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Painful Dose of Reality for Patients

With medical costs exploding, insured employees will have to dig deeper.

October 20, 2002|Paul B. Ginsburg

Many insured working Americans, accustomed to paying as little as $10 for a doctor visit, have little idea of the true costs of medical care. But employers are about to administer a dose of strong medicine to workers in their 2003 health insurance plans.

Spending on health care grew seven times faster than the overall economy last year, an unsustainable pace. Starting next year, consumers are going to feel the pain. Not only will they pay more when they go to the doctor or fill a prescription, they are going to have more taken out of their paychecks to cover the cost of health insurance.

In many ways, we are returning to the benefit structure that we had in the days before managed care, when most insurance coverage had large deductibles and other hefty out-of-pocket expenses. Managed-care plans did away with much of that, offering low co-payments and generous coverage of preventive services and prescription drugs.

So how did we end up back where we started? Faced with a backlash against managed-care plans that seemed to do too much managing and not enough caring, many plans relaxed limits on care and expanded people's choice of doctors and hospitals. As health plans eased off the cost-control brakes, doctors and patients started using more services. The result: double-digit hikes in insurance premiums.

Until recently, many large employers were willing to absorb most of the increases and were loath to reduce benefits in a tight job market during the late-1990s economic boom. Then the economy cooled.

After the public's rejection of tightly managed care, there's little left in the cost-containment arsenal except making workers pay a greater share of premiums or increasing patient cost-sharing. So far, most employers have wisely opted for increased cost-sharing because it offers consumers the option of economizing on the use of health care to limit their financial burden. The alternative of making workers contribute a larger share of premiums also runs the risk of tempting younger and healthier workers to decline coverage if they see the cost as too high.

The simple fact is that society needs to control health-care spending. It's also important to keep in mind that most insured patients are still paying a smaller proportion of the costs of their care than they did before the managed-care era.

Giving consumers more of a financial stake in their care can raise awareness about costs. Medical care is complex, and it is better that patients and their doctors consider treatment costs than be bound by intrusive administrative rules. Moreover, there are opportunities to economize without major sacrifices, such as by using generic drugs.

But too much cost-sharing can indeed become a barrier to needed care, especially for people with low incomes and those with chronic illnesses. And we are starting to hear examples of that, especially in regard to prescription drugs.

Here are some ways to make cost-sharing effective:

* Placing limits on how much a family has to pay annually.

* Offering lower costs to steer patients to the most efficient doctors and hospitals.

* Offering bonuses to people who take steps to save money. Diabetics, for example, could be encouraged to enter disease management programs -- which save money by helping people to stay healthy -- through offers of free diabetic supplies.

* Giving consumers better information on price and quality to help them make informed choices.

When it comes down to it, if given an option of tightly managed care, many consumers would prefer that to the current system of loosely managed care with substantial cost-sharing.

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Paul B. Ginsburg is an economist and president of the Center for Studying Health System Change, a nonpartisan policy research organization based in Washington.

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