John Graves of Vanderbilt’s health policy group raises an interesting point that I want to expand on:
A uniquely American dynamic to keep tabs on is that as the end of insurance plan years approaches, its well known that people schedule ($$$) elective medical procedures before their deductible resets on Jan 1.
— John Graves (@johngraves9) October 2, 2020
We know that massive amounts of deferrable care was pushed off in March, April and May. Utilization is still down for the year as people aren’t going to the hospital as readily or as quickly even as there are beds open and hospitals are performing a near normal surgery and procedure schedule.
We also know that the 4th Quarter of the year tends to be fairly heavy on elective procedures. The financial incentives are really clear here.
Some people will know that they will hit their deductible and out of pocket spending maximum every year. They know that they are going to have to come up with the cash again in January-February-March of next year. Maxing out their deductibles and out of pocket limits does not change their expected future spending and scheduling a procedure in November instead of March might be a cash flow decision, it might be a decision that the doc that they like is available, it might be a decision that the chunk of cartilage floating in their knee hurts like a son of a bitch or it might be a decision that they have a vacation scheduled in March and want to be up and about for all of it. There are good reasons for people who know that they are always going to max out their spending limits to schedule in one year or another, but the timing won’t change the two year total spending.
However, most people don’t consistently max out their out of pocket spending. Most years, most people barely interact with the medical system. However in some years, some people will max out their cost-sharing. They could have had a baby. They could have broken a leg and needed surgery. They could have had a set of symptoms that required expensive imaging to rule out really bad outcomes and have the symptoms resolve on their own. Who knows what the story would be. But the important part is that these individuals would have a reasonable expectation that the next year won’t be a max-out year.
In that case, timing matters. If there are issues that have been deferred and could be deferred for a while long, timing really matters. A sleep study performed in November and a CPAP machine arriving in December could cost the patient thousands of dollars less than the same exact service and delivery in January. A minor surgery to clean up bone fragments from an untreated ankle injury incurred while refereeing a 2013 soccer game could cost nothing if done in October and $3,000 if done in February.
People who maxed out their deductibles and have a reason to believe that they won’t have large medical expenses in the next contract period will shift services from the future where cost-sharing applies, to the present where cost-sharing is not relevant for a little while.
We know this happens. Actuaries expect it to happen. And actuaries can incorporate past behavior into future projections that account for this behavior. However, it is extremely likely that in 2020 the number of people who are going into the 4th Quarter of the year fully maxed out is less then normal. It is also quite plausible that of the people who are maxed out, the probability of scheduling another procedure is lower than it otherwise would be.
If we assume those two things are true, why does this matter?
In the short run, insurers will make more money as claims will be lower than premiums by a bigger margin than expected. Some of the procedures that we would have expected to happen in November 2020 will occur at some point in 2021 but not all. More importantly, it makes the ability to project the future fuzzier. Actuaries count on the near future to look a lot like the near past. The shock to utilization patterns due to COVID is massive and makes the ability to project 2022 or 2023 from 2020 data very questionable. Projections will either rely on older data, fuzzier data or shorter data spans. If that is the case, good faith professional estimates are likely to have wider error bands for several years going forward until whatever the new normal is stabilized.
Punchy
I cannot speak to the insurance side of this, but I know that surgeries of any kind are a logistical mess nowadays. Limited (or even no) guests/parents/friends can visit (read: bring food, books, emotional support), possible quarantine restrictions for everyone upon return from said hospital. Masks to be worn from wake-up to bedtime, no exceptions.
Also due to COVID: whether this is as widespread nationwide as it is at our company, but nearly all my colleagues forewent using PTO from ~March — Sept, since travel was so difficult and states had diff mask and quarantine rules. Now most of us need (since it’s use or lose) to burn a shit-ton of PTO in ~3 months, which means a ton of 3-day and 4-day weeks. Going to impact company output, efficiency, customer service….
