Trade Offs in Health Insurance Benefit Design

Appendicitis can teach us about the trade-offs in health insurance.

Not all abdominal pain is from appendicitis. So, when physicians worry about appendicitis in an emergency room patient with severe belly pain, they also worry that its rupture can lead to complications. However, they also know that unnecessary surgery should be avoided. So, should doctors: 1) arrange for that person to go to the operating room right away, because waiting can lead to rupture, or 2) should they sit tight and see if the pain gets better because it might not be appendicitis and unnecessary surgery could be avoided?

The best - yet imperfect - answer is that "it depends." This JAMA article shows us that the the rate of ruptured appendices in the U.S. is around 35% and that the rate of normal appendices being taken out is 2-3%.

Which leads to the trade-off. If we collectively decided as a society that we wanted to really reduce the rate of appendicial rupture, we'd need to have a lower threshold for taking people to the operating room. We could a) educate people to seek medical care ASAP for suspicious abdominal pain, b) require insurance companies to only sell benefit plans that encourage persons to get emergency and hospital care for any pain that mimics appendicits and c) economically incent hospitals and physicians with "no payment" if there is a complicated rupture. However, the problem is that there will be more people going to the emergency room and then onto the operating room and there will be more normal appendices being taken out.

The Disease Management Care Blog keeps this kind of economic trade-off in mind whenever it reads articles like this one that was just published in April 14 JAMA. Briefly, the medical records of 3721 consecutive heart attack patients in 24 U.S. urban hospitals were reviewed to determine insurance status and how much time elapsed between the onset of symptoms and getting medical care. The patients were also interviewed about their "financial concerns" when they decided to go to a hospital. Patients were placed in one of three categories: 1) insurance present and no concerns, 2) insurance present but concerned and 3) no insurance. Persons with no concerns were more likely to make it to a hospital within two hours: it was 36.6% vs. 33.5% (among persons with concerns) vs. 27.5% (among persons with no insurance). The conclusion of the authors was that economic barriers are associated with delays in seeking care for heart attack.

They're right.

It has been known for a long time that relatively small changes in out-of-pocket expenses can have an important impact on the decision by patients to seek medical care. That's why increasing consumer payments through co-pays, co-insurance and benefit limits have been widely used to address the perfect storm of medical as well as emergency room overutilization that can, in turn, can make employer-based health insurance less unaffordable.

Which leads to the appendicitis-like trade off. Decreasing the financial barriers to accessing timely health care could lead to 10% more patients seeking timely heart attack care. On the other hand, that could also lead to emergency room overcrowding and overuse by persons who would otherwise have second thoughts and their belly pain. On the other hand, by increasing "skin in the game," patients can be more cautious and savvy consumers of health care even though it could cost lives.

The DMCB isn't sure there is a right answer here. However, it figures there are smart ways and dumb ways to configure an insurance benefit that navigates between open unfettered overutilization and inappropriate economic barriers.

This is still very much a work in progress. More on that in a future post, but here's a preview: don't count on the traditional doctor-patient relationship to figure it out.