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Imagine There's No Insurance

The ACA is not the only health care game in town. Either because they are opposed to the values embodied in the ACA or because they are unable to afford the costs it imposes, some people are dropping out of mainstream insurance altogether. WaPo looks at some of the health care programs they are opting into instead. Of particular note are groups like Christian Healthcare Ministries. Members of CHM pool money to pay for each other’s health care bills, out of pocket and unmediated by insurance. 

We don’t know how many people are using this kind of system; the piece does tell us that CHM has 80,000 members, and the overall number is probably vanishingly small. But CHM and similar groups represent a kind of approach that deserves more attention than it is getting, for two reasons. First, it encourages responsible health care use. Last year, Reason explained why in a piece on Samaritan ministries:

Take Roger Stuber, a Samaritan member and residential contractor in Tremont, Illinois. He experienced a series of seizures last year that revealed a leaky vein in his brain that required surgery. Even in the midst of this terrifying episode, Stuber went to lengths to insure that he wasn’t overcharged. The hospital initially was going to bill him more than $63,000 for his surgery, which he negotiated down to just over $36,000. When he was billed $5,000 for a follow-up MRI, at first the hospital refused to offer him much of a discount. So he marched down to the finance office and demanded to see the manager in charge. She eventually agreed to accept just under $1,500 if Stuber paid cash on the spot.

If he hadn’t gone to all of this effort, the bills would have been covered almost entirely by other members. “But I’m part of a body there at Samaritan,” says Stuber, “and if I can keep costs down, I’m helping the group.”

Cost-sharing groups therefore provide exactly the kind of cost-controlling incentives that an impersonal, national insurance system can’t. Perhaps more importantly, programs like this introduce some sense of social solidarity into the health care market. Of course, America’s dwindling social capital poses a significant obstacle to the formation of these kinds of health care cost-sharing initiatives. And they are for most people not a true substitute for catastrophic insurance in the case of major emergencies. But re-imagining how to provide social services in a way that builds up, rather than obviates, social capital is a hugely important project, one for which CHM is a useful model.

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  • Andrew Allison

    “The ACA is not the only game health care game in town.”! Aside from the carelessness, ACA is (yes, this is a recording), an INSURANCE program which has little or nothing to do with the delivery or cost of health care. The real import of the post is the importance of patient involvement in establishing the price paid (as opposed to the health maintenance involvement discussed in the immediately preceding post) for care. It it really news that the cost of medical care is negotiable? Insurance providers, both public and private, do it all the time. Individuals, whether self- or un-insured should be doing the same. Perhaps what’s really needed are organizations that will facilitate this.

    • Stephen

      The problem with most “insurance” plans is that they are structured more as pre-paid healthcare plans than insurance.

      Most people would save money and would be well served by high deductible plans – plans that in the 60’s were called hospitalization insurance and were far more common than today. Many, many more were out-of-pocket at that time and bills were commonly paid to doctors in installments.

      If you want to control costs, then outlaw all insurance except for high deductible plans and HSA’s. However, most discussions end up revolving around the provision of pre-paid monitoring and treatment; so-called health management plans. If that’s your goal, cost-control is an illusion.

      • Andrew Allison

        Insurance plans are structured to spread risk among a pool of insured. Put simply, in the case of health insurance, the premiums paid by the healthy pay for the care of the unhealthy.
        I couldn’t agree more that high-deductible plans are the best form of health insurance: by requiring the patient to pay for routine care, they represent a giant step toward making patients cost-conscious, and reducing the cost of healthcare. The unintended consequence may be that people will put off care until they have to go to the emergency room, which defeats the purpose. Oddly enough, the only redeeming feature of ACA is that it has outlawed all health insurance except for (relatively) high deductible plans. It’s going to be really interesting to see how this shakes out — especially when those who opted for Bronze coverage get their medical bills and premiums rise to reflect the increased cost due to pre-existing conditions. My guess is that people who thought they were getting the typical pre-ACA plan, with minimal deductibles and co-pays are going to institute the dreaded “death spiral”. ACA plans only make sense for people who anticipate medical expenses well over the maximum out-of-pocket cost, and actuarial realities tell us what that means for premiums.

