Health Care Lottery, Shirley Jackson Style
posted by Frank Pasquale
The old idea of insurance was to spread costs by having the relatively healthy subsidize the sick. But many insurers and pharmacy benefit managers are challenging that ideal:
Instead of paying a modest $10 to $30 co-payment, as is usually the case for cheaper drugs, patients who need especially costly medicines are being forced to pay 20 percent to 33 percent of the bill (up to an annual maximum) for drugs that can cost tens of thousands of dollars, or even hundreds of thousands of dollars, a year. . . .
The insurers say that forcing patients to pay more for unusually high-priced drugs allows them to keep down the premiums charged to everyone else. That turns the ordinary notion of insurance on its head. Instead of spreading the risks and costs across a wide pool of people to protect a smaller number of very sick patients from financial ruin, insurers are gouging the sickest patients to keep premiums down for healthier people.
It’s not just insurers; drug benefit managers (who were supposed to be a great market innovation for holding down drug prices) are sticking it to those with rare illnesses.
These trends shed new light on consumer-directed health care plans that promise to deliver cheaper insurance “designed for your needs.” Most people are healthy, and don’t need much care. But ill-conceived “breaks” for the many may subject chronically ill to a ruinous financial version of the lottery Shirley Jackson so memorably evoked.
April 20, 2008 at 5:37 pm
Posted in: Health Law
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Responses (3)
KipEsquire - April 20, 2008 at 6:28 pm
“The old idea of insurance was to spread costs by having the relatively healthy subsidize the sick.”
Strange, I always thought the purpose of insurance was, like any other industry, to provide a service people wanted and were willing to pay for.
It’s precisely the fact that we have moved from true insurance to cost insulation — combined with a schizophrenic (and hardly “free market”) tax code that was intended to be a temporary facet of wage & price controls dating back to WWII — that is contributing to the financing dilemma.
Would you suggest that auto insurance is somehow “unfair” because it doesn’t include tune-ups and oil changes (not to mention gas and tolls)? Or because different policyholders pay different premiums for different cars or driving records?
If not, then your position on health insurance is simply indefensible as a matter of basic logic, let alone economics or political philosophy.
Belle Lettre - April 20, 2008 at 6:39 pm
That’s a fantastic short story.
But so depressing as a comparator to the healthcare model. Sigh.
A.J. Sutter - April 20, 2008 at 9:47 pm
Apropos of insurance being “a service people wanted and were willing to pay for.” Indeed it is. But that’s not inconsistent with Frank’s analysis.
Tune-ups and oil changes are related to car maintenance. People buy auto insurance to covers disasters to themselves and others (and small accidents like fender-benders).
The main reasons people buy health insurance is in case they get sick. That health insurance should also cover the cost of check-ups has a reasonable separate justification — by encouraging people to get check-ups, insurance companies can reduce future outlays (to say nothing of there being social benefits of a healthier populace).
The high-cost medicines are exactly for sick people. So insurance is not performing the service its purchasers intended. The mere privilege of paying for insurance is not what people believe they are buying.
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