Wednesday, July 23, 2008

Moving Goalposts

We've talked in the past about various caps and limitations on health insurance policies. Some limit outpatient meds, others maternity expenses, still others limit how much the carrier will pay out annually, or in one's lifetime.
We've also talked about "the uninsured," including folks who choose to "go bare."
Recently, Ezra Klein posted a thoughtful (albeit misinformed) piece on a relatively new phenomenon, "the underinsured." We've actually discussed this before, but there are some new studies out purporting to tell us just how bad the situation has become. And, of course, to tout various (and ill-fated) gummint-based solutions to a non-problem.
A "non-problem?" What's that supposed to mean?
Ezra reports on a Commonwealth Fund study released in June. Interestingly, the CF doesn't even try to hide its partisan nature; a quick search through OpenSecrets shows that their directors donate a lot of dollars to Democrats, and none to Republicans. Nothing wrong with that, of course, but understand that they have a very specific agenda here.
The study, in defining folks who are "underinsured" arbitrarily chose "10% of income spent on health care" as its cutoff. That is, if folks "spent 10 percent of more of their income...on out-of-pocket medical expenses, or if they had deductibles that equaled 5 percent or more of their income," then they were "underinsured."
Why those numbers?
The report really doesn't tell us. One might presume that spending 10% of one's income would be a significant drain. But are these catastrophic claims? That is, one-shot deals from which the patient either recovers or dies? Or are they chronic claims, such as MS or cancer treatments? And wouldn't there be both quantitative and qualitative differences between these two types of claims? It would also be helpful to know how it was that the insured had such an ostensibly high OOP. Did they choose a plan with internal maximums to save a few bucks in premium? Isn't that called risk management? We're just left in the dark.
Ezra then goes on to discuss those who are affected by this problem: "some folks being half insured and half uninsured." What does that even mean? How is one "half insured?" Seems to me, that's like being "sorta pregnant:" you either are or you're not. If one has insurance that isn't getting the job done, why is that? Certainly there are poorly designed plans out there, and some are purposely designed to look good on paper, if not in practice. But how many folks choose their coverage based on price alone [ed: I'd bet it's more than we think]? If price is the sole criterion, and we really don't know from the CF study that it was, then whose fault is it that someone ends up disappointed?
On the other hand, many folks are ignorant of their own plight, or have little choice about it. I recently blogged on a situation where the underlying plan looked fine, but had a $100,000 annual cap on all benefits paid. In today's environment, a hundred grand doesn't go as far as it used to, leaving a potentially catastrophic financial risk. Still, there are solutions to that problem; one has only to do a little research.
And what about people who choose high deductible (perhaps HSA compliant) plans? Are they "underinsured?" First, basing the criterion on income, as opposed to worth, is (ahem) "risky." If one has sufficient assets to cover the deductible (not terribly difficult to do, particularly with the help of an HSA), then what does income ratio have to do with it? And now that folks can jump-start those plans with a boost from their IRA, there's even less "there, there."
Which is not to say that there aren't problems. For example, I know that some folks choose to replace their major medical plans with less expensive (but also less useful) "mini-med" plans. I think that this is playing with fire: for the dollars saved, it's an awfully big risk to take. And there are folks who choose cheaper "hospital only" plans, incorrectly assuming that in-patient care is much more expensive than out. Sometimes that's true, but it's often not the case, again leaving a big financial hole.
So what's my point [ed: um, yeah, we were kinda wondering that ourselves]? There are no "magic bullets," no truly effective "one size fits all" solutions. As long as folks are free to make choices, they're free to make mistakes (or be mislead). But "underinsured" seems to me so ill-defined as to be essentially meaningless. And that just adds more confusion to an already complex problem, instead of actually offering substantive answers.
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