Thursday, May 19, 2011

Reverse Deductible

A problematic byproduct of the American approach to health care has been the divorcing of a substantial number of patients from health care costs. Patients with low deductibles and extensive coverage have little incentive to moderate use of health care; many economists believe that this contributes to medical inflation. Policy analysts from across the political spectrum have recommended higher deductibles as a antidote.

Yesterday during a talk at the University of Washington, Kaiser Permanente CEO George Halvorson turned this argument on its head. Deductibles, he argued, should reflect the French approach and come only after payment had been exhausted. It works like this: Insurers cover a given procedure up to a standard amount. The patient pays anything in excess of that. Halvorson believes that this sets up a a situation in which doctors will compete to design procedures that charge the standard amount. Nothing prevents anyone from charging more for a blue-ribbon approach, but in that case the only people paying more would be those who chose to.

This one is new on me, and I don't know what the arguments against it would be. However, there are definite holes in the idea of charging higher deductibles. For one, companies that offer insurance with low deductibles and extensive coverage are unlikely to change this practice even though it would mean lower costs for them.

Businesses don't offer gold-plated benefits packages out of altruism: They offer such benefits because they are competing for employees. They're unlikely to adopt an approach that would put them at a competitive disadvantage; it would be penny-wise and pound-foolish for Google to lower benefits if that reduced their intellectual capital by putting them at a recruiting disadvantage with Microsoft. Thus, the very people who overuse the health care system would be unaffected by the high-deductible policy meant to curb their enthusiasm...

Halvorson, a Norwegian-American, favored the audience with a Norwegian joke: "Then there was the husband who loved his wife so much that he almost told her"...