The Confusion in Coverage

By Kim Bellard, January 11, 2012

The more I think about our health care system, the crazier it seems. 

Let’s do a thought experiment.  You’re in an accident, and have an orthopedic surgeon fix some broken bones.  You are fortunate enough to be employed and to have health insurance from your employer, so certainly your health insurance will pay the bills, right? 

Not so fast.  Maybe the accident was work-related, in which case your workers compensation would apply.  Maybe the accident was in your car, in which case your or another driver’s auto insurance might pay.  Or maybe you fell at your neighbor’s house, in which case their homeowner’s policy might come into play.  Which type of coverage pays, how much they pay to the providers, how much you’ll have to pay, even which orthopedic surgeon you can see -- all depend on the circumstances.  One has to wonder if your eventual outcome is subject to the same lottery.

Perhaps that’s too problematic an example.  Let’s take what should be an easier example.  You get all of the recommended preventive exams.  It should be clear that those are covered by your health insurance, especially now that PPACA has specified that health plans have to cover preventive services at 100%.  Except that it doesn’t, not quite.  E.g., your preventative dental exams or vision exams aren’t covered by your health insurance.  If you are lucky, you might have dental and vision insurance that covers those exams.  Otherwise, you’re out of pocket for following the guidelines.

Adding insult to injury, if you need, say, oral surgery, you’ll probably have to figure out whether your dental or your medical insurance covers it.  Again, how much it pays, how much you pay, and which physicians you can go to depend on the answer. 

What a mess.  Then throw in the inter-insurer squabbling and coordination between the different types of insurance in situations that are overlapping or borderline.  All that adds to the costs for both payers and providers, and the frustration from consumers, providers, and payors. 

The costs of these other types of health-related insurance are not trivial.  According to the Bureau of Labor Statistics, costs for workers compensation is about 20% of health insurance costs, and about half of those workers compensation costs are for the medical component (as opposed to the disability).  The most recent National Health Expenditures (NHE) report showed “other third party payers” – which include workers compensation and a variety of other payers -- accounting for about $450 billion in 2011, almost 17% of total spending.  It’s significant.

It’s not that these other services are unimportant.  There’s a growing body of evidence linking oral health to other health conditions, highlighting the need for regular dental exams.  Vision exams are critical for spotting glaucoma or cataracts.  So why do we treat eyes and teeth differently than, say, feet or ears?  Why is periodontal disease somehow less important – often covered at only 50% in dental coverage – than diabetes, which is often correlated by gum problems?

A lot of this is due to historical accidents, if you will.  Employer-based health coverage got a big boost from the tax preference that avoided wage controls.  Medicare Parts A and B are structured to reflect then-typical Blue Cross Blue Shield plans in the 1960’s.  Medicare has struggled to evolve its design, growing ever-more complicated and adding Part D, but ending up with most recipients still adding a supplement to make coverage more comprehensive (unless the recipient chooses a more modern plan design via Medicare Advantage).  Both Medicare and employer coverage initially focused on a very medically-oriented, institutionally-based approach; both have broadened over the decades, but neither has truly revamped its approach, although the introduction of HMOs has helped force both types of coverage to include more preventive coverage. 

Medicaid does a better job than most other payers in covering a broad range of services, but actual benefits vary widely state to state and often coverage is more broad than deep (e.g., limits on hospital days or physician visits), and it requires an army of bureaucrats to determine who is eligible on any particular day.  Then we’ve got CHIP, VA, CHAMPUS, Indian Health Services and so on – each program no doubt well-intentioned but adding to the complexity of the system.  Our health system is a veritable zoo of different versions of health insurance.

The boldest thinkers at the federal level these days seem to be Senator Wyden and Representative Ryan, with their recent proposal to reform Medicare and small business coverage.  It certainly is a dramatic change from today’s programs, but I’d really like to see us take a step back and think more deeply about what “health” is, how “insurance” can support that health, and how we ensure that all Americans – regardless of age, income level, or health status have access to both health services and the redesigned health coverage. 

E.g., we certainly want employers to have safe workplace conditions, but is it necessary to have a separate medical component to incent that, or does the disability portion, along with some liability consequences, accomplish that?  I’m not talking about the so-called “24 hour” coverage that combines health coverage and workers compensation.  This has been attempted several times, none of which have, to my knowledge, been particularly successful – in no small part because each component still had to follow the specific laws and regulations that apply to the component.  That makes true integration difficult.  I’m talking about truly engineering what health insurance is, what it should cover, and how it should pay.  Rethinking what health insurance should include would be a hard task, fraught with the prospect of undue influence from various lobbying organizations, but it’s one I wish we had leaders bold enough to attempt.

I suspect few, if any, Americans fully understand the details of the various health programs they may be covered by, much less be able to have great confidence that they can truly compare choices in them.  I’m all for competition and variation, but not in the “fine print” – the definitions, exclusions, and covered benefits.  It would greatly enhance competition to truly have a uniform structure, and it would help us accomplish modern health goals if that structure was more broadly designed.  Doing so should force us to realize that some things should be paid for via insurance and others should not. 

Sadly, even the Obama Administration seems to be backing off of the PPACA requirement for common essential benefits, in their recent decision about plans offered through the forthcoming exchanges.  They are bending to calls for state flexibility by allowing state decisions on the essential benefits, within specified parameters, but the rules don’t bode well for someone who, say, lives in one state but works in another, or someone who moves between states.  They could see very different benefits based on through which exchange they get their coverage.

Some might read the above and misread me to be advocating an all-encompassing single payor system.  Nothing could be further from the truth.  I’m hard pressed to think of any monolithic program, government or otherwise, that offers the kind of innovation and choice Americans value.  I am advocating drastically new product designs that break the existing artificial barriers to protecting and enhancing good health.  If this requires changing the applicable laws and regulations – and it would – then so be it.

Winston Churchill once famous said: “Americans can always be counted on to do the right thing…after they have exhausted all the other possibilities.”  I just wish we didn’t have to go through so many other possibilities before we decide to fundamentally rearchitect not just who finances coverage but also what “coverage” should look like.

Comments

[P Stevens]

Your article, Confusion in Coverage,makes some very good points. The goal of the Affordable Care Act is to provide low cost medical insurance to U.S. citizens and legal residents. The concept is flawed in many ways. Following are just a couple of things that undermine the law as written. If the Supreme Court upholds the individual mandate of the healthcare law and it goes into effect in 2014 the penalty for not purchasing health insurance is so low that there is no incentive, if your healthy or just don't want to buy insurance, to purchase individual medical insurance. Just pay the penalty and save some money. You can't be turned down by a carrier, so why not wait until you need the coverage?
Secondly, the cost of the healthcare law is to be paid for by $500 billion in new taxes and $500 billion from Medicare. The reductions to Medicare Advantage providers has already started. Carriers are raising deductibles and co-pays, charging or raising their monthly fee and revising drug tiers in their formulary. Costs are on the way up, benefits are on the way down. The underlying cost of health care has not been addressed. Simply reducing benefits to providers does not solve the problem.

[Jane]

Thank you for posting this. Sometimes people skip dental insurance when money is tight, and when people don’t have dental insurance they tend to skip routine cleanings. Unfortunately, this ends up costing them more later on. Here is additional information on the difference between discount dental plans and dental insurance: http://bit.ly/LaVpBC