CO-PAYMENTS ARE THE ANSWER

The Medicine Man is skeptical of Arnold Kling's explanation for people's dislike of health insurance plans that require high co-payments. His conclusion is highly orthodox and I agree with it. Some excerpts:

Patient's remarkable unwillingness to pay for the slightest out-of-pocket expense is striking though. I've seen it first hand in many situations. I've noted that although patients know full well that they have a nominal co-payment for an office visit, remarkably, they show up with no cash on hand and no credit card. Patients seem to have a way of knowing that most offices will simply say "bring it next time" and just write it off. People have an amazing aversion to paying even five dollars to see a doctor.

On the other hand, even nominal co-payments will discourage frivolous appointments. At one group I worked at, one of our managed care insurers unilaterally decided that their subscribers would have no co-payment for an office visit. They simply announced this on their television commercials without telling the medical groups. We were literally overwhelmed by patients requesting appointments (for largely ridiculous reasons). Utilization went way up.

I've seen wealthy patients complain that they had to spend hours and days on the phone with their insurer to get them to provide a twenty dollar bedside commode without charge. Kling argues that a preference for insular over catastrophic insurance doesn't make economic sense because of the higher premiums and that there are "noneconomic" principles at work here......

While I agree that there may be some truth to his argument, I think that it's really simpler than that. When an employer or the government pays the premiums, patients will be singularly unconcerned about the cost of premiums. However, the greater their own responsibility in paying those premiums, the more likely they are to take a high deductible, catastrophic health plan (though they'll grumble bitterly that they can't afford good insurance). In fact, if the premiums are high enough, they'll take the ultimate catastrophic plan: no insurance at all.

The issue isn't so much ownership in their ailments, it's the perception that someone else is paying the bill (employer or government).

So yes, I do agree that patients do have a unique disdain for paying medical expenses. This disdain may be in part explainable by failure to take ownership of their disease and thereby lead to noneconomic-based decisions. On the other hand, this irrational decision making tends to dissolve when there is no third party payer.

I also think this goes the other way as well: When doctors know that their patient is going to be stuck with the whole bill, we tend to provide more cost-effective care. I think there's a lesson here. To bring down utilization (and therefore costs) from both the patient and the doctor side, one can require more direct patient out-of-pocket contributions.





AMAZING: Australian public hospital supplies cut off over unpaid bills

Cash-strapped New South Wales hospitals are having critical supplies cut off because they can't pay their bills. Doctors said yesterday one hospital was forced to postpone surgery after running out of equipment. Australian Medical Association state president Dr John Gullotta said clinicians at Royal North Shore hospital were restricted to only emergency procedures when the company providing heart and lung surgical equipment went unpaid for a year. "They only had enough equipment for six operations, which means elective surgery gets cancelled," he said. He said the hospital needed to spend up to $25 million on new equipment but there was only $1.2 million in the budget. According to the latest data released by the Auditor-General, eight of the 17 health services made creditors wait more than 45 days for $30 million in debt.

Opposition Leader John Brogden last night accused the big-spending health services of holding companies to ransom, with some hospitals taking longer than 90 days to pay bills. "NSW Health is often the biggest client for a business, meaning stopping supply is not an option," he said. Figures obtained by the Opposition through Freedom of Information, covering up until the end of August last year, show the New England Area Health Service had more than $3 million in debt over two months overdue, while the Wentworth Area Health Service owed more than $1.3 million. The Western Sydney Area Health Service had more than $2.7 million worth of outstanding bills waiting more than a month for payment, while the Greater Murray Area Health Service owed $2.5 million to creditors waiting more than 45 days. In total, Northern Sydney had the highest debt, owing $31 million, out of the $137 million owed by health services.

The Neverfail water company, owned by Coca-Cola Amatil, was forced to cut off water supplies to Northern Sydney hospitals this year, after bills went unpaid for more than six months. A spokeswoman from the now united Wentworth and Western Sydney area health services said only $24,000 of overdue debt remained unpaid, not including services in dispute.

A spokesman for Health Minister Morris Iemma confirmed NSW Health was working with three health services - Northern Sydney, Greater Southern and the South Western Sydney Area Health Service - to reduce payment delays. He said all area health services were expected to pay their bills within budget and should not exceed the 45-day limit. He said, while some area health services had exceeded the benchmark, strategies hade been put in place to address creditor payment.

Source

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation.

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