This report and its very premise are ludicrous. Individuals aren’t making sub-optimal choices amid a plethora of legitimate “choices” in health care coverage, they are blindfolded and throwing a dart at a target that is designed and moved around continuously by monopolistic, anti-competitive, unaccountable corporations.
When working for Corporate America, most employees don’t get a true “choice” of health plans. For a national company operating in forty different metro areas, the employer shops for plans in each metro area which themselves have partnerships with what are likely to be only three or four “networks” of providers who not only own all hospitals and surgery centers in the area but also as of the mid-2010s probably directly employ 90% of all GPs, specialists, surgeons, etc. in the “network.” Sure, you can “choose” to use a doctor that is out of that network but reimbursement rates are often 50% of in-network levels.
An employee’s “choice” for health plans typically doesn’t change which doctors will be available. Most doctors take “the big 3 or 4” in the area. It only alters the monthly premium and the portion of that premium fed to a reimbursement account for spending throughout the year versus directly to premiums.
Most insurance plans also “bundle” prescription drug benefits so the selection of plan not only involves ensuring you are comfortable with the doctors you might be forced to use or give up but understanding the potential impact of any particular deal the insurance company cut with a pharmacy benefit manager company and the deals that PBM cut with actual drug makers. Those deals can suddenly require a change in a long term prescription simply because the PBM negotiated a new deal with Generic B instead of Generic A.
As many patients will attest, particularly those on anti-depressives, drugs are NOT always interchangeable and for more complicated health issues, subtle changes in formulation between intended generics can have major impacts on patients. As many on anti-depressives also know, being forced to arbitrarily switch from one medication to another can completely destabilize a patient who may have taken MONTHS to find a stable dose on medication A amid five other medications they may also take which all interact with each other in completely unpredictable ways.
The key problems in any analysis of the health care “system” are:
Purchasing healthcare INSURANCE is not the same thing as buying health CARE. Insurance companies can alter coverage rules at any time or make decisions in such opaque ways that individuals have no way of assuring at time of enrollment that a given plan will provide expected CARE at the time it becomes needed during that term.
Purchasing health CARE is not the same thing as buying HEALTH. In other words, spending money on care does not guarantee actual health. Ask the tens of millions of Americans with long-haul COVID if their insurance coverage is helping them cure their medical issues resulting from the condition.
Billing of services rendered by “network” monopolies is consistently, intentionally opaque and fraudulent. After having a heart procedure in 2012, I spotted some odd lab charges the hospital had seemingly charged to me as though an outside firm performed the tests at a a premium when ALL of them had been performed in the hospital. After talking to my insurance company, they said “We’re not paying any of these bills for at least three months until the dust settles and the numbers stop changing.” On a $160,000 bill…
Suppose you have a net worth of $2,000,000 and a life expectancy of 20 years. Is purchasing health insurance a smart financial decision? As an individual, decent insurance in a mid-tier city (not NY or LA but not Podunk, AR) will likely cost about $780-850 per month or $9360 to $10,200 per year. Assume it provides Rx coverage for most drugs and a $1000 co-pay for treatments and max copay of $5000 for any hospitalization. Assume a typical BIG MEDICAL problem (heart issue, cancer treatment, unexpected surgery) might cost between $90,000 and $220,000 (just making those up) and assume over your remaining 20 year life expectancy, you might have one or two of those events.
If you already face conditions which require $5000 worth of drugs yearly, insurance is an easy YES decision. The net cost is only about $5200 after factoring in savings on your required drugs. Over 20 years, you would pay about $104,000 in net premiums which would protect you from a big medical bill which we estimated might range from $90,000 to $220,000. Even for someone with $5,000,000, those terms on their own are likely NPV positive. If you get more than one major illness, it’s a no-brainer.
If you have conditions that require a few generics that cost maybe $40/month, now some math is involved. The drugs you know you need at this point are only $40/month or $480/year and if you buy NO insurance, you could keep $10,200, buy the drugs at retail price and save the other $9720 over 20 years to have $194,400 to cover a big bill. AND YOU STILL HAVE $2 million in net worth.
Ah, but how much will that big medical bill cost if you aren’t buying that care at insured rates? You don’t know and have no way to find out – no hospital will publish a la carte uninsured pricing. You’ll find out the cost when they send you the bill. Will “retail” pricing of hospital care be 2X insured rates? 3X? Your willingness to buy insurance to guard against a concentrated sky-high bill over a short period of time depends upon how much of a financial cushion you want to have for food, shelter, taxes, etc.
And if you don’t get insurance and have three big procedures and one final end-of-life downturn that requires a month-long hospital stay, 18 months of nursing home care and 6 months of hospice? A one-month hospitalization might be $500,000. 18 months of nursing home care might be $9000/month or $108,000 per year for a private room. Hospice care is typically around $150/day for in-home care or $500/day for in-patient care so six months of that could be $27,300 to $91,000. There’s no clear picture on how much of that would be covered by private insurance or Medicare / state Medicaid. The amounts add up to $699,000 or 35 percent of the $2 million dollar nest egg. If expenses prior to the time of the illness ate more than $1,300,000 of the nest egg, that will take you to zero. Great if you hit zero exactly. If you come up short or have heirs requiring financial support, not so good for them.
Except for the wealthy with a clear handle on their non-medical expenses and net worth, attempting to make informed FINANCIAL decisions about healthcare is virtually impossible – by design.