajones | May 24, 2005 10:33:22 PM
Sonny and JimPortlandOR,
Actually one of the big reasons that I favor single-payer or some other universal non employer-based system is precidely those concerns about privacy. (That and the fact that it makes changing jobs and starting a new business so much more difficult.)
Posted by: Abby | May 24, 2005 11:03:02 PM
From your link:
22% - Drugs, medical devices and medical advances
18% - Rising provider expenses
15% - Government mandates and regulation
15% - Increased consumer demand
7% - Litigation and risk management
5% - Fraud, abuse, miscellaneous
18% - General inflation
Those are given as the factors in health cost increases.
I don't see that as support for the assertion that a big factor is unnecessary and expensive technological therapy given to spoiled workers and pensioners. That would have to be under the '22% Drugs, medical devices and medical advances' but these include necessary use, research, marketing and manufacturing. After all, technology and drug advances are given as the reason we pay so much more than other countries for drugs. What percent of the 22 is 'unnecessary', what percent is drug marketing?
But all this is quibbling, thinking we can get out of our health care disaster by tweaking deductables is a distraction.
Posted by: Dick Durata | May 25, 2005 2:35:14 AM
I work for a major health insurance company, and we rolled out an HSA plan this year that is very similar to the Oshkosh plan you describe. Actually, I think it's an even better deal, at least for a healthy, (sort of) young person like myself:
$0.00 - $500.00: Covered by initial HSA funding
$500.00 - $1K: Out-of-Pocket
$1K and up: 80% coinsurance (i.e. covered by plan)
Max annual out-of-pocket is $2K, so if something catastrophic hits, you don't get whacked by that 20% too bad.
And the best part? Bi-weekly payroll deduction is only $13, compared with the $35 I was paying last year for a PPO Network plan (non-gatekeeper).
As someone who works in the belly of the private health insurance beast, I've seen plenty to make me skeptical of the industry's future. But this sort of plan just might be the right mix to get people to start controlling their own costs while providing sufficient protection against catastrophe.
Posted by: Toast | May 25, 2005 10:02:29 AM
Dick, from that list you provided, increased consumer demand is almost certainly entirely attributable to drugs. Consumers have increased demand for precisely the drugs that they didn't even know they needed until they saw them advertised. In other words, not only is ALL of the 22% drug marketing, but so is ALL of the 15% for demand, and a good chunk of the 18% for provider expenses, and that entire 40-50% falls under "unnecessary and expensive technological therapy."
Posted by: diddy | May 25, 2005 10:05:42 AM
And FYI, the plan I described in comments to this post yesterday is also very similar to the Oshkosh plan. Most interestingly, it shares the "donut hole" structure with the Medicare Part D plan. However, Medicare D has a demographic problem -- ie, everyone's old and sick -- that makes that sort of payment structure a bad idea, not only for an old population, but especially for a welfare benefit available to an old population.
Posted by: diddy | May 25, 2005 10:09:29 AM
I have a plan like this, except with a $2000 "donut hole".
For a family of 5 we figured 1-2 doctors appointments in the year would fit into the $1000 "Health Fund".
Preventative care ( baby care, physicals, etc ) is covered at 100% .
We do not have HSA's to cover the "donut hole", however you can use a "Flexible spending" account to pay it pretax. We do not hovwever because the FSA is 1) "use-it-or-lose-it", which sucks, and 2) a huge paperwork burden. It just wasn't worth it for us.
Posted by: fasteddie | May 25, 2005 11:46:09 AM
I'm sorry Ezra the BusinessWeek article plan can't be an HSA. By law, HSA insurance must pay 100% after a maximum out-of-pocket chosen by the insured. That plan only pays 90% the article says.
Also, there is no use it or lose it with HSAs. I think some commentors are confusing a Flex Spending Account (FSA) with an HSA.
In Michigan state employee family health insurance is over $1,000 a month for tax payers. In contrast HSA individual insurance is only $150 a month for a 30 year old couple and 2 children in Lansing.
Our insurance company (We wrote the first MSA in the USA) reported that 43% of HSAs had no previous insurance. This stat was also reported by the Bush administration. So the facts are a little bit different than the propaganda.
I advertise --- don't pay $1,000 a month for health insurance that's insane. Many families have HSA health insurance for $200 a month then they grow their savings in a tax free HSA. HSA funds that are never taxed will last longer in retirement. President Bush says, "Become empowered with a tax free HSA."
Personally I like tax free deposits, growth and withdrawals that the HSA is designed for. I think the best tax cut is no taxes. IRAs and 401ks are old taxed accounts. Taxing every dollar saved for retirement is wrong. Where "trickle down", saved by citizens in tax free HSAs, is right.
Oh ya, I always end radio commercials with: Medical Underwriting is required.
I have had many clients become sick and die with MSA and HSA coverage. So if you need examples from every angle I have them. This is our 9th year of enrollments.
I'm glad to see you are at least keeping an open mind Ezra. I know it's tempting to think that if you were King and could control all $1.8 trillion in health care spending that you would do a better job. I just don't think that is going to happen anytime soon. But that is a fun game to play.
Posted by: Ron Greiner | May 25, 2005 7:26:49 PM
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