        • Stephen

          Sure, insurance plans are structured to spread risk. That’s the problem with government provided, or subsidized, plans involving the provision of medical treatment. There’s no proper definition or accounting of risk.

          This is a casualty product rather than a life product. Life products can be reasonably modeled sans the occasional nuclear war or pandemic disease with high mortality. Recent subsidized offerings are more akin to the National Flood Insurance Program where premiums set artificially low assume a very high tolerance for the risk of loss – where the concept of loss itself is not well defined. If I can tolerate an infinite loss, then I can offer you a product with a level premium of $0. Beat that.

          And this doesn’t touch on the poor modeling of utilization. We have life tables going back the better part of 200 years now on which to model mortality, but what about modeling the utilization of medical technology existing and soon to be developed in the treatment or monitoring of disease, much less the more nebulous notion of disease prevention? You can’t do it. Yet if this is to be an insurance program, you must; because this is central to determining risk – assuming there is something less than a tolerance for infinite loss and a ceiling has been identified.

          To assume that any of this can or will be done by a central authority is foolish.

        • AriTai

          re: trading prudent care for emergency room. This is not true when the deductible applies to ER care as well. But that’s not how the current system works. What’s more interesting is that between the ages of 18 and 32, childless adults see a doctor only about six times, and 5.75 of those visits are for their birth control. Meaning these young people are largely invincible (save for the 1 in 10000 bicyclists who have a serious accident wearing a helmet which leaves them a vegetable for the next 60 years.. vice those without a helmet who go quickly) and would be well served by a high deductible (say, a dozen iPads or so) catastrophic care policy. About $300 per year for that demographic.

          And if we made BC pills “pharmacist over-the-counter” (get a little longer lecture from the pharmacist about danger signs and when to go the doctor – or better yet endure / absorb a lecture and pass a quiz at the pharmacist’s kiosk vice rely on rote human recitation) the generic pills would drop from $9 month at Walgreens to $4. And if we made injury from BC pills “no fault” – rather than allowing damages just address the costs of the problem caused, the price of BC pills would drop to maybe $2 a month. Granted, this would be too simple and deny the politicians easy access to and influence over the 53% of the voters (women). And the other guilds are certainly complicit (doctors, hospitals, drug companies, etc.) who all can’t look beyond the gift of enlarging their customer base by 20% without having to compete for it.


        • Jeanne_DeVoto

          They’re high-deductible plans, but they’re first-dollar coverage. What that means is that every charge must go through the insurance company, even though you’re paying out of pocket for the care.

          Which in turn means that the price charged is the price negotiated with the insurance company. They won’t give you a negotiated discount once they know you have X Insurance. In fact, contractually, they can’t: they’re required to charge all X Insurance patients the agreed rate.

          In other words, the ACA plans have the primary disadvantage of high-deductible plans (total costs are hard to predict) while retaining the primary disadvantage of comprehensive plans (no way for customers to comparison-shop or take action to reduce their out-of-pocket costs – other than foregoing care altogether).

          So there’s no redeeming feature after all and the ACA’s record is unblemished: it worsens the system of paying for medical care in every regard, without exception.

          • TheRadicalModerate

            So this really isn’t an ACA issue so much as it is an issue with network-negotiated rates. That’s an important point, because, while rates negotiated at the insurer level are less of a monopsony system than, say, a single-payer, they’re still pretty close to a monopsony in comparison with a consumer-negotiated system. If you used a consumer-negotiated payment that got sent in for purposes of tracking the deductible (and compared against the old “reasonable and customary” test that the insurer used to use before PPOs became so popular), you’d have the best of both worlds.

