Claims And Issues

HSA'S: "HIGHLY SUSPECT ALTERNATIVES" TO HEALTH INSURANCE?

Health savings accounts may not be such a good option for you or your clients.  We have been examining some of these patient solutions recently.

Health savings accounts demonstrably work best if you or your clients have a health insurance plan with a high deductible and you do not try to put off healthcare costs thinking that keeping a health savings account balance high is like keeping a savings account balance high.  "A high balance doesn't help if you die because you did not want to spend your H.S.A. money to have a doctor check a mysterious lump."  Ron Lieber, "HEALTH INSURANCE / Your Money" (Online on Friday, February 24, 2017).  This "Your Money" column is a good place to "begin with a quick review session on H.S.A.s."

So, the people who will get the most out of health savings accounts as their health insurance are wealthy people with steady incomes increasing their wealth and therefore with a greater need for income tax deductions than for having the money to pay for healthcare.

"Is that something we wish to cement and perpetuate? Because if we do, our health care system will start to resemble a wealth care system, too."  Ron Lieber, "HEALTH INSURANCE / Your Money" (Online on Friday, February 24, 2017).

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"INSURANCE:  MANAGING RISK AND BALANCING RESPONSIBILITY WITH AFFORDABILITY".

Check out this article of the same name, which explores the history and purposes of all types and kinds of insurance, the special uses of insurance as a risk management tool, and how to buy car insurance, among other thoroughly useful things:  Kris Bertelsen, "Insurance:  Managing Risk and Balancing Responsibility With Affordability," published in the Economic Research Newsletter of the Federal Reserve Bank of St. Louis (February, 2017).

A few minutes of your time could hardly be better spent than with this linked article, and I am telling you no lie.  Today is George Washington's Birthday.

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CUTTING THE FEDERAL BUDGET BY CUTTING MEDICAID ... INCREASING STATES' BURDENS.

In the course of signing a new law that would attack heroin overdose, Governor John Kasich, Republican of Ohio, was reported by the Toledo Blade newspaper to say:

“We have spent a billion dollars on this issue. A billion dollars…,” Mr. Kasich said. “Thank God we expanded Medicaid, because that Medicaid money is helping to rehab people…There are going to be more tools to come, but we’re not going to defeat this just from the top down.”

Toledo Blade Online, January 4, 2017.

When Medicaid is not available to help to rehab people, for one thing, then there will be more people presenting drug overdoses to hospital emergency rooms.  And the bills will go to the States, not Washington.

And a billion dollars will look like pocket change.

But the money will not show up in the new Federal budget.

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MEDICAL CARE COSTS UNTOUCHED BY INCREASING PATIENTS' COSTS, CUTTING GOVERNMENT COSTS.

There are three "balls in the air" so to speak for health insurance costs and coverages, and each one comes back to costs:  The costs of medical care, patients' costs, and government costs.  For any new proposal to replace the Affordable Care Act a/k/a "Obamacare" (and there will be many), look for how it handles the costs of medical care.

The current proposals include all or some combination of the following measures:

1. Higher deductibles and co-pays paid by patients.  Higher deductibles and co-pays do not lower the costs of medical care.
2. Cost-sharing which reduces government costs with a corresponding increase in patients' costs. (The twin effects of cost-sharing, where it has been implemented, are that it causes patients to (1) skip necessary treatments or (2) cut back on prescribed medicines, and (3) both.)  Cost-sharing does not reduce the costs of medical care.
3. Narrower physicians networks, such that with fewer physicians to choose "in network" patients' costs go up whenever they cannot find treatment in the narrow limits of the carrier's "network" and so the patient pays more going "out of network."  Narrower physicians networks do not reduce the costs of medical care.
4. Return to the pre-existing condition exclusion. Again, the only group that pays more under this measure is the only group containing the people who need medical care:    Patients.  The pre-existing condition exclusion bars coverage for the costs of medical care for pre-existing conditions.  Period.  Moreover, government costs for healthcare are reduced substantially while patients' costs for healthcare are increased substantially.  The pre-existing condition exclusion never reduced the costs of medical care and it will not reduce the costs of medical care now.

All of these points and more are discussed by Professor C.F. Chang in his op-ed piece in the Memphis Commercial Appeal on Lincoln's Birthday, 2017.

Two points before closing, to be addressed by these measures and by any substitute proposal for that matter:

What is the point of having a government program if the government's only purpose is for government not to pay for the program, but just to shift existing government costs to patients to pay?

