Suppose I told you that you could go out and buy something very valuable that cost $20,000 for $75 a month and a one-time cost of $10. Would you go buy the new item? Absolutely. Would you go buy a new one of these items every year? Sure, it’s only a one-time cost of $10 and you are already paying the required $75 a month.
But let’s assume that sellers of these items are in business to make money (like most businesses are). Wouldn’t you suppose that these business people would try to find ways to make more money as time goes on? Maybe they will raise the monthly cost, or maybe the one-time fee. Or maybe they will do something even more sinister – raise the value of the item.
What is the significance of raising the value of the underlying product? Well, if you can’t or wont pay the $75 per month then you are not eligible for the deal. So now, if you want the item you will have to pay the full $20,000 cost. Suddenly the item seems far more unattainable.
The valuable item I am referring to is health care. Millions of Americans pay their monthly insurance premium ($75 per month) and when they go to the doctor, simply pay their $10 co-pay. Most health care users never even stop to look at the dollar value of the service they received, if they did they might stop for a second to catch their breath and thank God that they have health insurance.
Insurance companies are in business to make money, a lot of it. In order to do this, they raise the premium cost every year, increase co-pay cost and yes even more sinister – they inauspiciously contribute to the rising value of health care.
As consumers we should be leery of any product that we purchase where the actual value is hidden in the fine print of a statement we receive 6 months after the fact. Think about those paycheck advance shops on every street corner. The mere fact that they are everywhere tells me that they are in business to make lots and lots of money. The truth of the matter is that they do. Why? Because the consumers that use them do not clearly see the actual cost of the service.
Our society has labeled paycheck advance shops as “Predatory” to consumers. How is the health care insurance industry any different?
The only way for us to put an end to the rising cost of health care is to clearly state the actual cost of the services being offered. Would you pay 50% interest for a 3 day advance on a check? NO WAY! You would say “I can wait!” Would you go to the clinic for the sniffles if you knew that it cost $500 just for the 15 minute exam? I wouldn’t! I would only go to the clinic when I absolutely needed to, I would go when the value of the service matched the value I was willing to pay.
Forbes Article on Consumer Driven Health Care
Purchasing health care should be no different than purchasing a new TV at the local electronics store. The value of the item matches the value I am willing to pay. If the TV is more expense than I want to spend then I forgo purchase of the item.
The good news is that there are products out there that promote this logic and will help you on your savings pilgrimage. High deductable health insurance policies offer low monthly premiums and the ability to contribute to a health savings account. This puts the power back in your hands. Health savings accounts offer significant tax advantages and will help you to be a conscious consumer. If you want more information on these types of accounts please contact me!
I actually just attended a teleconference about this.
ReplyDeleteAt first glance, CDHC might just sound like lumping more costs on individuals, but in practice it actually sums to a benefit for the insurees. They spend more up front for their actual services, but in attempting to minimize their own out of pocket costs, they also minimize the amount of wasteful procedures, creating efficiency in the system, and all the while saving the insuree money at the end of the year via lower monthly premiums.
When you expand this concept to a a company-wide perspective, where the company pays less premiums by putting its employees in charge of purchasing health care, the effect is pretty substantial.
Really the biggest problem with CDHC is awareness - people really need to know what health care is needed and what isn't, so they can make quality decisions. Things like employer-provided healthcare advising services and wellness programs really help to fill this gap.
Very well put Aaron. The truth of the matter is that the government can't fix the problem by throwing more money at it. Consumers have to take the torch and run with it. I think as more people learn about CDHC and as more employers offer these types of plans, we could radically change the face of insurance as we know it.
ReplyDelete