Background

I interviewed Brian, a small business owner who founded and runs his own personal training business. Brian knows more about health care and health insurance than the average worker who has employee-sponsored coverage (and is therefore somewhat insulated from costs), because he has had to purchase coverage in the individual market, giving him a better sense of the prices involved. He has also faced health issues that have forced him to repeatedly enter the health care system and seek treatments that are not completely covered by his insurance. At the same time, the recession has had a negative impact on his business, forcing him to make difficult decisions and trade-offs between his health care and other aspects of his daily life. In short, Brian has had first-hand experience with health care affordability and therefore appeared an insightful person to interview.

Findings

As expected, Brian had a lot to say about health care affordability. First, he brought up a distinction between affordable health care and affordable health insurance. As he has experienced first-hand, affordable health insurance does not automatically translate into affordable health care. Thus, as Brian points out, even insured individuals can be left with crippling medical debt that would not be considered affordable. As a solution to this issue, Brian suggested that affordability efforts should include finding ways to ensure consumers are paying the true cost of medical care, not the market list price. He proposed allowing doctors to deal directly with other doctors, hospitals, and patients when determining prices and billing as a way to realize this goal. Additionally, he made the point that looking at premiums when considering affordability is short-sighted in that it only considers an individual's ability to pay in the short-term, before health services are utilized and costs accrue. As medical expenses increase, they may become unaffordable in the long-term even if monthly premium costs fit within a budget.

Brian also raised a lot of points about the types of trade-offs people make in health care purchasing decisions. In particular he felt that affordable health care means that the risk of having medical bills lead to declarations of bankruptcy be eliminated, possibly through legislation. He also stated that individuals and families should not have to choose between getting health care and sacrificing food and shelter, or not purchasing health care and allowing health to worsen. He stated that these types of trade-offs can have extremely negative implications for society as a whole and are therefore unjustified.

In the final minutes of the interview, we talked about how subsidies should be set and how affordability should be determined in practice. Again, Brian raised his distinction between the market price and what he labels the “true cost” of health care stating: “to me, a fair determinant of affordable health care is what a person can afford, not what the market price is. Healthcare should not be impoverishing people.” He is against counting savings as part of a person's ability to pay for health care, instead he felt that affordability measures should factor savings into monthly expenses. Otherwise, we risk creating a situation where medical bills take away from an individual's ability to save money for the future, therein promoting future poverty. He felt that subsidies should be decided in a transparent process involving experts from multiple sectors, from health care to finance. He also mentioned that it is important to involve laypeople in this process because “experts can theorize all day about what people are spending, but these predictions may not reflect reality and the financial choices people actually make.” He felt that subsidy levels should be adjusted by income. When pressed to give a number, Brian felt that $100 per month as a premium was reasonable for poorer individuals near the federal poverty level and stated that “even $150 a month is really pushing it for people with limited incomes.”

Reflection

Brian's distinction between affordable health care and affordable health insurance gets to the heart of the issues we have talked about in terms of costs being high throughout the health care system. He seemed to hint at ACOs and reorganizing payment systems/incentives when he proposed the solution of having doctors work and negotiate directly with other doctors, hospitals, and patients. Although there are political barriers that have prevented systemic reorganization in the past (and the present), ultimately this does seem to be a core solution to dealing with the cost issue. In my opinion the affordability situation needs to worsen further and reach an even more widespread crisis point before the impetus for meaningful change will be reached, but it does seem that ultimately these types of reorganizations will need to take place if we want to get at the root causes of high costs.

His distinction between “market cost” and “true cost” was also insightful because it gets at the issue of reimbursement rates and fee-for-service. By historically allowing providers to set their own rates, we have created a system where cost increases are built-in. When paired with the fee-for-service reimbursement model it is difficult to see how anything but high costs would be the end result. ACA does take some steps to reduce reimbursement to doctors and hospitals, but I wonder if the overall effect of these measures will be to increase the reimbursements doctors and hospitals receive from private insurance as they recoup what could be perceived as lost income. This could have a negative impact on the affordability of private insurance in the long run. Again, as we have discussed, tinkering with aspects of reimbursement without overhauling the entire system may not lead to long-term affordability for consumers as various players in the system respond to changes.

Brian's point that laypeople should be involved in the subsidy process is an important one because it will help to ensure that health care is affordable in practice. If we are too top-down in determining these levels, we risk having legislation that does not reflect on the ground realities and choices. I also agree that we should set subsidies in a way that enables people to save money in the long-run, though we do have a country-wide issue of low savings and I am not sure that accounting for savings when determining a subsidy will translate into that money actually being saved by individuals. This is a larger societal issue that health care subsidies alone will not solve. Ideally, setting subsidies should also entail refining how we determine the federal poverty level in the first place. We have done little to change the way we measure poverty since the 1960s and it is arguably an unrealistic measure of true poverty in the US. Therefore using the federal poverty level to determine subsidy levels can lead to some very problematic estimates of affordability that do not translate to the real world. Shifting to a relative poverty measure, or at least reevaluating the validity of our current measure (eg by reexamining how food prices affect budgets) could provide a better picture of affordability and the way in which trade-offs play out in practice, enabling us to better target subsidies and ensure realistic estimates of affordability.