In a recent article in the American Journal of Managed Care Duffy et al looked at cost-sharing for pregnancies that do and do not cross plan years:
Methods: The study sample comprises 1,379,300 deliveries among high-deductible health plan enrollees in years 2012 through 2021. Patients’ mean cost sharing is calculated across all service types for 3 time periods: (1) delivery hospitalization, (2) maternity episode from 40 weeks prior to delivery hospitalization through 12 weeks after discharge, and (3) extended period spanning 3 years from January of the year before delivery through December of the year after delivery.
Results: For each of the 3 episode measurements, mean out-of-pocket spending is highest among those who deliver in January and declines in each subsequent month until August and September (the delivery months with most pregnancy and postpartum periods within the same year), then flattens for the remainder of the year. Mean cost sharing for the maternity episode was $6308 in January and $4998 in December, a difference of $1310. Patients delivering in January also had mean out-of-pocket costs $1491 greater for delivery hospitalization and $1005 greater over the 3-year period than patients delivering in December.
Almost all insurance contracts are a year in length or less. Most contracts renew on January 1st. When a contract renews, it almost always resets the cost-sharing accumulators back to zero. The economic rationale for cost-sharing is to deter moral hazard for deductibles, and to make patients more cost-sensitive by seeking higher value and lower cost locations of care for co-insurance.
Conception occurring on St. Patrick’s Day versus Patriots Day is a quasi-random event but it has substantial financial consequences. A deductible is not influencing moral hazard for labor and delivery services when someone is already 8 months pregnant. A deductible reset may lead to movement of scheduled C-sections, induction, and high consumption of raspberry tea and foot massages in the week between Christmas and New Year’s Day as women try to avoid the reset (and trigger tax benefits.) The only women in a labor and delivery ward on New Years Day are the ones who really need to be there.
Deductible resets are highly unlikely to have any incentive altering effects except perhaps minor timing issues. This is just a transfer from the unlucky who pay more cost-sharing to the lucky who have slightly lower premiums. Broadening this out a bit, we also have good evidence that resource availability in the first year of a child’s life is really important so as a function of luck pulling $1300+ out of a family with a newborn depending if that kid was born early or late in a week seems to be substantially counter-productive.**
** DISCLOSOURE: My oldest kid is part of any Local Average Treatment Effect bin for any regression discontinuity design so I have feelings about this beyond purely academic interest.
Anonymous At Work
As someone involved in pediatrics and neonatology over the years, I am aware that timing can suck and prematurity comes with cost and you keep that kid in there as long as possible to develop last-in-line organs, such as lungs.
BUT…what’s the policy fix here? Federal law declaring that conception/implantation is the event and all that follows from it (presumably until mother and infant leave hospital) are all on one contract?
Mousebumples
I had to change ob’s for mini Mouse #2. Realized that between mini Mouse #1 and #2, my doc had changed their delivery hospital to one that was out of network. I liked my ob, but not an extra $4K worth. (OOP max for in vs out of network delivery)
New ob worked out fine, but definitely a few stressful weeks from late December (when I realized that change) to late January (when I could get in to see the new ob) as I worried about hypothetical early labor ~30 weeks and where I’d go.
All good now, but not ideal in the moment.
Related – any idea how many (# or %) pregnant persons get Medicaid coverage?
rikyrah
Thank you, Dr. Anderson. :)
narya
I was a C-section, so my younger sister (and brother) would be as well. My sister’s birthdate–12/31–was chosen precisely because of the tax advantage.
I will email you later this week or next week; I thought I’d give you a couple of days to celebrate/relax before inundating you with Thoughts.
David Anderson
@Mousebumples: depending on state but between 40% to 50% is a reasonable estimate.
CaseyL
Holy cats. Pregnancies are stressful under the best of circumstances. Having to calculate where you are in deductibles as well is nuts.
@narya: But unless you want a premie, you can’t just do a C section any old time. it seems you’d also need to be very aware of when to conceive. Not just whether, but exactly when.
narya
@CaseyL: it wasn’t that fancy. They gave my parents a due date of the first week in January, to schedule the C-section, and my parents basically said, well, how about December 31? A couple of days wasn’t going to make a difference.
