Unintended consequences from healthcare reform

In early October, the New York Times published two articles that addressed a pervasive problem from slightly different perspectives. Boiled down to its essence, the problem is the unintended consequences of some provisions of the new healthcare reform legislation.

In his well crafted article, entitled “Health Care’s Uneven Road to a New Era,” David Leonhardt explored the impact caused by the introduction of new regulations into a “status quo” system.

So-called “mini-med” health plans — i.e., low-cost, low-benefit arrangements that provide minimal coverage — are offered by some companies to provide at least some type of health insurance for their employees. Mr. Leonhardt used McDonald’s as an example.

Currently, McDonald’s employees, most of them part-time and earning less than $20,000 a year, can sign up for a mini-med plan for as little as $730 a year. So, what’s the catch?

The coverage under this plan is capped at $2,000 a year.

Just think about it for a minute … what would not be covered by $2,000 in our overpriced healthcare system? The cost of a single diagnostic test (e.g., MRI), a single visit to the emergency room, or even adequate care for a common chronic condition such as asthma or diabetes would well exceed this cap.

This isn’t just McDonald’s’ problem — when the $2,000 cap is reached, it becomes everyone’s problem!

That’s because, for all intents and purposes, the person “covered” by the mini-med plan becomes “uninsured” by virtue of exhausting the benefit allowance.

When he or she ends up in the ER or needs treatment for cancer, the cascade of problems begins. The patient may end up delaying treatment or skipping some of it entirely because of lack of funds. The hospital and other providers either don’t get paid or recover only part of the cost of treatment. Inevitably, insurance premiums rise for everyone to help make up the difference.

By virtue of the low benefits they provide based on the premiums charged, it turns out that many mini-med plans might violate a provision of the new healthcare reform law that requires health plans to spend at least 85% of their revenue on medical care.

This brings me to the second article in the Times, “Waivers Aim at Talk of Dropping Health Coverage” by Reed Abelson. Balking at new regulations, he writes, some health insurers — particularly small companies and those offering limited benefit policies — have threatened to withdraw from the market or eliminate certain products.

Typically, more than a million people are covered by limited-benefit policies.

When the law takes full effect in 2014, insurance exchanges will be established to fill the potential gap in affordable health insurance. In the meantime, what should we do for the next three years to deal with this unintended consequence?

The administration’s initial response has been to issue waivers. To date, waivers have been granted to 30 or more insurers, employers, and union plans in an effort to assure a smooth transition.

Of course, opponents of healthcare reform have begun to cite the waivers as evidence of failure.

So, what can we learn from all this?

First, although mini-med plans are better than nothing, they are certainly not what policymakers intended when they passed healthcare reform. We need to consider moving up the timetable to get health exchanges up and running — 2014 may be too late!

Second, we must recognize that healthcare reform fails to address the real issue — cost control.

Finally, I see our healthcare system as a huge balloon — when you push it in one spot, it pops out in another spot. The key is to recognize that everything is intertwined.

Expanding on the wisdom of the poet, John Donne, “No man — and no part of the system — is an island.”

David B. Nash is Founding Dean of the Jefferson School of Population Health at Thomas Jefferson University and blogs at Nash on Health Policy.

Originally published in MedPage Today. Visit MedPageToday.com for more health policy news.

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  • stargirl65

    Do college student insurance programs qualify as a mini-med plans? Do they spend 85% of their moneys on health care?

  • gzuckier

    that’s kind of the opposite of insurance; classically, insurance would indemnitize you for the risk of a cost that was too high for you to pay yourself. medical insurance has morphed from that into the “health plan”. now you have this, which will pay for anything that you could pay for yourself, but nothing else.