          • Jeanne_DeVoto

            Well, sort of. It’s an issue with first-dollar plans, because with first-dollar plans, all medical care is subject to the negotiated rate (even if you’re paying for it out of pocket because you haven’t met your deductible). This is OK in a true comprehensive plan (that covers all your care, with no deductible). It’s also OK if your plan is a traditional high-deductible plan that isn’t first-dollar. But our friend the ACA functionally outlawed both options and made everything a first-dollar plan, but with high deductible.

            I think I mentioned a while back the idea of having payments made from your HSA count toward the deductible/out of pocket max. Of course, you’d need to lift the ACA restrictions on HSAs for this to work well. It has the advantage of equalizing tax treatment between out-of-pocket expenditures (currently taxable) and premiums (tax-exempt) – that unequal treatment is one thing that pushes people toward comprehensive plans and away from negotiating prices for care.

          • TheRadicalModerate

            I might be misunderstanding something here: It’s not so much an issue of “first dollar” as it is of “has a provider network with negotiated rates”, isn’t it? Even for a traditional, old-timey plan with a deductible, the “first dollar” has to be accounted for, because that’s how you know when you’ve exceeded the deductible. It’s just a question of whether it’s accounted for at the consumer-to-provider transaction price or at the network-negotiated price.

            AFAIK, ACA doesn’t really care about either of these things, as long as you provide the mandatory minimum coverage set. It’s perfectly fine to offer an unrestricted-network, high-deductible plan. Now, whether anybody will buy it or not is another story, because there’s price-fixing going on behind the scenes. In other industries, this would be hanging ten on the edge of an anti-trust action, but here in Cloud Cuckoo Land, this is hailed as a great step toward “affordable care”.

            I think we’re in violent agreement here, but I’m prepared to believe that I’m being obtuse.

          • Jeanne_DeVoto

            The old-school high-deductible plans generally didn’t have a network (in other words, they weren’t PPOs). So no network-negotiated price for routine care. By first-dollar I mean that all bills, even the first dollar, needs to go through the insurance company – even if you’re paying the full bill yourself because you’re still in the deductible.

            I’m actually not sure whether the ACA specifically bans unrestricted-network plans, but I do know that in my trawling of various exchanges, I did not see any plans that didn’t have a network. PPOs at the high end, EPOs and HMOs at medium to low. Not one without a network, and most didn’t allow out-of-network care at all, even with a higher deductible and out-of-pocket max.

            I think we’re probably in violent agreement as to the nature of the problem, possibly in disagreement as to the details… but the details are just that. The basic problem is insurance that’s set up (by policy and sometimes by legal mandate) so as to make it difficult or impossible for patients to have any control at all over the price they pay for care.

          • Andrew Allison

            FUBAR! Your encyclopedic knowledge of the largely unplumbed depths of the Obaminable Care Act prompts me to ask more questions. First, in terms of lowering costs, am I wrong in thinking that while the insured don’t get to negotiate cost their insurers have more leverage, thereby lowering their costs? Doesn’t the greatest leverage lie with the uninsured who, in addition to having the ability to shop around rather than deal with networks, can save the provider the cost of dealing with insurance? Doesn’t an individual in good health who doesn’t qualify for subsidies, secure in the knowledge that they can negotiate costs, deduct catastrophic medical expenses or, if push comes to shove, file for bankruptcy, have every incentive to pass on paying premiums plus a high deductible and 10-40% of the next few thousand?

          • Jeanne_DeVoto

            The insurers have more leverage with providers than an individual because almost all insurance is now network-based – so insurers can say “We will bring you lots of customers if you accept our [low] payment rates.”

            The problem with this is seen in the narrow networks of many ACA plans: pushing for low rates means a lot of hospitals and doctors won’t accept your insurance because they can’t survive with the low rates without compromising quality of care. So you end up with insurance that doesn’t cover the best specialists or the best hospitals (bad idea when you’re really sick or badly injured and need the best), or with primary-care doctors that give you four minutes of time because they need to run dozens of patients through per day to make any money at the low rates, or both.

            The fact that a cash payer means you don’t have to deal with insurance companies is indeed a draw for providers. Hence concierge medical practices, where you pay a flat yearly fee for all your routine care. But it isn’t practical for most people to pay cash for major medical problems (which brings us back to insurance).

