The Goldilocks Approach to Insurance Design with Out Of Pocket Expenses

In a prior post, the Disease Management Care Blog touched on the complex economic trade-offs that need to be considered in insurance benefit designs. It likened the topic to the double edged sword of possible appendicitis, where maintaining too low a threshold for going to surgery means some people will have an unnecessary operation, while too high a threshold and waiting will lead to complicated rupture. Good surgeons and hospitals know the best is a middle-of-the-road "Goldilocks" approach that manages and minimizes both extremes.

And so it is with the design of health insurance and the degree of out of pocket expenses. Articles like this and this would have unsophisticated readers believe that the best approach is a "low threshold" approach to health insurance that pays for every health care need, both great and small. On the other hand, the DMCB has encounted C-Suite executives who embrace the "high threshold" style of insurance that pays for precisely defined covered services using a simplified and rigid one-size-fits-all benefit - and not a cent more. In between these two extremes is a curious mix of politics and insurer tone deafness has resulted in national health care policy tilted toward paying for every need.

Critics of the health insurance reform passed by Congress say that that level of generosity cannot continue. Supporters respond by pointing to a host of study pilots, commissions, tax policies and comparative effectiveness research (CER) that will point the way to a more enlighted approach that still manage to pay for every health need. The DMCB is not optimistic that that will be enough. Our expanding Federal bureaucracy is unlikely to execute well on the pilots, get any commission's recommendations past Congress or credibly mainstream any CER findings.

There is good news, however:

1) Disease management organizations (DMOs have a wealth of experience in not only helping patients choose among competing care options but, in many instances, also understanding how to navigate through their insurance benefit. The "Goldilocks" trick is to present the risks, benefits and alternatives to getting a mammogram or going to the emergency room and help the patient make the right decision. Why else would Congress be so interested in Shared Decision Making (SDM)?

2) Value based insurance designs (VBID) are also making good headway. While it there are significant administrative challenges, toggling out of pocket patient expenses according to the value of the medical service - as defined by market demand or government fiat - is another Goldilocks approach. Why else would the Feds be so interested in Value Based Purchasing (VBP)?

The DMCB predicts that when the current Administration's approach to the pilots and comparative effectiveness research proves unable to tame health inflation, there will be even more renewed interest in DMOs, SDM and VBIDs.