Previous discussion (see part 1 and, in particular, part 2) noted that health care costs are a large part of consumer incomes and noted who in the proposed system can obtain health coverage.  Next up are proposals on services coverage and pricing.

In the proposed system, a basic coverage policy is offered by each insurer.  The basic policy limits coverage to just that needed for the treatment of illness and injuries.  Advanced and esoteric services are offered in an optional “extended coverage” policy that some insurers might choose to offer.

In this proposal basic coverage includes: generic drugs, most medical and surgical services provided in a local clinic or general hospital setting; prenatal and childbirth; limited stay in psychiatric or addiction treatment or orthopedic rehabilitation facilities; and other common treatments for illness or injury.  The basic policy is the pathway to essential services and its limits and copays are the main defense against runaway costs.  Since drugs are a crucial part in the treatment of many illnesses and injuries, they are included in basic coverage.  Most drugs under patent protection are priced at nose-bleed levels in the U.S.   Despite some differences in efficacy, an illness can often be treated by either proprietary or generic drugs.  Since generic drugs are much cheaper, they are included in the proposed basic policy.

E.g. in 2011, at a Publix Pharmacy, 30 tablets of Crestor (under patent protection) cost $142.00 and 30 tablets of simvastatin (generic) cost $11.32.  Both are drugs for cholesterol control.

Despite widespread public disdain for ACA, some lobbyists still advocate coverage for every health service or lifestyle want and insist that the public should bear the cost even though they  cynically plead ignorance of the cost.  Long term care was dumped from the original ACA because it could not be made affordable.  At about $60,000 per year over the average stay of 3 years, long term care is unaffordable for most consumers who’d have to pay their own way.

At an insurer’s option, an extended coverage policy may be offered that includes: long term care; advanced reproductive interventions such as IVF; some proprietary drugs (those for which there are no generic drugs with similar curative powers); dentistry, vision and hearing care.     The aim is to make extended coverage as affordable and attractive as possible to people with more sophisticated wants and matching budget.  Beyond “extended,” some insurers may offer “designer” policies that include; a personal DNA map, tattoo removal, cosmetic surgeries, chronic psychiatric counseling and perhaps “new age” cures they find to be marketable.

Prices for medical services should be posted at the point of service delivery.  Those who feel this is crass probably have not had to pay the extortionate rack rates charged.   Some consumers are insulated from knowing the high cost of services they consume because someone else does the actual “paying.”  To force a conscious decision by the patient on whether the service is necessary, there should be a copay for each service delivered, and the copay should be more than just a token amount.

Prudent consumers should not be stuck with the costs of another person’s intentional misbehavior.   So for the cool kids who ride a motorcycle or bicycle or ski without helmet, drive an automobile without seatbelt, overdose on street drugs or alcohol, participate in fight-club, ride Niagara Falls in a barrel, or suffer injuries while committing a felony, the cost of getting patched up should be painfully theirs.  The Emergency Room copay charges for injury and illness due to those misbehaviors should be 100%.  The costs must not be tossed onto the backs of well-behaved consumers and taxpayers no matter how much the cool kids admire high risk behavior.

In the proposal, insurance policy prices (plus copays) should cover the actual services costs.  Policy premiums for each of the basic and extended coverage policies should reflect the insured party’s age (coarse strata such as 18 years or less versus 19 and older) and health condition (coarse strata such as standard risk versus higher risk).  Standard risk may include the lower two-thirds of the risk pool.  Higher risk may include the top third of the risk pool.  The high risk category is where many “pre-existing condition” consumers would be placed.  But, the “higher risk” boundary puts about 100 million people in the category so the premiums will be closer to “reasonable” than to “ridiculously high.”

Covering only the essential services, paying noticeable copays and being very aware of prices are proposal elements that drive costs down.  Paying for what we consume is a topic that tends to awaken our inner-Ayn Rand or inner-Karl Marx.  No doubt there will be strife over what copays are fair.  It is essential that the insurance prices cover actual costs – because that’s what helps align prudent behavior and lower costs.

Alan Daley is a retired businessman living in Colorado who follows public policy from a consumer’s perspective.