If you chose your health plan, you may well have the wrong one
December 14, 2020
Topics: Quote of the Day
Most Americans make poor choices. So do most professional insurance brokers, a new study finds.
By Margot Sanger-Katz
The New York Times, December 11, 2020
When Paul Krugman, the Nobel-winning economist and a New York Times columnist, started a teaching job at the City University of New York, he had a choice between one union health plan at The Times and an array of university options, “which I found incomprehensible,” he said in an email.
“I asked H.R. at CUNY if they could explain the differences; they said no. So I went with The Times, precisely because it didn’t require that I make a choice!”
For most Americans, with or without a Ph.D in economics, right now is the time to pick your health insurance. Medicare beneficiaries can choose a Medicare Advantage plan or a Part D prescription drug plan. People with coverage at work can choose from the options their employers offer. People who buy their own insurance can make a choice on the Obamacare marketplace in their state.
The range of choice is generally heralded as a good thing: Not everyone wants the same plan, the thinking goes, so offering multiple options helps people shop for the one that is best for them. That logic drove the creation of Medicare Advantage, with legislation passed by Republicans, and drove the design of Obamacare, with legislation passed by Democrats.
But it turns out in real life most people are terrible at picking the health plan that is right for them. Health insurance is a complicated financial product, and study after study has shown that people routinely pick bad plans, even choosing options that leave them worse off financially in every possible scenario. And, because people are so bad at choosing good plans, the market often sends weird signals to insurance companies, encouraging them to offer more of the wrong plans instead of the right ones.
People struggle to make good choices when it comes to all kinds of financial products, but health insurance is especially confusing, with its mix of technical benefits and fees. Many Americans don’t understand terms like “deductible” or “coinsurance” very well. And few are good at predicting what sort of health care needs they will have in the coming year. Picking an ideal health plan requires combining all of these features — knowing what you might use, what it might cost you, and how those expenses combine with the plan’s monthly premium.
The people most likely to make bad choices appear to be those least able to afford it. A recent study in the Netherlands, which offers insurance to everyone through an Obamacare-like marketplace, found that only 5 percent of Dutch customers did a better job at choosing an ideal plan than they would have by choosing a plan at random.
But even highly educated Dutch professionals struggled. People who worked in the insurance industry and had advanced degrees made a good choice about 30 percent of the time. And only about 40 percent of trained statisticians — the group with the best performance — chose good plans for their needs.
In the United States, a working paper has found that many professionals who help people select health insurance are also bad at picking plans, performing substantially worse than a computer algorithm.
Brigitte Madrian, the dean of the Marriott School of Business at Brigham Young University, has also studied health insurance, but said picking a plan for her family when she arrived in Utah was a heavy lift. She set aside an entire Saturday for the task, scouring websites and constructing spreadsheets. Ultimately, she asked her fellow health economists what they had chosen.
“If I’m having a hard time, what is the rest of the population doing?” she said she wondered. “They must be throwing darts.”
Reader response:
By Don McCanne, M.D., San Juan Capistrano, CA
The traditional Medicare program gives patients almost unlimited choices in their health care professionals and hospitals which are the choices they really want, not choices of confusing health plans.
But deductibles, coinsurance and potential catastrophic losses in Medicare may be a problem for some. If we were to fold Medigap-type benefits into Medicare then it becomes the one size that really does fit all that we truly want – a comprehensive program that works for everyone (i.e., an improved Medicare for All). There would be no need to have to choose between plans that limit your choices to provider networks, with a high risk of turning out to have been the wrong plan choice, as Margot Sanger-Katz’s article shows us.
The administrative efficiency would save hundreds of billions of dollars which would be more than enough to pay for the improved benefits of Medicare for All.
By Charles Pack, Redbank
Why do we do this to people, especially old folks like me? Insurance should be pooling everyone into one pool and sharing the “risk”. Asking everyone to choose a plan (and pay for it) assigns the risk to each individual. This is wrong and unnecessary. Single payer systems like Medicare for All is the only way to go.
Comment:
By Don McCanne, M.D.
Americans make poor choices when offered a variety of plans through their employer, through an insurance broker, through the ACA exchanges, through Medicare Advantage, through Medicare Part D, or whatever. If you want more proof then you might check the three reports available through the “study after study” links in the article by Margot Sanger-Katz. Or do your own Internet search.
Suppose the government took away your choice of these confusing plans that often provide unpleasant surprises when you need to use them, like your own doctor isn’t covered, or your community hospital isn’t covered, or the deductibles and the surprise bills are unaffordable, or the insurer refuses to authorize the care your doctor recommended, or, well, the list goes on. Not such great choices.
Suppose instead the government limited you to only one plan – one that covered you from conception to death, one that provided you the freedom to choose your health care professionals and institutions, one that provided all essential health care benefits, one that made health care affordable based on your ability to pay regardless of the extent of your health care needs, one that covered you wherever you happen to be, one that eliminated the expensive and burdensome administrative excesses generated by the private insurance industry, and one that could do this in an efficient system that included your family, friends, associates and everyone else in the country. Would you really object to the fact that this means that you would bow out of a system in which the odds are you would make a poor choice in selecting a health plan – a plan that didn’t serve you very well?
Many of the reader responses to the New York Times article expressed a sentiment like that of Charles Pack of Redbank (above). Single payer Medicare for All is the one choice that most people really want. Many have had it with private health plans; President Biden doesn’t need to guarantee us any more of that!
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About the Commentator, Don McCanne
Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.
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