Parts is Parts, Costs is Costs

August 11th, 2009 | Healthcare Reform

This was true back in the 80's and is still true today. When it comes to Healthcare Reform, you might restate it and say "cost is cost." As the target practice shifts increasingly to Health Insurance Companies, there seems to be a knowledge gap when it comes to Benefit Structure.

Anyone who owns and drives a car is supposed to have auto insurance – at least, far as I know. There are lots of different coverage options and depending on which set you choose, your premium can be higher or lower than the guy in the car next to you. For example, if you choose a $1000 deductible and you are "at fault" in an accident (assuming you are not in a no-fault state), you end up paying the first $1000 of damage.

Not surprisingly, Health Insurance is NO different. If you – or your employer – purchases a policy with a high deductible and high co-pays, your premium will be less BUT your out-of-pocket cost will be higher when you are sick.

However desirable a lack of annual or lifetime coverage Caps are from the insured's perspective, these Caps represent substantial cost issues from the insurers perspective and, lo and behold, the Caps play a significant role in determining the annual premium one pays for a policy! Thus, we have one more argument that Savings will pay for Healthcare Reform even as billions of dollars of additional costs are added to the system. Sadly, methinks "not a chance."

Medicare Advantage is under attack as well. Medicare Advantage is the Legislative or Statutory name for the (original) Medicare HMO Program and (more recent) Medicare private fee for service plans and other variations. The HMOs have been around for decades and originated on the West Coast where HMOs for the non-Medicare population got their start. Notwithstanding the weaknesses of the program, many Seniors are quite happy with the Benefit Structures they have in these HMOs. There was a major reduction in these programs in the Balanced Budget Act of 1997 which proved so unpopular that the Medicare Modernization Act of 2003 restored them to levels similar to those pre-BBA 1997. Having negotiated many such contracts and lectured across the country on them at the height of their popularity in the 1990s, at some future time I will prepare a Post to explain how they work.

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