  • http://fertilityfile.com IVF-MD

    Isn’t the concept of insurance supposed to represent coverage for things that are rare and unexpected? So then doesn’t it seem to be perverse that a plan would cover things UNDER a certain amount (say $2000 in this case) and not cover things over that amount, rather than the other way around? How about giving people the freedom to make all their own healthcare choices and accept responsibility for things under a certain amount (say $6000 for example) and then have insurance cover only things above that amount? I think we’re starting to see the reasons why this current system is failing patients, doctors and people as a whole (via the harm to the economy). We do not have a free market. We don’t have enough freedom of choice. And by allowing those in Washington to take more control, what that does do the quality of life overall for us? Let’s stand up for our freedom and the freedom of those we care about, because if we don’t, then who will?

  • http://www.BocaConciergeDoc.com Steven Reznick MD FACP

    Student health plans that Student Governments offered to undergraduates fell victim to the new regulations as well.

    Last week I received a notice from my health insurance agent that Blue Cross Blue Shield of Florida would no longer send out monthly premium bills. I cover my three employees and family with a small group policy. Not only will they not send out bills but they want electronic payment either through direct payment from our bank account or by being given a credit card. I dont know about you but I am not looking to contribute to BC/BS of Florida’s improved cash flow. I dont want any payment to get there until the last nanosecond before it is considered late.
    I let my agent know that I wanted to continue to be billed by mail and mail in my payment. He melted down. He told me that with 85% of the premium dollar having to go into the richness of the policy and only 15% to administrative costs, the company had to trim the fat. They were no longer going to use agents and he basically was going to lose a revenue source. The large government mandated exchanges will put this agent out of business. I do not know about you but when I search on line for insurance policies it is wonderful to have a knowledgable and experienced professional available to explain the subtle differences between one offering and another within the same company or in different companies. What is supposed to be crystal clear is often difficult to see without his help If the agents disappearing is a consequence of the new health care reform legislation if is a loss to consumers who are not directly in the health insurance industry

  • inchoate but earnest

    IVF-MD wrote: “I think we’re starting to see the reasons why this current system is failing patients, doctors and people as a whole (via the harm to the economy). We do not have a free market. We don’t have enough freedom of choice.”

    IVF, the evidence shows that, when left “free” to choose whether or not to pay for routine maintenance care, people (“consumers”, in your markets-uber-alles model) choose not to. And then they wait until they need much more expensive rescue care.

    We have plenty of freedom of choice. And it hurts the good choosers as well as the poor choosers.

    Among the things we’re short of is effective incentives to get enough people who can benefit themselves and everyone else by obtaining effective care for manageable chronic conditions (thus avoiding pricey rescue care), to do so. How many of the people in this category is enough? I don’t know – but I DO know the “good enough to manage costs pretty well” answer is NOT “every single one of them”.

    Dr. Reznick, technical question: how does electronic payment prevent you from paying at “the last nanosecond”? It should actually HELP you do that.

    • http://fertilityfile.com IVF-MD

      Yes good point! I imagine the light bulbs in your head just came on as you just very accurately made my point. You have just described bad behavior that people exhibit in a NON-FREE-MARKET model where the cost to fix the problems caused by their own lack of responsibility fall on the backs of others.

      I agree it’s possible that under our current NON-FREE-MARKET model:
      when left “free” to choose whether or not to pay for routine maintenance care, people (“consumers”, in your markets-uber-alles model) choose not to. And then they wait until they need much more expensive rescue care.

      Right, but if it’s true, it’s clearly because it’s NOT a free-market model based on voluntary incentives and assumption of ones own responsibility. And behavior like this is bad. Let me explain in a way that will make it clearer.

      Let’s imagine that it is decided by some central planners that cars breaking down from lack of regular oil changes is bad. So they establish repair stations that people can bring their cars to when they break down and get the problem fixed for free or in some cases, get a new car. They force the mechanics to do the repairs for free. They force the car dealers to give the replacement cars out for free. Now of course there also provide stations all over that give out free oil changes. They also put up posters and run TV ads telling people “go get your oil changed. go get your oil changed.” What do you think will happen? Do you think that people will now voluntarily go get their oil changed because it’s free? OR do you think more and more of them will think to themselves “well, if I wait longer to get an oil change here and there, my car MIGHT break down. but who cares, if it does, somebody else will pay to fix it”. THIS is the problem where coercive measures to fix a solution always end up creating unexpected consequences that are worse than the original problem.

