Tuesday, September 08, 2009

How to cut your health care costs sensibly.

In the last week I made one of my rare visits to American health care provider. I say rare because most of us, including myself, rarely actually need to see a physician or go to a clinic. I know lots of people do it at the drop of a hat—certainly that is their right—but they do drive up health care costs needlessly.

Generally my policy is to watch my health myself. I regularly monitor things like heart rate and blood pressure. And when I get sick I try to rest, take an appropriate medication, and wait out the illness. Of course, you can’t always do that—though you can most of the time. I knew I was going to get a cold. I had some small sliver of popcorn aggravating my throat. I knew that would lead to a sore throat and when that happens I end up with a cold, which progresses over several days before clearing.

This time, things went as normal except at the end of the period when the lungs stayed congested. So, after a couple days of this, I decided it was time to have it looked it. I was driving past a clinic down the road from the house and decided to go in, with no appointment.

It is one of those small clinics that are now cropping up in shopping malls and stores to provide basic health care. I checked in using a touch screen. The only staff is the Advance Practice Nurse. I know a lot of people get worried because a nurse is not a doctor. But we really rarely need a doctor. If people got that through their heads they could cut health care costs substantially.

I don’t worry about an APN handling things. In hospitals nurses do the bulk of the routine work anyway. Most of the actual health care I had over my lifetime has come from nurses. My mother was a nurse. And I can’t remember a single time in childhood when she took me, or any of my three siblings, to see a physician because we were ill. We had all the normal childhood diseases from colds, to the flu, to measles (which I guess aren’t that normal anymore). Mother never saw any of this as a reason to bother with a doctor’s appointment. I’m sure if the situation got worse, or took unusual turns, she would have done so.

But my mother knew that 90% of the time a doctor’s visit is not warranted. And it wasn’t the cost. She worked in hospitals as well as in private practices. She worked for quite a long time for one doctor in particular and we could have had him check us over at no cost. But even when it was free, it was also unnecessary. Unfortunately a lot of people don’t think that way.

And that puts a burden on health care that drives up costs. A large number of Americans now routinely see a doctor over the slightest sniffle. I was reading an article in the New York Times that spoke of an over-stressed free clinic in a poor area. The article was praising a woman who did what “she was supposed to” by taking her child, with a case of a runny nose, to the clinic for care. I wanted to scream. It is precisely that sort of needless visits that means the free clinic is stressed. The article was lamenting how the clinic can't pay its bills, while praising the public for over-using the clinic. The fantasy that the Left, like the New York Times, has is that we can have unlimited supplies of medical care. We can’t. You can encourage people to rush off to the clinic at the drop of a hat but when you do it will mean that resources get used to treat sniffles and then aren't there later on.

My check-up went about the way I figured. The nurse was able to write a prescription, which is useful. I’m not up on the facts here, but I suspect in many places that wouldn’t be allowed—which is daft. She prescribed an antibiotic for the lungs as well as a cream for a skin rash. She suggested an over-the-counter drug as well. She did a basic check-up and said things looked good but that the infection was trying to make a home in my lungs. Basic stuff really, no physician was necessary. Total cost for everything, including the medications, $88.00. Total waiting time at the clinic, about 15 minutes. I spent more time than that with the nurse as she checked me over. I can only compare that to one visit to the National Health Service in the UK when I was staying there. Wait time there was about an hour, time with the physician about 10 minutes. I also got a follow-up phone call three days later to see how I was doing.

People today spend a lot on health care that needn’t be spent. A cold is not a reason to see a doctor. A kid claiming to have a sore throat is not a reason to rush down to hospital or make an appointment at the clinic. So why do people do it? Simple, third party payment schemes give people the incentive to over-consume. If you pay a flat rate per month for health insurance, and that covers the bulk of the cost for a visit to the doctor, then the way to maximize your “profit” from the insurance is to use it, even when you don’t really need to. You will pay that rate even if you don’t visit the doctor once in the year—that is how insurance works.

