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You are here: Home / Anderson On Health Insurance / Going where the money is: Essential health benefits

Going where the money is: Essential health benefits

by David Anderson|  December 12, 20168:06 am| 26 Comments

This post is in: Anderson On Health Insurance

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The Republican “Replace” plans make a big blather about reducing the scope of essential health benefits in order to dramatically lower premiums for healthy individuals.  Let’s take a look at what is an Essential Health Benefit (EHB) and then do some analysis from there:

By law, they are in Section 1302 of the ACA:

(1)In generalSubject to paragraph (2), the Secretary shall define the essential health benefits, except that such benefits shall include at least the following general categories and the items and services covered within the categories:

(A)

Ambulatory patient services.

(B)

Emergency services.

(C)

Hospitalization.

(D)

Maternity and newborn care.

(E)

Mental health and substance use disorder services, including behavioral health treatment.

(F)

Prescription drugs.

(G)

Rehabilitative and habilitative services and devices.

(H)

Laboratory services.

(I)

Preventive and wellness services and chronic disease management.

(J)

Pediatric services, including oral and vision care.
What are the excessive services here?

The vast majority of the spending is on a combination of Hospitalization (C), Prescription Drugs (F) Ambulatory Patient Services (A) and Chronic Disease Management (I).  Ambulatory patient services are sick visits to physicians.   If those things are core services that need to be covered then it makes perfect sense that lab services (H) are covered as that fuels decision making and improves care.   Well visits are fairly cheap as the screenings tend to be both fairly low cost and infrequent.  At this point, Emergency Services (B) and Maternity/Newborn care (D) are the big money areas that could be cut from the essential benefits definition.  However we run into the EMTALA problem that emergency services must be provided to the point of stabilization without regard to the patients’ ability to pay.  Someone will pay.

Mental Health and substance abuse treatment services is the next “logical” spot to cut back as these run into the argument that mental health is a personal problem and not a disease (although that attitude is thankfully fading).  But some money could be carved out of premiums.  It might be a 5% savings on average with higher savings in regions that are getting hit hard by the opioid crisis.  The trade-off is more dead people.

Finally, section J is vulnerable.  Pediatric dental and vision are seen as add-ons.  There is a good evidence base that kids who have good teeth and can see the chalkboard are better off than kids whose teeth hurt and can’t see if it is an “O” or a “U” on the board.  The problem from a premium savings point of view is that there is almost no money here.  Kids, once they can wipe their own butt, are dirt cheap to cover.  Carving out pediatric dental/vision out of a risk pool that has relatively few kids makes the savings under $1 per member per month.

Realistically, the only way to have insurers spend significantly less money on essential health benefits is to institute usage limits.  We do that to some degree with Rehabilitative services.  It is not uncommon for states to decide that 25 or 30 Physical Therapy Visits at normal cost sharing is the essential service.  Restricting covered days in the hospital like Medicare does would reduce insurance company spending and thus lower premiums.  Restricting the number of brand name scrips or the number and type of diagnostic and labortory tests would also lower utilization and insurance company spending.  But unless there are some standards we get a race to the bottom where healthy people get very weak insurance which is fine as long as nothing goes wrong and very sick people get comprehensive insurance that they can not afford because the subsidies being batted around are too damn small.

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Reader Interactions

26Comments

  1. 1.

    cruxdaemon

    December 12, 2016 at 8:29 am

    This makes sense, and I absolutely believe you. Given these facts, why would insurance companies offer plans with less than the essential health benefits? Were most minimal pre-ACA plans excluding things like hospital stays or ambulatory care? It does seem clear that enforcing inclusion of these essential benefits materially raised the rates for some in the individual market.

  2. 2.

    Victor Matheson

    December 12, 2016 at 8:41 am

    The benchmark plans for some states also have annual limits on durable medical equipment (which would get at H – rehabiltive and habilitive services and devices). You could make those more strict across the board by allowing replacing of things like wheelchairs or prosthetics on a less frequent basis or requiring more cost sharing in general there, but again that probably isn’t a big deal in terms of cost except for the very sickest.

    In the end, isn’t 99% of the talk about EHB just about angry men who are upset their coverage includes birth control pills and pregnancy services?

  3. 3.

    nycmt

    December 12, 2016 at 8:46 am

    Decades have elapsed since my last econometrics modeling courses. I was looking at strictly rural and exurban macro effects of terminating the medicaid expansion and of ending PPACA individual health insurance services. Seems to me that the end of that stimulative flow (around sixty billion?) will probably wack around 750,000 jobs. That’s a nice rural recession, right there, without the prospects of rural consumer spending getting shorn by a few extra points of payroll. But R’s don’t believe in macro.

