Harvard protests health insurance costs – for a couple of very good reasons

Tt’s a delicious irony; academics at one of the nation’s top universities, averaging a cool $200k income, some of whom championed parts of health reform and PPACA, are whining about deductibles of $250, $20 copays for office visits, and out-of-pocket maximums of $1500 for individuals.

Oh, the tragedy!

Yes, part of the cost increase may be due to ACA requirements for dependent and preventive care coverage, the elimination of lifetime maximums, and a higher tax burden due to the Cadillac tax.

But these Cambridgians are merely experiencing higher insurance costs and more out-of-pocket costs – what the rest of us have dealt with for years.

What’s missing from the mass media’s reportage is any real understanding of two underlying concerns, concerns that are real, important, and significant.

First, requiring cost sharing does cause some reduction in necessary care.  There’s no question about that.  As reported in the NYT article; “Consumer cost-sharing is a blunt instrument,” Professor Rosenthal [of the Harvard School of Public Health] said. “It will save money, but we have strong evidence that when faced with high out-of-pocket costs, consumers make choices that do not appear to be in their best interests in terms of health.”

This is a valid concern, and one not getting near enough attention.  Deductibles and copays have far outlived their utility; they discourage seeking needed and unnecessary care.  And, once the member blows thru their out-of-pocket maximum, they don’t do anything to reduce unnecessary utilization.  As a relatively few people incur most health care costs, we need a far smarter approach than these crude cost dis-incentives.

Second, costs are high in large part because employees’ health care choices are very broad.  Again, the NYT: “Harvard employees want access to everything,” said Dr. Barbara J. McNeil, the head of the health care policy department at Harvard Medical School and a member of the benefits committee. “They don’t want to be restricted in what institutions they can get care from.”

And therein lies the rub.  Smaller, narrow expert networks deliver better outcomes for lower cost.

What does this mean for you?

I’d expect much better approaches will emerge soon.  Especially now that the real world has invaded the Halls of Academe.