Mini-Med Plans

Today’s Managing Health Care Costs Indicator is $2000

There’s not a lot you can buy in health care today for $2000.   An MRI? Often $2000.  A hospital day (not a hospital stay!), more than $2000.   Obstetrical professional charge for care through pregnancy?  $2000.

So it was big news when the Wall Street Journal reported that McDonalds was threatening to discontinue its “mini-med” health insurance plan, which has an annual coverage limit of $2000 (or $10,000, according to the WSJ article). This plan has high administrative costs as a percentage of total premium, since the total premium is so low and there are certain fixed costs of operating a health plan. Health care reform requires that at least 80-85% of total premium is spent on delivering health care.

The Obama administration indicated that it would grant exemptions to these health plans until 2014, when health exchanges would be in place to allow these employees to purchase their own health policies with substantial federal subsidies.  David Leonhardt  in tomorrow’s NY Times points out that the mini-med plans are good if you’re healthy, but they are not especially helpful if you have any serious illness.

But let’s look ahead to 2014.  Someone making minimum wage will be eligible for substantial subsidies to purchase much more meaningful health insurance – the kind that would cover him if he got leukemia, or needed an emergency appendectomy.   Socially – this is good, because people won’t delay seeking care, and there will be less uncollectable bad debt at hospitals. 

But I have another fear.  How will the post-health-care reform world look to the bike messenger? See this archival article from the Boston Phoenix for the reference.  I’m worried that this will look like a raw deal for the bike messenger who would have foregone health insurance altogether, or for the burger-flipper who would have paid $7 a week from his paycheck for a policy that wonks know is inadequate, but that serves the healthy 23 year old perfectly well.  The new world of having to pay $25 per week for “real” health insurance is likely to be very unattractive. 

Ultimately, the problem is not McDonalds – where a full-fledged health care benefit would cost half again as much as the employee’s salary.  The problem isn’t immortal 23 year old bike messengers, who can’t believe they could ever have a serious illness.  The problem is that health care is too expensive, and American consumers are too price sensitive to allow low-wage companies to add the cost of full-benefit health care insurance to their prices.

Let’s hope that other elements of health care reform, including Medicare cuts, comparative effectiveness research, limited networks, and transparency are successful at suppressing medical inflation so that this problem won’t seem even worse by 2014.

A few miscellaneous links:

·        Brigham and Women’s researchers, including HPM235 alum Angela Bader, did a simulation to show that even hospitals with a modest complication rate would save money by implementing surgical checklists.  There are ways to save health care resources that even improve the quality of care – but they take leadership and they’re not easy.

·        The Washington Post ran a good article last week about how costly the newer biopharmaceuticals have become.  From the article:
The latest is Provenge, a first-of-a-kind therapy approved in April. It costs $93,000 and adds four months' survival, on average, for men with incurable prostate tumors. Bob Svensson is honest about why he got it: insurance paid.

·        The October Health Affairs  has hit the internet (although it’s probably still weeks from my mailbox).  The headlined topic is comparative effectiveness – more on this in future posts.

·        The AMA’s American Medical News reports that hospitals are having a historic high number of layoffs in 2010.  This indicates that many hospitals really are seeing the need to constrain the resources they use.  This is bad news for an already-shaky economy.  But realistically, we can’t expect the health care sector to be lowering health care inflation and robustly hiring simultaneously – since labor costs are a substantial portion of the resource cost of delivering health care.