But health care insurance isn’t like other forms of insurance. You aren’t going to crash your car just to put in a claim. Nor are you likely to burn down your house. But health depends on how you feel. To a large extent it is subjective and not easily verifiable. So, if you are a bit under the weather, and your co-payment is relatively low, you may rush down to the doctor. The doctor will tell you to rest, drink plenty of fluids, and might prescribe an over-the-counter medication that you knew about anyway. But the co-payment was low so you didn’t mind spending a little bit for the assurances. Of course, the total cost went to the insurer and premiums are pushed upwards as a result. But when consumption of a good, including health care, is divorced from payment of the good people will tend to over-consume.

People are notorious for not putting two and two together, and getting four. They don’t realize that little issues, that really don’t need a physician, drive up the total cost of health care. So mothers drag their kids with the earaches, runny noses, sniffles, and little coughs off to clinics. Most of the time they would be better off putting the kid to bed, giving him some medication, and pampering him. In most cases this is what the doctor would suggest. But the cost of having a doctor tell you is much higher—but people don't worry about that, the insurance will cover it. But they will bitch when the insurance premiums go up. The truth is that most people could cut out much of what they spend on health care without any measurable impact on their health. In other words, all that extra money people spend, isn’t making them healthier. One reason Americas spend so much extra on health care is because they want to.

There are, of course, some people, who really do need constant care. But that isn’t the case for the bulk of the population. With basic hygiene, a reasonable diet, and common sense most of us avoid the need for any intensive health care. Of course, if we choose to smoke, get drunk, or overeat and become obese, then our health care needs will dramatically increase.

One of the things I like about health savings accounts is that they understand this problem. Under those schemes the individual has a flat rate per year that they can spend on routine visits. If they don’t spend it they can roll it over to the next year. It is their money. That covers routine visits but encourages the consumer to consider the costs. If they go to the doctor it comes out of their savings account, it is their money they are spending. Suddenly the sniffles are not a reason to rush off to the doctor’s office. At the same time these policies usually provide catastrophic insurance for the unlikely, but serious illnesses that may crop up. The total cost for such policies are low compared to routine health insurance.

They are low because they encourage people to think rationally about the small problems but this plan also allows for care when things get serious. This is what Singapore basically does with their health care system. Individuals put a percentage of their income into a health savings account, which they own. That money is put aside for routine care but it belongs to the individual, not to the system. Out of that they also pay for major insurance to cover the major illnesses. The poorest people are put into the system by the government. But you are free to choose from any doctor and clinics are required to advertise prices to encourage competition. Only about 10% of the population requires state help to pay for the care. In the end Singapore spends much less per person on health care than any of the socialized systems of Europe, with better results.

So why isn’t that popular with the “universal health care” crowd? May I suggest that it doesn’t give the state control of medicine as the reason? I have concluded that many on the Left don’t give a damn for health care; they just want state controlled health care—much like they want state-controlled everything.

This is why they attacked Whole Foods for offering a generous health program to their employees. Whole Foods uses the same sort of health savings account plan that is used in Singapore. Employees are given a basic amount per year for routine visits and covered for all serious illnesses. The incentives mean they don’t over-consume on the small issues since what they don’t use belongs to them. But when John Mackey, of Whole Foods, wrote an opinion piece about how the Whole Foods health system was good for workers and could be emulated in other industries, the rabid Left started demanding a boycott. That alone was almost enough to make me buy from Mr. Mackey’s stores, but I’m not into organic.

If you are self-employed or don't have insurance then you can set up a similar plan for yourself. For routine visits pay 100% out of your own pocket. Then purchase catastrophic insurance that kicks in at some relatively high level, say $5,000 or even $10,000. You will be surprised at a cheap your health care will become. Put a small amount aside each month for the routine visits and keep saving it. Only use it when you have to and you could quickly save the deductible for the catastrophic insurance. Really, if you don't waste your resources on the small issues, which are unlikely to impact your health, you can have them later for when you really need them.