One of the struggles in the American health insurance context is that there are two very different things going on under the same rubric. For people like my family who are relatively healthy and are minimal users of medical services at this time, the insurance that we get through my work is fundamentally a discount shopper’s club card for our day to day concerns. This year even with ER visits for my son’s asthma and a broken wrist for my daughter, we just maxed out our deductible this weekend when I refilled the inhaler prescription for my son. Insurance is, for us, only valuable for unlikely and unexpected scenarios. This perspective is common for most individuals who are insured. They’ll use it for primary care appointments, a few low level prescriptions and maybe an urgent care visit or two. It is a discount buyers club with hit by the bus protection.
Insurance is also a Pareto curve industry in that 20% of the users drive over 80% of the costs. Here, insurance is a very different beast. An individual with epilepsy, or serious mental illness, or significant cardiovascular concerns or multiple sclerosis or any of the other long term chronic conditions have a very different relationship with insurance. Here the question is when will a person hit their out of pocket limit over the course of a year not if. An individual could hit their limit in January if the limit is configured as first dollar deductible spending. If the same limit is configured as a 20% co-insurance, they hit the limit in July instead.
These two populations have some overlap but they are fairly distinct populations with very different needs, and creating a single insurance template does not address either need well.
what if the federal government backstops health insurance, kind of like an FDIC for your life instead of your bank account? If you get a long term chronic disease, you can opt to be taken off your private health insurance plan and put on Medicare. There would have to be a list of conditions that a group of doctors agree are long-term and expensive enough to warrant this, call it a “life panel”. This would be 1) good for people that get extremely sick because dealing with private insurance with chronic illness is – Richard says sub-optimal – fucking shitballs; 2) good for private insurers and the healthy population because the insurers could lower premiums and stop creeping around trying to figure out ways to run off the sick, which would in theory be cheaper and give more options to everyone else; and 3) relatively inexpensive for Medicare because it’s already a YOOGE system that has machinery already in place for dealing with the very sick, since older folks tend to be sicker, so it could best absorb the cost of a group of very sick people added to its coverage.
If we identified a set of big chronic conditions that are impossible to game or upcode, this could be an interesting proposal that reduces private medical premiums, and total net medical spend.
Let us take cystic fibrosis and hemophilia as examples. These are conditions that can’t be faked on a chart and can be easily verified. They are also very expensive conditions. Insurers with small risk pools in a particular region/product can be destroyed by having an unnatural cluster of CF or hemophilia members that they cover. Each condition can cost $300,000 or more per person per year to treat. Fifty or more very low utilizers in an exchange or commercial plan are needed to generate sufficient surplus to cover one CF person.
Moving these very high cost individuals to Medicare immediately lowers the medical expenses of the privately insured groups as some of their highest cost members have been removed. This means lower premiums (and for those who think insurers are inherently evil, lower potential profits as the MLR requirements kick in). Medicare tends to pay a lower rate for services than commercial and Exchange plans. The rate for Exchange plans is usually Medicare plus a bit, while large employer groups tend to pay at Medicare plus a lot.
How could this be financed? The most direct way would be for Medicare to charge the insurers who they are taking high cost patients off of for the cost of treatment based on disease category and claims history. Medicare would act effectively as a third party administrator. From a federal budgeting perspective, it could be budget neutral to slightly budget positive. The more just way would be general taxation or taxation on all private insurance plans that are eligible to move known risk to Medicare as effectively a user re-insurance fee.
There are a couple of things to think about for this scheme. First, we already do this to some extent for very ill individuals, we just don’t call it a Medicare back-stop. Our disability and SSI systems remove the sickest individuals from the workforce and transfer them to either Medicaid or Medicare depending on their prior work history, family income and asset status and a few other qualifiers. A decent proportion of CF patients are already covered by Medicaid.
About 35 percent of those now eligible for Orkambi are insured by Medicaid, the government program for low-income residents. Most of the rest are covered by private insurers. But even when insurers foot most of the bill, patients are responsible for often hefty deductibles and copays. And the drugs contribute to a health care system that is increasingly expensive for everyone.
Secondly, the two examples I chose are some of the easiest examples to put on a hypothetical life panel. They can’t be gamed. However creating a structure where XYZ conditions and diagnosis codes are on the “life panel” list while ABC conditions and codes are not will lead insurers to find ways to convert condition C to condition X. This would be done via aggressive upcoding and pet doctors (as shown in the black lung disgrace at John Hopkins) as they want to unload high cost patients to someone else. I think aggressive chart review and medical necessity auditing would clamp down on upcoding, but the structure of a life panel program design creates the incentive to push patients over no matter what structure is in place to insure that only truly sick people with real qualified conditions would be on the panel.