JaySinWA
Is this an effect of not having prepaid part of the deductible prior to the event? Or am I misunderstanding? Is this particularly evident in childbirth due to prenatal care working through the smaller deductions, while high deductible events hit other low users randomly throughout the year?
Mousebumples
@David Anderson: thanks!
David Anderson
@JaySinWA: Lots of continual appointments through the first 8 months and then 1 huge ass expense in month 9 under the best case scenario.
We typically have strategic timing/ie can’t schedule an elective surgery in December as everyone who had a one off deductible meeting event has everything else that they had been holding off for a while.
JaySinWA
@David Anderson: Got it, I have experienced some delayed treatment based on insurance caps (dentistry) pushing stuff into January, sometimes January is booked solid for that.
Capri
My third was born at home after a 45 minute labor. My ob/gyn billed me as if I had given birth at a hospital under their care. When I called to complain I was told that the doc would have cared for me if I had made it to the hospital. My counter arguement was that if I had a tooth ache and the tooth fell out before I made it to the dentist, the dentist couldn’t bill me.
My mistake was going in for my 6 week post-birth exam, which kept me under the doctor’s care through that time. If I had called and fired them right after my son was born I would have only been billed for pre-term care. My insurance company covered without batting an eye, so I didn’t fight it too much.
rusty
I was going through a job change in the late 90’s just as our second was due. For one job, they didn’t start you on their health plan for 30 days, they bumped the signing bonus offer to cover COBRA. The other offer (that I took for other reasons) was a large company that started health benefits on day one. My first day on the job I called HR and asked for my health insurance number. I was told that it would issue the next month with the regular cycle, save any receipts and they would reimburse me. I then said my wife was due in two weeks. There was silence for a few moments, and they said they would call me back. An hour later the phone rang and they had my number for the doctors and hospital.
A very different experience was our fourth. We were living in the UK on an expat assignment for my job. We had our son “on the NHS” as they say. There, the mom goes to an OB group, and when the baby comes you get whoever in the group is on call that day. My wife was very nervous not knowing who would deliver the baby, and threated to fly back to the US! We had a regular appointment and it turned out to be with the head doctor for the group. She was obviously not native UK, and we were Americans , having this baby in the UK. My wife was 43 (a late bonus surprise baby!) and would be a 4th C-section. The doctor decided she would label it high risk, and she picked the hospital she thought best and the day so she would have her best assistant doctor. This was a no-frills birth, no hospital blanket, the hospital wouldn’t even provide nappies (diapers), but the equipment and medical team were excellent, probably the best of all 4 kids. We paid nothing and the post-natal visits were by a nurse coming to our house. Culturally , they thought it crazy for an infant and mom to leave the house. Better to have the medical care come to you.
LanceThruster
I remember when trying to suss the right cell phone plan early on in their availability, it could be difficult to weigh all the combined means of usage so that your desire to save money didn’t cost you excessively if you exceeded your data minutes or sent too many text messages or whatever. Failure to choose the right plan greatly benefitted the carriers in the same way it did for banks with overdraft fees (in their case actually configuring the order of deposits and charge amounts to maximize the penalties where even the penalties themselves maximized the penalties by when and where they were applied, but that’s another story).
The amount of endless supplemental health plan advertising targetted at the Oolds (why, that’s me!) establishes beyond dispute that it certainly must be profitable and it’s not much of a stretch to presume those profits are not used primarily if at all, to further increase and improve the care provided. The devil is always in the details and fine print is fine for a reason just the same way required disclaimers at the end of broadcast ads are rushed through by an announcer sounding like the guy from the old FedEx commercials. If there’s matching text to the voice over, that scrolls past at lightning speed.
The “everybody in, nobody out” of universal healthcare shuts the door to many of the gimmicks most widely used to fleece their customers. Again, the amount charged annually in overdraft fees throughout the industry is its own growth industry, and the effort it often takes to get them to correct their own errors and the extent they’re required to provide reimbursement is a good example of how the deck is stacked.
