Incentives are key to fixing healthcare

This year I tried something new.  I signed up for a high-deductible health plan.  After a little research, I decided to leave my traditional health plan and opt for a consumer driven one.  And this decision has made me a more conscientious consumer of health care.  Here’s how it works.

On January 1, United Healthcare deposited $2,400 into my health reimbursement account.  I can use this money anywhere I wish so long as the expenses are health related.  I can’t buy a bag of chips with it, but I can use it for doctor’s visits, prescription drugs, and the like.  Each time I transact with a health care provider, the fee is deducted from my account.  Should I not use all the funds by December 31, they roll over to the next year – up to $10,000 for a family. 

 

Here’s the incentive part.  If my HRA runs dry during the year, my health care provider (United Healthcare) won’t begin paying for my doctor’s visits and drugs until I reach my deductible of $3,600.  That means I have come out of pocket $1,200 before my “traditional” insurance kicks in.  (1200 out of pocket = 3600 deductible – 2400 HRA deposit).

This arrangement has made us consider carefully every doctor visit, drug, and other medical expense because we really want to ensure our $2,400 lasts us throughout the year.  For example, yesterday my wife took our 8 year to the doctor.  She was complaining of a sore throat and running a fever.  The doctor swabbed her throat (negative for strep) and prescribed an antibiotic for a sinus infection.  The doctor wanted to send the swab off to another lab for additional testing – testing we would have to pay for. So we declined and saved that unnecessary lab fee (the results of the lab would not have changed the doctor’s remedy – an antibiotic).

Traditional insurance removes the incentive to make consumers savvy shoppers of healthcare.  We plunk down our insurance card, fork over a small co-pay, and couldn’t care less what happens after that. If we want to change people’s behavior regarding healthcare, this arrangement has to change.