  4. 4.

    rikyrah

    December 12, 2016 at 8:47 am

    It’s a scam and a fraud. People will die. I, as a woman, will become more expensive.

    I still get depressed thinking about it.

  5. 5.

    Richard Mayhew

    December 12, 2016 at 8:54 am

    @cruxdaemon: Cherry picking. Get the young and the healthy that use almost no services and have a very low Medical Loss Ratio so that means more hookers and blow

  6. 6.

    ThresherK

    December 12, 2016 at 9:03 am

    Hey, if health insurance covered nothing, would the policy be free?

    They are threatening to converge those two lines.

  7. 7.

    Victor Matheson

    December 12, 2016 at 9:16 am

    @cruxdaemon: If you have an individual mandate that everyone has to buy insurance then you have to have a definition of what counts as insurance or people just go to 7-11 and buy $5 piece of paper with “insurance” written on it to meet their obligation.

    The ACA defines insurance as a policy that covers a general set of EHBs, has a maximum out of pocket annual cost including co-pays and deductibles of $6,850 for a single person and $13,700 for a family, and has no annual or lifetime caps on coverage

    Prior to the ACA insurers could sell policies that covered little, maxed out quickly, and had massive cost sharing. And as long as there were a market of either very desperate or very healthy people, those policies could be profitably sold.

    There is room to argue about what should truly count as insurance, and there is nothing magical about the definition created by the ACA, but we could also be talking about making the requirement more generous. $13,700 per year out of pocket for a family with a child with a chronic condition is pretty rough.

  8. 8.

    Barbara

    December 12, 2016 at 9:38 am

    Insurers tried to cut maternity benefits and were accused of forcing “drive by deliveries” and that’s why Congress passed a specific statute. The same thing will happen again if they try it again. The problem with mental health coverage isn’t that it is unnecessary, it’s that there are virtually no standards for judging who needs what, and what actually works. This leads to a situation whereby those who need care the most are utterly resistant to getting it, and those who may or may not need care for lesser order but still vexing issues have no idea whether their treatment is in any way more helpful than a placebo. Even their therapists don’t know. Insisting on “parity” does not help these foundational weaknesses.

  9. 9.

    Evap

    December 12, 2016 at 9:48 am

    @ThresherK: that was actually the basis of a Monty Python sketch. “Unfortunately, you have a no claims policy”

  10. 10.

    Ang

    December 12, 2016 at 10:03 am

    @Victor Matheson: Funny how the same angry men who scream the loudest about slut pills and pregnancy services never mention Viagra or Cialis prescriptions as anything but the most necessary of fully covered services.

  11. 11.

    ThresherK

    December 12, 2016 at 10:03 am

    @Evap: I can’t believe I don’t know that. Now I gotta stand in a box and sing “England’s Mountains Green” for penance.

  12. 12.

    piratedan

    December 12, 2016 at 10:17 am

    well… one, I think we’re reaching the point where if you ask “ordinary” Americans if someone should be making a “profit” on their health care, the answer would be no. Essentially, I think people are coming around to the idea that “paying” for insurance is a fools game and you’re the fool if you think whatever you might get out of the magical malady hat will be covered. The issue comes down to, what is fair compensation to the providers of health care itself… what do the nurses, therapists, administrators, ancillary staff and clinicians of all stripes deserve as compensation for their training and knowledge? What do the pharmaceutical conglomerates deserve as compensation for their products, the same for the purveyors of other medical devices, from emesis basins to MRI units to laboratory analyzers and nifty surgical lasers? How much are you willing to pay to keep yourself and your loved ones alive, much less in good health? Right now the scales are woefully tilted to the folks that are the real death panels and to a good number of folks who have leveraged their skills into well compensated specialties. The front line general practitioners, not so much.

    How do you change that? Someone supposedly has to take one for “the team”, but generally, no one wants it to be them. The GOP is still working under the idea that healthcare is a privilege, are they right?

  13. 13.

