The reality of health reform

The Obama administration announced last week that 3.6 million Medicare Part D recipients received $2.1 billion in pharmaceutical discounts in 2011, thanks to health reform.

Because of the law, drug companies are required to give seniors discounts once they reach the so-called doughnut hole, at which point they have to pay up to $4,550 out-of-pocket after their prescription costs pass $2,840 in a given year.

This is an excellent example of why health reform likely will not be repealed even with a Republican president and majority in Congress. The pharmaceutical industry agreed to these discounts to help pay for reform because Medicaid expansion and the health insurance exchanges would expand the market. Seniors are now enjoying them. Repealing reform would (1) spit in the eye of one of most powerful lobbies in Washington, and (2) deeply disappoint the most powerful voting bloc.

Ain’t. Gonna. Happen.

We’re all going down together

U.S. single-payer system proponents like to point to other industrial nations, especially in Europe, who have lower health-care costs. This is true, but it has become clear costs are rising as swiftly elsewhere. This suggests rising health costs are caused by something other than “the system.”

Standard & Poor’s (S&P) recently warned it might downgrade “a number of highly rated” industrialized nations because they have failed to curb health-care spending.

S&P blames the aging populations in the U.S. and elsewhere for endangering public finances during the first half of the 21st century. Absent reforms (and the Affordable Care Act is unlikely to count), S&P plans credit downgrades in the next three years.

S&P cited an International Monetary Fund study as an afterthought – although it should have been the headline – that technology accounts for up to two-thirds of projected health-care increases.

Bottom line: Nearly every nation is grappling with the same thing. However, it is especially pronounced in rich nations who can afford high-tech health gadgets.

Meet U.S. health care, circa 2020

The high-deductible health plan (HDHP) will be commonplace in 2020 because many will not be able to afford anything else.

People with HDHPs almost invariably use less health care. They usually use self-diagnosis, followed by self-rationing. They generally cut back equally on unnecessary and necessary care. Patients tend to give less weight to the future state of their health than to present costs.

RAND Corp. conducted groundbreaking research in the 1970s that illustrates what happens with high consumer cost-sharing. The so-called Health Insurance Experiment randomly assigned 5,800 working-age adults to different levels of cost sharing, ranging from free to 95 percent. The results showed:

  • As the percentage paid by the patient rose, physician visits decreased.
  • The total amount of treatment received was unaffected once they began medical care, meaning consumers tended to lose control of costs.
  • Health outcomes were unaffected regardless of cost-sharing and medical usage.

Another, more recent RAND study showed that HDHP enrollees cut back on care regardless of their income or health.

A recent study found that families with HDHPs between $1,000 and $6,000 were 3-4 times more likely to delay or skip health care than those on traditional plans.

As Health Care in 2020 points out continuously, this will be our nation’s health-care landscape in a few short years, regardless of what happens to the health-reform law.