Paying Up For Quality Care

Get ready for the next scary change in your company health insurance. Employers have squeezed almost all the costs they can from managed care. Now they're working on ways to pass consumers the ball--and the bill. You'll soon have to decide if you're willing (or able) to pay extra money for the same quality care you had before.

Behind this new approach lies a sudden spurt in the cost of medical insurance. Employers are looking at increases this year in the 13 percent range, after 12 percent in 2001. There's no relief in sight. Drug prices are soaring, big networks of doctors and hospitals now have the bargaining clout to win higher fees, the work force will soon begin to age and, yes, they're gonna get high-tech care.

Employers simply won't pay for all this--but they've noticed that many of you can and will. When offered either an HMO or a PPO, 55 percent of employees take the PPO, which costs more but provides easy access to most doctors and treatments. So the next question is, will you go even higher to get convenience and choice?

You'll face this question as soon as "tiering" is added to your company plan. It's a system for charging different prices for different medical choices, and shows up already in most pharmaceutical plans. You might pay $10 out of pocket for a generic drug, $15 for an approved brand-name drug and $25 for other brand names. You can use any high-priced pill you want, but at your expense.

A few hospital plans--including Tufts Health Plan in Massachusetts and Premera Blue Cross in Washington state--are starting to offer tiered choices, too. Your co-payment might be low for a community hospital and high if you go to a prominent medical center.

Once that idea catches on, you'll see tiered prices for doctors, too--with the better-known doctors becoming the Tiffany choice. Last month the Humana Health Plan of Ohio announced a new plan that gives workers access to three different groups of doctors, each one costing progressively more.

After tiering comes a whole complex of health-plan proposals, known in the business as "consumer-driven care." I don't hear consumers hollering for them, but never mind. They've become the very latest in free-market "choice" and "personal control."

Consumer plans offer a menu of health-insurance options, each with different deductibles, co-pays, doctor groups and coverage limitations. You mix and match yourself. The more of your medical bills you agree to pay, the lower your monthly premium.

In one popular plan, your employer gives you a fixed sum of money for medical expenses--say, $1,000 a year. You pay any further expenses yourself until you reach a maximum--say, $2,000 a year for an individual or $4,000 for a family. After that, the employer pays. (Similar fixed-contribution plans exist today, but usually without as many choices.)

Taking another approach, Vivius in Minneapolis sells a plan that lets workers set up their own HMOs by naming the particular doctors they want in their network. Their monthly premium depends on how cheap or expensive those doctors are.

Consumer-choice plans come down to this: if you buy less coverage and stay healthy, you win. But if you or a family member gets more than a passing illness, you lose. Losers will grump. Winners will gloat. But to my mind, nobody wins when people play roulette with their health.

What's more, we aren't very good at assessing our future financial risk. Think of all those retirement savers who lost half their money when the stock market sank.

The promoters behind consumer choice (start-up companies, such as Definity Health, Lumenos and HealthMarkets, along with such veterans as Aetna and Wellpoint) say that you'll find it easy to select a plan. Just go to the Web, compare prices and coverage and presto, there's the right one. But Web sites aren't written for workers with low literacy levels. And even smart people rarely understand their plans.

What are some of the implications of tiering and choice?

There's another angle. When you have to pay more of the medical bill, you'll presumably see doctors less often, fill fewer prescriptions and take fewer expensive tests. You'll cut back on unnecessary procedures. (But you may cut back on necessary health care, too.)

What's the alternative? Open and contentious price increases, across the board. "Deductibles and co-pays would go even further up," says Kenneth Sperling of the consulting firm Hewitt Associates. "Happy isn't what we're going to have."

A better choice would be slimming down our immense private health-care bureaucracy and switching to a simpler single-payer system. That's off the table today. We're headed the opposite way.

But if these "consumer-driven" plans push enough workers into corners, interest in universal coverage might rise again, says Paul Fronstin of the Employee Benefit Research Institute in Washington, D.C. Combining a national system with competitive private plans and individual choice would look something like, er, the Clinton plan. (But don't say that aloud.)