Scott
Know this well. Two years ago, my son and daughter-in-law were scheduled to be induced on Jan 3 until they took a second and thought about it. Result: beautiful granddaughter born at 1530, 31 Dec. Not only maxing healthcare dollars but also tax deductions. All illustrative of how crazy our system is.
Benw
Man, the system in the US is really fucked up
JAFD
@Scott: So, young lady may not get many birthday gifts, but will have great parties…
Meself, was born at 10:30 AM. Have always thot that was a quite proper time to get out of bed and start the day ;-)
PST
One time I had a colonoscopy in January expecting it to be free as a screening procedure to which my deductible would not apply. But when the doctor found and removed a couple of polyps it converted to a therapeutic procedure that I had to pay for. I was highly annoyed not to have scheduled in December, although really I should have just been more grateful for dodging a cancer risk.
David Anderson
@Scott: My daughter was born at 2:20PM on January 1
Those 14 hours cost us probably $5000 between deductibles, OOPMaxes and tax benefits.
And that year we really would have appreciated the money as it was a tight year.
Ohio Mom
One December, Ohio Dad spent a couple of nights in the hospital with a nasty case of diverticulosis. Total cost to us after a year of other medical adventures: $75.
BruceFromOhio
Our family dentist knows this end-of-year turn of events, and is pushing patients to SCHEDULE NOW.
@Punchy: Same with our crew, and we have a couple of long-timers that get more PTO due to tenure. Rules were relaxed to allow for additional carry-over, but the HR folk are following the dentists’ lead and pushing people to SCHEDULE NOW. I plan to burn a Wednesday each week in December as its the only day the team is otherwise fully present as everyone puts in for Mondays and Fridays off. Fortunately we deliver on a big project in a few weeks, we’ll be gently coasting through project closeout until year-end anyway.
Another Scott
@Scott: A colleague was thinking that their first child was going to arrive in mid-late September. He was born on October 1 instead. Which just happened to be the date that federal employee paid parental leave starts.
:-/
Incentives matter. A lot.
A rational system wouldn’t have these weird phase-of-the-moon incentives.
Cheers,
Scott.
Omnes Omnibus
@Another Scott: I would think that the family leave thing starting on October 1 is due to the beginning of the new fiscal year.
Another Scott
@Omnes Omnibus: There was an effort in the House to make it retroactive to December 20, 2019, but it didn’t make it into the FY21 NDAA bill.
federalnewsnetwork.com/benefits/2020/07/house-committee-clears-ndaa-with-federal-paid-parental-leave…
Cheers,
Scott.
JaneE
My insurance doesn’t have a deductible – Kaiser Medicare coverage – but I was scheduled for a procedure just before the state locked down. They will call me to reschedule, when they feel comfortable doing so. At that time they indicated that I might hear something in August. It is now October, and no calls yet. You still can’t book in-person appointments online either.
TomatoQueen
@JAFD: No. That’s not how it works. She gets her full share of birthday presents. If she partakes in Xmas, she gets her full share of Xmas presents. This is the first law of December 31 birthdays. Other days in December are included if the Gods of December Birthdays allow it, and usually they do. Anyone who practices parsimony in these matters is to be exposed as a cheap-ass weenie.
—TQ, President for Life of the December 31 Birthday Society, now in the 65th year of celebrating.
LongHairedWeirdo
Was that a typo for “…down for the year”?
StringOnAStick
I’m so glad I did my knee replacements least year given the Covid situation. I was only going to do the really bad one, but the other one got worse from taking the extra load, and the fact that it would be BOGO was the final decision point.
I’m even more glad because not only am I past two hard surgeries, now I can hike 12 miles, rock climb again and had my old ski mojo back last spring before Covid shut that down. We don’t ski at ski areas but there will be such limits on ski area visitors and back country ski gear has been bought up like the freshest hotcakes so we’ll be burning the hubby’s unused PTO to back country ski during the week and leaving the weekend frenzy to all the newbies. We’ve dug up a very dead avalanche victim once and don’t want to experience that again so avoiding the less careful/harder charging BC skiers is high in our list of good things.