            Whether it’s practical to “go commando” depends very much on your situation – how much cash you have, your general health, whether you have assets. If you can’t pay for the care, you do have the option of bankruptcy to clear the debt (or persuading the providers to write off some or all of it). Bankruptcy of course will cause chaos in your financial life for years to come, as well as putting any assets you have in danger, and I wouldn’t recommend anyone be cavalier about “Oh, I can just go bankrupt.” Also, if you can’t pay, this may affect the quality of care available to you in the first place. So it is problematic.

            Moreover, the ACA (among all its other provisions) cut Federal reimbursements to hospitals for charity care (low-cost or no-cost), so hospitals are also getting strapped and I expect they’ll get more aggressive about collecting debts because of it.

            High-cost plans with high out-of-pocket expenses obviously aren’t as attractive as a risk-mitigation strategy as the insurance that used to be available. But going without also carries serious risks.

            You might want to check out the blog and book “The Self-Pay Patient” which offers an overview of various forms of care outside the insurance system, as well as the forms of non-ACA insurance. It’s not about the ACA specifically, but it is quite informative about the alternatives and workarounds available.

          • Andrew Allison

            Thank you.

          • Andrew Allison

            Much as I despise ACA, I think you may be mistaken. What first dollar coverage means in this context is a slight delay in presentation of the bill to the patient. One bite may well be enough to deliver the message that ACA is far from affordable. Furthermore, the co-pays (which are 40% for the Bronze crowd are immediate. There’s another underreported little problem for those enjoying subsidies — they are provided as a tax credit, so recipients will have to wait, on average, six months for reimbursement.

          • Jeanne_DeVoto

            The subsidies are actually a prepaid tax credit – so those with subsidies pay the premiums net of subsidy, and the rest is paid by HHS immediately to the insurance company. (At least that’s the theory. I’m not sure they ever did get that part of the back end working.)

            By first-dollar coverage I just mean that all care has to go through insurance-company billing (and so the patient has no opportunity to negotiate costs or comparison-shop), not that the patient doesn’t actually have to pay for that first dollar out-of-pocket. There may be a better phrase for this though.

          • Andrew Allison

            It just gets worse!

          • Jeanne_DeVoto

            There is a “clawback” provision in the law: when you file your 2014 taxes, if your income was greater than you stated when you got the subsidy, the IRS can “claw back” the subsidy amount (or part of it) that was improperly paid on your behalf. And unlike the tax or fine or whatever we’re calling it now for not having ACA insurance, the clawback can be collected via normal IRS procedures.

            However: this poses a serious problem for a lot of people, because the subsidy is based on 2014 income. Back last year when people were buying the insurance, they didn’t necessarily know what their 2014 income would be, since 2014 hadn’t even started yet. Get a raise, get a bonus, change jobs, work more hours, have a spouse join the work force… any of these can reduce or eliminate your subsidy. (God help you if you’re self-employed and can’t make exact predictions of your income a year in advance.) You are supposed to report any change in income to “the Marketplace”, but a lot of people won’t do that or won’t think to do it. Those people are going to be in a world of hurt come next April. and not necessarily through any direct fault of their own.

            So I’m guessing the White House will order the clawback provisions not to be enforced in the end.

            It’s clowns all the way down.

          • Andrew Allison

            Thank you for the education regarding the unbelievable lunacy of “pass it so that we can find out what’s in it”! You obviously know far more about the lunacies of ACA than any of the commentators I’ve read. Question: is the relevant income that for the year to the year of coverage (as you point out, nobody knows what their future income is going to be)? Isn’t the the fraud on the part of those signing up for 2014 coverage lying about their 2013 income?Shouldn’t the clawback for 2014 be based on the 2013 tax return?

          • Jeanne_DeVoto

            No, the relevant income for subsidies is the income for the year for which subsidies were granted. If you signed up for an ACA plan, it covers the year 2014; and if it’s subsidized, that subsidy is on the basis of 2014 income (the current year).

