Unintended Consequences of "Market-Based" Health Reforms

The essence of “market-based” health care “reforms” is that patients are exposed to the prices of the services that they receive (or are offered) and choose not to consume those with low perceived net benefits. With high-deductible health plans favored by conservative reformers, this means paying out of pocket for routine services. [*] This is a centerpiece of health care reform a la McCain, in the mild camouflage of “innovative insurance” and “expand[ed] benefits of health savings accounts.” [**] These plans already have been growing rapidly with a push from Bush and congressional Republican policies.

So how are they working out? In the S’trib’, Chen May Yee finds that market magic does not always include putting enough dollars in those pockets:

Once a month, doctors and staff at Edina [Minnesota] Sports Health & Wellness stay late to talk business…. Then there’s the topic nobody likes: which patients to drop because they aren’t paying their bills.

The clinic has been terminating an average of 16 patients a month. Most have high-deductible health plans and haven’t paid their bills for more than nine months…

Break-up letters from doctors are just one unintended consequence in the roll-out of high-deductible plans, the fastest-growing segment of the medical insurance market as traditional plans become ever more unaffordable.

Yee reports that the breakups happen in relatively special cases (e.g. small clinics that can’t afford to provide much uncompensated care) and information on the extent of the phenomenon is anecdotal. However, larger organizations are seeing increases in uncompensated care provided to the theoretically-insured:

Last year, [Hennepin County Medical Center] gave away $86 million in uncompensated care — $4 million, or 4.7 percent, to insured patients. This year, HCMC expects $90 million in uncompensated care, with 8.4 percent, or $7.5 million, from insured patients…

Fairview Health Services, Regions Hospital and HealthEast Care System also are seeing more unpaid bills from insured patients. Like HCMC, they’re nonprofit, with policies not to turn patients away.

I might suggest that a system is only so market-based when it relies on the public or (publicly-subsidized) nonprofit sectors to cover its failures. And for an added bonus, the system is not necessarily cheaper to administer:

Medical billing offices are working harder than ever. What used to be paid by insurance in a couple of weeks is now being stretched out to two- to six-month payment plans for patients, said Randi Tapio, chief executive of Medical Billing Professionals in St. Cloud, a firm that works with independent physician offices.

“We’re sending statements every month, calling them,” Tapio said. “Our costs go up.”

If a patient is uninsured, a clinic can ask for payment upfront or devise an early payment plan. But with insured patients, health plans require that clinics wait until after the service and the health plan determines who owes what. By then, the patient is out the door.

But never fear, improved bill-collection technology is here!

Recently, [a] clinic began asking patients having costly procedures such as surgeries to swipe a credit card upfront. An estimated amount is authorized but not charged until the health plan sends a letter saying what the patient owes…

HealthEast clinics are looking into check-in kiosks, like those at airports, where patients insert a credit card and are asked if they want to pay their co-pay.

“The thing is to be more intentional about collecting,” said Keith Rahn, who oversees HealthEast clinic billing.

The U.S. Chamber of Commerce has been running ‘issue ads’ telling Minnesotans that Sen. Norm Coleman has been working to keep government out of health care decisions. The credit-card companies, not so much.

[*] Which is to say, the premise of the system is that its biggest problem is overconsumption of routine care. In this regard, it runs against the current of some traditional health plans which have been reducing out-of-pocket shares for some expenditures (e.g. related to chronic conditions like diabetes) because their members are perceived as not being good at picking and paying for the higher-return care.

[**] Amusingly, while Obama issues pages generally link to more detailed briefing documents [PDF], a “Learn More About the McCain Health Care Reform Plan” link takes visitors to this page with a few bullet points and an auto-playing video ad, which in turn links back to the issues page for “the facts.”