The arguments against universal healthcare are varied and many, but if you follow the money, who benefits is pretty clear, as is when looking at where lobby cash goes. Every time a politician is speechifying about saving lives by this or that action desperately needed, I contrast it with how many lives universal healthcare saves, while saving money to boot. I remember seeing a documentary during the height of Covid, and these doctors treating poor and minority communities expressed their frustration at the number of early deaths they were seeing due to people unable to afford the treatment and medications needed to address the underlying conditions of conditions that were entirely treatable. They fell through the cracks but as a community had little political clout so in essence were expendable.
This goes beyond the moral hazard of lifestyle as there’s plenty of catastrophic illness unconnected to lifestyle, unless you count the “poor choices” of living where your exposure to pollution and toxins count. Plenty of studies where the autopsies of children killed by accident showing things like for families living near busy freeways had lung impairment not dissimilar to chain smokers and respiratory ailments of all sorts are quite common. Hope they know how to shop for healthcare plans, but at least they can take comfort that medical bankruptcy will not be counted on their credit score so there’s that. Only not having any money will (“same is in town” as the punchline goes).
The “moral hazard” of Wall St gambling with house money and regularly being bailed out when the markers are called in doesn’t seem to make enough of an impression to even consider effective action to prevent the next meltdown in the pipeline, with Wall St resisting any attempt to tax their transactions gaming the system despite the way this trading is accomplished is part of the problem and a great source of their own profit as that take a piece for themselves at every step along the way as the money moves about.
Triage and death panels already come into play and heavy drinkers with connections might indeed get moved to the head of the line for a donor kidney, and other programs are rife with inefficiencies that seem like pouring buckets of gasoline down the intake of a leaky carburetor without calls to shut the whole thing down because of who is profiting. But discover any waste or fraud in program lowering mortality rates in all age groups and delivering an improved quality of life by ensuring the bulk of expentuters goes to the care as opposed to the administrative end or to service shareholder dividends and you’re just a clueless bastard looking to destroy America in your quest for free stuff. I’m OK with needy right wingers get the care they need too. Often complaints against any program is an objection to whose community receives the most benefit (even if only by the range of improvement vs total dollar amount). Maybe that’s where the strongest resistance is as the MAGAt on their government subsidized Rascal complains about pre-natal care in poor minority communities being a drain on real America.
No matter… I want them to have universal healthcare too. And it’s always worth pointing out that we seem fine paying for Israelis to have universal healthcare year after year despite Americans going without because it’s just too damn complicated, unlike the smoke and mirrors of healthcare insurance plans. Stupid by choice not by chance is the plan we seem to have adopted. Glob bless America.
LanceThruster
@rusty: – thank you for sharing that. Fascinating. Competing factions seem to demonize based on an agenda above any other considerations. Your story brought a response almost immediately of thinking about those poor dumb bastards (of which I’m pretty much a lifetime member) who were not quite able to navigate the maze as successfully as you have appeared to. Maybe they are not as in demand in the job market so perks and incentives to not come into play, or they missed opportunities to maximize their benefits or missed deadlines or were unaware of what considerations were most important for their healthcare long term. For profit systems sell you on what supposedly benefits you the most but often are less forthcoming on why a given plan has the greatest benefits for them. The less they spend on care, the more can be paid out in dividends to shareholders.
WeimarGerman
@Anonymous At Work: What’s the policy fix here?
There are lot of insurance plan carve outs for $0 or low co-pays for chronic diseases. Insurers want to make sure people with diabetes get preventative care rather than an ER visit.
If an insurer wanted to they could create a single dollar charge for all prenatal visits and delivery. They could charge this amount at the start of pregnancy, likely spread it out over the course of the remaining months. They’d likely carve out exceptions for different things too. But actuarily its not that hard. This payment plan can carry over into a new year and not be part of the deductible.
There are two things that make this hard. One is how to handle people who change insurance on Jan 1. If you pre-pay Aetna for this type of program but transition to Humana, then what happens?
Second, none of the white males in the executive rooms give a crap about this situation. There are not enough women in Congress to mandate a change to force this to happen. As one of my healthcare mentors told me, “The fastest way to change healthcare is through legislation.” He’s right and it sucks.