            So people who signed up last year weren’t asked about their 2013 income; they were asked what their income would be this year, 2014. (At least, that’s what they were supposed to have been asked – some of the exchange forms didn’t make this very clear and just asked what your income is.) If your 2014 income ends up higher than you guessed it would be last November, I wouldn’t call that fraud. It’s kind of insane, but that’t the way it works.

            I think the basic problem is that the people who wrote these regulations are federal employees. They are paid on a salaried basis, they get the standard step-increases every year, they work full-time, and bonuses and promotions are usually predictable. There’s no overtime in their world, no getting your hours cut to 29 per week, no being laid off, no taking a second job to make ends meet. These people have no understanding that ordinary people might not be able to predict their income a year or more in advance.

          • Andrew Allison

            Thank you! I can only speak to Covered CA, but it simply asks for “annual family income”. Seems to me that a good first step would be to change that to “AGI reported on your most recent tax return”. That, for all but the self-employed, will at least be in the ball park and eliminate most fraud (those receiving bonuses, etc. are employed). Given the IRS’s predilections for harassing conservative groups and junkets at taxpayer expense instead of doing its job, it seems likely that legislation requiring HHS to use IRS data to determine eligibility or otherwise for the claimed subsidies will be required. Welcome to the ACA horrors picture show!

  • Dan

    The kind of structure that Samaritan Ministries provides includes
    incentives for individuals to keep their own healthcare costs down and
    does not require a massive government bureaucracy to administer. It is
    clearly an unamerican approach to healthcare.

  • Stephen

    CHM and Samaritan seem to be examples of what used to be called mutual aid societies.

    What’s old is new again.

  • sean_parnell

    Actually, the health care sharing ministries can be a ” true substitute for catastrophic insurance in the case of major emergencies.” Members routinely have cancer, heart attacks, brain surgery, major trauma, and other very serious and expensive care covered under these programs. If that’s not the definition of a substitute for catastrophic insurance, I don’t know what is. The Washington Post article linked to includes a reference to me, my book The Self-Pay Patient, and my blog, and I regularly feature people who are covered for major, catastrophic medical expenses by sharing ministries or other options.

  • lhfry

    Maybe the climate is right for a “shared economy” solution to our medical care problem.

    • teapartydoc

      What those people are doing is voluntary, not totalitarian.

  • pabarge

    Walter Russell Mead voted for Barack OBAMA both times. Never, ever forget this.

    • Breif2

      In a race that could well determine control of the Senate, Paul A’Barge advocates voting for a Democrat over Senate Minority Leader Mitch McConnell.

  • Thad Puckett

    I became a member of Samaritan Ministries when I joined The Health Co-Op. I can honestly say the model of health care sharing is a qualitatively better experience than anything I ever experienced with traditional insurance.

  • Bob Parkman

    This IS insurance. What is missing is the discussion of how much each member is required to contribute yearly for coverage. Attitudinally each member may act as if it’s their own money, but there is still likely that not all members work as hard as each other at the point of purchase/service so there is still a bit of a free-rider problem.

    • Jeanne_DeVoto

      It isn’t insurance, no. It’s a mutual agreement to help pay for each other’s large medical bills. Insurance requires a pool of money sufficient to pay out claims, and with health-sharing ministries there is no pool of money.

  • stefanstackhouse

    Almost any variation of a cooperative form of organization for health care finance would be preferable to the top-down bureaucratic management of either central government or profit-seeking corporations. When HMOs first came out in the late 70s, we were members of one that was set up as a patient-owned cooperative. That was the best and most affordable health care I ever had. You can’t have health care cost control without some combination of palatable managed care and proactive patient involvement. You can get that with patient-owned cooperatives of one form or another.

  • teapartydoc

    Affordable health care offered in a competitive price environment will not happen without elimination of licensing by government. You may as well ask why baseball players are paid hundreds of millions of dollars. Same reason. It’s a government-sponsored monopoly.

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