Today’s Managing Health Care Costs Number is $0
Kaiser Health News reported yesterday that there are health plans on the Obamacare exchanges in metropolitan areas across the country which are offering “free” primary care visits – visits that are covered before patients must pay a deductible. That’s big news – it’s typical to have deductibles of $5000 for silver or bronze plan – and these deductibles mean that patients have to pay for the entirety of their health care out of pocket until they have a hospitalization or a large medical expense.
The plans have a number of approaches to making this possible. Some own their own delivery systems – so the cost of primary care is “fixed,” and the plan essentially won’t be incur extra expenses for more primary care services unless their physicians are already at full capacity. Others have very limited primary care networks – which could include only the physicians associated with the lowest overall health care costs. Others are betting that this benefit will let them recruit the healthiest populations, which allows for enhanced benefits while total costs will stay low. Many cite the notion that a bit of primary care now is less expensive than hospitalization that the primary care visit can prevent.
Kaiser Health News couldn’t even find an expert to argue this is a bad idea – many pointed to this as evidence of good new innovation in the health care exchanges. I wrote a blog post in 2009 that IBM’s plan to offer “free” primary care visits would not likely save medical claims dollars – but I was considering only the incremental cost of each new visit.
This is refreshing news from a plan benefit design point of view. Many patients with modest incomes simply cannot afford routine health care – and these plans address this issue for those without serious illness. Further, primary care typically costs 5% or less of total health care costs –but impacts a huge majority of patients –so this benefit design shift will be attractive but will not bust the bank.
This approach is not possible for employer sponsored health insurance that includes tax advantaged health savings accounts (HSA). These plans are not allowed to offer “first dollar” coverage until members reach their deductibles, except for preventive care. The regulations around HSAs are not compatible with value based insurance design, where members pay less out of pocket for higher value services.
There’s a potential dark side to this new benefit approach of offering “free” or low priced primary care services. The exchange plans are keyed to the “percent actuarial value” they offer to their members. A bronze plan offers 60% coverage, a silver plan offers 70% coverage, a gold plan offers 80% coverage and a platinum plan offers 90% coverage. Providing a higher level of coverage for those members who have low total expenses means that the insurance subsidy will have to be lower for those who have high total expenses.
Insurers can avoid charging the sick more to subsidize this benefit if the higher subsidy for office visits actually saves dollars in hospital care, in which case value would be increased. Recruiting healthier members would also allow an insurer to give extra subsidies for office visits – but that would simply transfer the real cost of sicker members to competing health plans.
Patients on average use a bit over two primary care visits a year. Covering these before invoking the deductible will therefore cost about $300 a year – or $25 a month. If this extra cost doesn’t lead to higher premiums but instead is transferred to the 20% of members who exceed the annual deductible (about $5000), they would incur an additional out of pocket liability of $125 per month, or $1500 a year!
Data from Kaiser Family Foundation, 2010. Note that the top 20% of patients represent over 80% of total cost - and these are likely the people who will exceed their deductibles.