      Now one might make the argument of “so what? Nobody deserves to have a broken car. Let’s just keep fixing these cars for free so people don’t have to suffer from broken cars. Well, here’s the problem. Where do you get the resources to fund/staff these free car-care facilities? It has to be done on the backs of the economy and if there were an infinite supply of resources, then fine, we’d be in utopia. But, as we are seeing very clearly now, the overtaxation model is unsustainable in every respect, so eventually we may end up with an epidemic of broken cars and broken bodies and not enough resources to fix them, especially after raising generations of people who are accustomed to not taking responsibility because someone else will fix the problem. THEN, when the system collapses due to lack of resources, a lot more people will be hurt than anyone can imagine.

  • http://onhealthtech.blogspot.com/ Margalit Gur-Arie

    “How about giving people the freedom to make all their own healthcare choices and accept responsibility for things under a certain amount (say $6000 for example) ”

    It seems, that some folks need to be more responsible than others. If for example, you choose a career in education of young children, you need to accept responsibility to the tune of a quarter of your salary, while those choosing a career in business or law or even medicine, should accept responsibility for a rounding error in their income.

    • http://fertilityfile.com IVF-MD

      True and it gets more complex than that. You then have to ask yourself WHY health care is so expensive and ask yourself WHY people who work 40 hours a week still don’t have enough money left over after taxes to afford routine expenses and WHY everything is so expensive so that it taxes ones budget this much.

    • ninguem

      Oh, give me a break. The people who “choose a career in education of young children” get some of the most generous insurance coverage via the teacher’s unions. Look what Gov Christie in NJ went through, trying to get the union to accept even small copays on their healthcare.

    • http://fertilityfile.com IVF-MD

      Good point, ninguem, I hadn’t thought of that. Even more importantly, we lose sight of the fact the rewards of the labor we perform from January to April (or January to May for some people) are stolen from us out of the private sector economy. That’s a lot of potential funds that we could put towards making our own choices of not only healthcare but countless other things as well. Even further, the merchants that we patronize also are subject to that same penalty without which their prices would be a lot less. It’s a gigantic factor in hindering the quality of life of working people.

  • http://www.BocaConciergeDoc.com Steven Reznick MD FACP

    Electronic payment to BC/BS/ FL involves going on line and filling out a fair amount of data and then faxing it back to BC/BS and my bank because the system they have set up does not allow me to complete the form and submit it on line. It involves re arranging my security and browser to accomodate the BC/BS system. This all takes time and ultimately costs me money. The changeover will benefit a multibillion dollar corporation but the changes are made at my financial and time expense. BC/BS of FL is a privately owned company listed as a non profit. My small staff and practice would far prefer to devote our time and energy to patient care and customer service not improving the bottom line at BC/BS of Florida especially if the savings are not being passed on to the consumers.

  • Marc Gorayeb, MD

    Obviously, a mini-med plan alone is inadequate for all but the most minor of health problems. However, if you eliminate such plans, then our citizens will lose an option that provides a stepping stone to a comprehensive plan tailored to their individual needs and financial circumstances. For example, consider the case where I choose to be insured with a comprehensive plan that has a high deductible and an HSA option. If I don’t have the cash to cover the high deductible and don’t have enough in my HSA account, a mini-med plan could provide the needed bridge until my HSA account is up to snuff. A responsible young person who doesn’t make a lot of money could cobble together an affordable comprehensive plan (with the help of a knowledgeable agent).
    Now look at Obamacare: the insurance options will be commoditized and become uniformly expensive and out of reach of people of modest income, forcing them into a government welfare plan. Agents will become extinct, forcing us to rely on government bureaucrats to navigate these complicated waters. The foundation is thus layed for the end-game we all know is coming. There is absolutely nothing “unintended” about this.

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