And, what is the point of shouting "reducing costs" if the proposal totally leaves the costs of medical care untouched?

Many people can think up better solutions than these.

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INDIANA COURT SAYS NO TO SILENCING ARBITRATION OPPONENT, ...

... SAYS YES TO "FAIRNESS."

In Watts Water Tech., Inc. v. State Farm Fire & Cas. Co., 66 N.E.3d 983, 986 (Ind. Ct. App. 2016), State Farm sued in subrogation after paying its policyholder's water damage claim.  State Farm alleged a product liability claim against one Watts Water Technology arising out of a defective product.

The operative facts alleged by State Farm were that State Farm's policyholder purchased a water heater with defendant Watts's brand connector.  Watts's brand connector failed, "causing water damage" to the policyholder's "home and property."

Watts "defended" as it were by filing a motion to compel arbitration.  Unfortunately for Watts, as it turned out, the evidence showed that Watts's arbitration program expressly excluded arbitrating products liability claims arising out of defective products.

Watts's response to this fact was in part to show that trial judges in other States had ruled in its favor, requiring arbitration of certain claims allegedly arising out of its allegedly defective products.  The Indiana appellate court refused to allow Watts to do this.  The Indiana court ruled instead that Watts could not cut off the debate as it were on whether its product in this case would be defective.

The Indiana court said that it would not allow Watts to do this because it would not be fair.

P.S.

Also, although the court did not come out and say it in this case, very few arguments will succeed in any particular appellate court when those arguments are based on trial court decisions from other states.

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ALTERNATIVE HEALTH CARE POLICIES AND PROPOSALS: EXPLORING THE NEXT FRONTIER.

This article is being posted a little later than usual this morning.  I hope you will find it worth the short wait.

Much is still being written lately about the repeal of the Affordable Care Act, or "Obamacare."  Once the ACA is repealed, the question of course becomes what will replace it. 

Insurance Claims and Issues Blog will continue to take a look at the main replacement proposals and the health care policies behind them, drawing on the far more granular observations in the easily understandable essay by Allison K. Hoffman, "The Unhealthy Return to Individual Responsibility in Health Policy" published on January 16, 2017 on RegBlog, the University of Pennsylvania Blog on Regulation.

We continue with a look at vouchers.  The announced theory behind replacing insurance under the Act with vouchers is freedom of movement.  Voucher proposals would allow patients to take their voucher in hand and buy the kind of medical treatment they want, similar to those TV commercials I suppose that encourage people to tell their doctors what drugs the manufacturers want doctors to prescribe.

The voucher proposals voiced so far have a major flaw for most patients, however.  The vouchers proposed so far would not keep pace with inflation.  They would be just like a dollar bill in the sense that they would not be enough to cover the doctor bills as time goes on, because even putting inflation to one side, the costs of doctors and drugs are rising even faster than inflation.  The medicalcare reality is that unless vouchers under any name -- voucher, tax credit, or tax deduction -- keep pace with and match doctors and drug costs, they would be a down payment at most.

On the other hand, vouchers would reduce the federal budget if they do not keep pace with medical costs.  It is the patients who would pay the costs, or go without medical care.

Vouchers that do not keep up with medicalcare costs leave no other choice.

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"EXTERNAL MEDICAL REVIEW" OF "MEDICAL NECESSITY": A CONTRACT IN MINNESOTA.

In Minnesota there is a statute which requires an "independent external medical review of adverse determinations" by an independent contractor at the expense of the government or of the health plan that denies medical benefits.  It is key that the benefits are "medically necessary."  See M.S.A. § 62Q.73, titled "Independent Review of Adverse Determinations."

"Medically necessary."  That is also the standard for receiving medical benefits under Medicare.

The Minnesota Court of Appeals recently held that the statutory right to an "independent medical review" of "medical necessity" is a contract right held by the person who was denied the medical benefits in question.  See Linn v. BCBSM, Inc., ___ N.W.2d ___, No. A16-0986, 2017 WL 393924, at *1 (Minn. Ct. App. January 30, 2017) ("Syllabus by the Court.  The determination of medical necessity in an external-review process conducted under Minnesota Statutes section 62Q.73 (2016) is contractually binding on a health insurer.").

Arguably, so should a "medically necessary" benefit be a contract right under Medicare.¹  "By a parity of reasoning," as they say.

Some would also say, by a parity of good judgment.

¹As might be expected, the Minnesota State Statute expressly exempts Federal Medicare from its operation.

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Related articles

Acci: Research Before Evaluations Including Insurance Coverage.