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The health care reform law has yet to be implemented, yet the
marketplace is already delivering one of the outcomes that the bill was intended
to provide, the potential for lower costs and lower insurance premiums.
The number of people visiting their doctor is starting to increase,
according to a report in The Wall Street Journal based on data from
insurance company earnings reports. The Journal summarizes the situation
as one in which "Insured Americans are using fewer medical services,
raising questions about whether patients are consuming less health
care as they pick up a greater share of the costs."
Based on the data, some interesting observations are emerging. For one: '"People
just aren't using health-care like they have," said Wayne DeVeydt, WellPoint
Inc.'s chief financial officer, in an interview Wednesday. "Utilization is lower
than we expected, and it's unusual." The details are even more interesting. For
example, data suggests that patients are decreasing the number of "elective" procedures,
such as knee replacements due to the current economy. That suggests that people
with jobs, those who tend to have commercial insurance, are putting off procedures,
perhaps to avoid being away from their jobs, for fear of losing their earnings,
or even their job.
One expert told the Journal that this may be a permanent development, with an
interesting side effect, the lowering of insurance premiums.
Another reason for the decreased utilization is the rise in high deductible insurance
plans, which shifts the up-front cost burden on the patient, and makes it harder
to get to the point where insurers have to start footing the bill. As people
become more responsible for their own medical costs, they tend to hold back on
their use of the system.
Some think that this is temporary, and is clearly due to the high deductibles.
Insurers are expecting utilization to rise later in the year as more people meet
their deductibles and rush to the doctor for more things that would be covered
by the insurance companies.
There are also other potential issues ahead that change patient behavior. According
to The Journal: "What's more, the federal health overhaul could cause usage to
surge again. The new law will hand insurance cards to many Americans in 2014,
which could unleash pent-up demand. Utilization has ticked down in previous recessions,
and tends to take a year or two to change because of how far in advance employers
and insurers design their health plans, said Carl McDonald, an analyst at Citigroup
Investment Research. He said the last time he saw utilization fall off was in
2003, adding that usage also dipped in the early 1990s. But he added the drop
is bigger this time than in previous recessions."
One thing is certain, insurance company profits are up. According to The Journal: "The
declines in utilization has boosted profits for insurers, who set their prices
to cover anticipated medical costs. Insurance industry prices and profits have
been under fire by Democrats and regulators this year. Insurers have justified
high premiums by pointing to out-of-control medical costs. But the recent drop
in usage could make it difficult for insurers to argue that continued price increases
are necessary. On Wednesday, Aetna said usage of health-care fell in the second
quarter, feeding a 42% increase in profits. WellPoint reported a 4% earnings
bump, saying that hospital admissions and usage of prescription drugs had dropped
compared with a year earlier."
Conclusion
The marketplace may be telling us something. If you make people pay for their
health care, costs will be more likely to decrease, as utilization of services
becomes more measured by consumers who have to pay their own way. Yet, what lies
ahead is uncertain, with the government creating a whole new set of rules and
regulations aimed at controlling the costs and the access to health care.
Here is a prevailing attitude that we've noticed in our own practice from Medicare
and Medicaid patients, who pay little or nothing for their medical care, and
often utilize large amounts of medical resources. When this scribe, in his physicial
role speaks to those patients with regard to cost, a fairly common response is "don't
worry about the cost Doc. I'm not paying for it." This happens on a fairly frequent
basis. And it's in the context of what medications or treatments insurance (Medicare,
Medicaid, or Medicare advantage) drug formularies and coverage agreements allow
to be used for certain conditions. It is not often the best drug or treatment
for the patient, but it is the drug or treatment that is covered by the policy.
These patients, who often pay small premiums, if any, for their coverage have
little clue as to what the cost of their treatment is. Thus, they are detached
from the decision and don't really care about the cost. They just want the service
or the medication. On the other hand, those patients with mainstream insurance,
and the increasingly frequent high deductible plans, often have to pay for their
own medications or their own treatments, as well as having to pay for the increasing
insurance premiums. That often means that several hundred dollars of their own
money leaves their pockets for treatment. Those patients, in our experience,
are very cost conscious, and also have realistic expectations about the outcome
of treatment.
If and when the entire Obama health care law is enacted, the upheaval in expectations
and the sudden reality check for those who have been paying little or nothing
for their care will be tremendous. As millions enter the health care system,
less services, not more, and less expensive (sometimes less effective) treatments
and medications will be available.
That means that chronic pain patients who have been taking Oxycontin and other
expensive drugs for their ailments will have to take generic morphine instead.
And the results may be less satisfactory. That, of course, is assuming that chronic
pain medication will be covered under the upcoming health care plan.
When that day comes, and it will, those patients that have been detached from
the cost side of the medical equation will suddenly be faced with the reality
of the relationship that exists between costs, results, and quality of service.
To those who have been paying their own way for some time, it will just be business
as usual. They won't like it much maybe, but at least they won't be shocked,
since their reality check came in 2010, not in 2014.
Physicians are already adjusting to the reality of the shock that lies ahead.
Many are becoming increasingly selective in who they see as patients, while others
are establishing cash based practices. Many are opting to leave the practice
of medicine altogether. And that's four years away from D-Day.
What's our point? The marketplace is much more efficient than the government,
and by the time the government solution is implemented, the market will be well
on its way to the next phase of the dynamic that the government is trying to
change.
We'll be on Twitter
some time today before the market closes with some updated comments.
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