    EuniceCycle

    December 12, 2016 at 10:20 am

    I live in one of the counties in Ohio hardest hit by the opioid crisis. I was recently at the opening of a new inpatient treatment facility, where the head of one of our largest mental health agencies said it was thanks to the Medicaid expansion they were able to do this. Our county used to have a 3 to 4 week wait for a bed; now there is no wait. When someone comes for treatment, they are immediately put into intensive outpatient or given a bed. This is literally saving lives every day. I work for a large hospital, and the Medicaid expansion has really helped our bottom line with reducing charity care. I am very worried what will happen if the Medicaid expansion goes away.

  14. 14.

    Barbara

    December 12, 2016 at 10:24 am

    @piratedan: It’s not just “how much are you willing to pay per unit” but how many units are necessary. Providers cannot answer that question in an unbiased manner. Insurers probably can’t either, but the idea that if we just get rid of the middleman and set a fair price we’ll all be just fine is a kind of liberal delusion. That’s the system we had in place that generated such hyperinflation in health care that gave rise to more active middlemen in the first place. The issue is whether the middlemen have the right incentives to make fair decisions based on medical evidence. There is no way doctors can be counted on to police the consumption of health care services by their own patients.

  15. 15.

    Jim

    December 12, 2016 at 10:24 am

    Chalkboard? You’re showing your age, Richard. :-)

  16. 16.

    The Moar You Know

    December 12, 2016 at 10:37 am

    What are the excessive services here?

    All of them. The lives of people who need government services or help of any kind are no longer deemed important.

  17. 17.

    Feathers

    December 12, 2016 at 10:43 am

    Whenever folks start blathering at me about how people should using savings to pay for medical treatment, I then admit that setting the minimum wage so that it would cover your kids cancer treatment. They don’t find it funny.

    What they don’t realize is that health insurance was created so that people could be treated for their illnesses, without employers having to pay wages that would also cover health emergencies. Curious – what would the minimum wage need to be to reasonably cover medical costs? That should be the other side in any bargaining over health insurance.

  18. 18.

    The Moar You Know

    December 12, 2016 at 10:44 am

    Hey, if health insurance covered nothing, would the policy be free?

    @ThresherK: A stellar example would be mandatory car insurance in CA. So, you NEED insurance to drive here. Mandated by the state. But minimal requirements for actual coverage (I think the minimum is a liability-only policy that will pay out 30k at the max on the low end – and in reality they pay nothing, but it meets the legal requirements). So yeah, you can pay $600/year or more for a policy that will pay nobody anything at all.

    The health insurance industry I’m sure cannot wait for such an opportunity.

  19. 19.

    OzarkHillbilly

    December 12, 2016 at 10:46 am

    Restricting covered days in the hospital like Medicare does would reduce insurance company spending and thus lower premiums.

    This is wrong, Richard. it would increase profit margins, not lower premiums.

  20. 20.

    Central Planning

    December 12, 2016 at 10:47 am

    @ThresherK: I propose we call that the ThresherKurve, similar to the Laffer Curve.

  21. 21.

    OzarkHillbilly

    December 12, 2016 at 10:54 am

    @The Moar You Know: “Our Exclusive No Claims Policy! Your covered as long as you don’t make a claim!”

    (I am roughly quoting an old Monty Python skit)

  22. 22.

    piratedan

    December 12, 2016 at 10:58 am

    @Barbara: disagree to a point Barbara, because the system as it currently stands requires clinicians to have to treat to what will be paid, not what the patient needs. I hear it from docs and nurses in regards to what they are allowed to do rather than what is in the best interests of the patient. Health care is just like anything else I suppose in that you have a majority of folks that would like to spend time doing their jobs rather than documenting and justifying what they can do.

  23. 23.

    Russ

    December 12, 2016 at 10:59 am

    I live in northern NY and I know people who at the current level of dollar support are going without health insurance. Any move to increase the cost of care will have more people around here going without. I know that if it costs much more I will. Around here many folks already have no chance of getting a loan or credit card so going to the hospital and then not paying is already happening. They have been living without credit forever so it’s nothing new.

  24. 24.

    Barbara

    December 12, 2016 at 11:12 am

    @piratedan: How do you think we arrived at this particular junction? Not because the lack of documentation created a system that everyone could afford. I sympathize with individual clinicians, but we are not going back to what we had under any circumstances.

  25. 25.

    Richard Mayhew

    December 12, 2016 at 11:19 am

    @Jim: My daughter’s classroom still has a chalkboard

  26. 26.

    Victor Matheson

    December 12, 2016 at 12:34 pm

    @Richard Mayhew: I use a chalkboard everyday. Like dark ink on light paper, chalk and a board remain a pretty great technology in terms of usefulness and price even in 2016.

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