Mandated insurance coverage means mandated cost. What do we really want to pay for?


Originally published here on 9/08/10 on the Health As Human Capital Foundation Blog

Have you ever tried to purchase cable television with just the channels you want to watch, and been told that you need to buy the ‘whole package’ to get service? Sound like your cell phone plan?

We often see private companies ‘bundle’ services to boost revenue or maximize their profit margins, and as consumers, we have to decide if we’re willing to purchase these sorts of arrangements. But what would happen if the government were to require the public to purchase a service, and then mandate a very expensive bundle of services without giving consumers a choice about what’s included? Welcome to healthcare.
While few of us spend the energy to pay close attention, the details of healthcare legislation are being decided not by patients, but by industries, legislators, and lobbyists. Most of the legislated components of healthcare involve small variations in the overall ‘bundle’ of requirements that are barely noticeable —and that’s the problem. Because even tiny decisions can have huge implications (to someone), those who have a lot at stake are trying to get in on the action. It reminds me of a quote:

“Democracy is four wolves and a lamb voting on what to have for lunch.”

— Ambrose Bierce

State Insurance Mandates Add Up

Anyone who survived math in junior high learned how to calculate a fraction. Very small fractions are almost unnoticeable compared to the whole. A number as small as one-two-hundredth, .005, for example, is minute; virtually unnoticed.

That’s how most mandates get included. A group with a worthy cause approaches a state legislature asking for mandatory coverage of specific treatments among an extremely large number (for example, birthmark removal or therapeutic massage). One can imagine proponents arguing that it costs only pennies to help improve quality of life. Not wanting to appear uncaring, legislators have been agreeing—frequently.

According to the Council for Affordable Health Insurance (CAHI), there are now more than 2,100 specific state mandates added to health plan requirements. Rhode Island, the most highly-mandated, has 70 while Idaho has only 13. Overall, there are 135 different types of mandates, some adopted by all states, others by only one (1). Examples of mandated services include: breast reduction, oriental medicine, special footwear, athletic trainers, wigs, and off-label use of pharmaceuticals (meaning coverage for uses of a drug that have not yet been approved by the FDA). It is a process dominated by political motives, not scientific or medical evidence that they are our “best” choice for saving or improving lives.

In math class, we also learned that if you add many, many, many small numbers together they eventually add up to something substantial. Taking the CAHI list for 2009 and using their figures to calculate the cost of these state mandates, we can conservatively estimate that all of the small government mandates in healthcare ‘bundling’ add up to a very significant 45% costs on top of non-mandated coverage (if we used the high end of CAHI’s estimated value instead of the midpoint it totals 72% in additional cost).

To be fair, almost of us might agree with the top ten most commonly adopted mandates. These include things like coverage for newborns, adopted children, and mammograms. If we assume that mandates adopted by 45 states or more are universally “worthy,” what remains? Still, an additional 33%.

Remember, the extra 33% does not necessarily reflect a sicker population or “better” care. It’s just more of certain things that were chosen because someone asked—not through a structured process. What is too easy to forget, is that—because resources are not infinite—saying ‘yes’ to one thing always means having to say ‘no’ to another (eventually). So, including certain types of cosmetic surgery for arguably noble reasons may steal funding away from, say, flu vaccine outreach programs which can literally save lives.

Don’t get me wrong, I would love to get massages, fitness-center dues, vitamins and fruit smoothies for “free.” But that isn’t what happens. Instead we are all forced to pay for an accumulating number of services, which ironically means that fewer and fewer people are able to afford the very basic care they need.

Most of these added services get rolled quietly into a massive package called “required minimum coverage.” In the few cases where the issue gets media attention, we all, like legislators, can be convinced that each cause deserves attention (e.g., the chain emails encouraging citizens to DEMAND that health plans cover extra days in the hospital following mastectomies, which is now mandated in 25 states).

Citizens cringe at any limitation that smells like rationing, but somewhere there needs to be an apolitical process for choosing what gets included. Right now, it seems to be more about heavy lobbying than about true medical need and affordability for the general public. Shouldn’t there be a way for me to purchase a lower level of insurance coverage and pay less? Whether we determine the “right” package(s) through market demand, scientific review, or prevalence of need, there needs to be a better process of signing individual procedures into law.

For television, at least there is a basic digital package to get local stations. For cell phones, we can find pay-as-you-go minimum cellular packages. Unfortunately in healthcare we have to take all-or-nothing, leaving us with overpriced insurance and ultimately, fewer people who can afford it.

Why this matters: Hidden deals and hidden costs do influence what health coverage includes and how much it costs. Unfortunately, the added features rarely are chosen because they make medical sense, or because consumers have determined their value. It is unlikely to change unless we engage patients in financial choices and (somehow) stop creating medical rules down at the State Capitol.

Wendy Lynch, PhD is Principal of Lynch Consulting.

2 thoughts on “Mandated insurance coverage means mandated cost. What do we really want to pay for?

  1. A massive difference in the health care arena is the associated risk in selecting only the services you think you need at the beginning of your plan year. Historic data consumption helps me decide what data plan to choose for my iPhone or what channels I need in my cable package. Historic data is not a great predictor of future need in health care. As a relatively healthy 27 year-old, do I elect for coverage for cancer treatments in the off case that I develop a tumor? Would cancer treatments be part of the base package? How big does this base package get?

  2. I wasn’t planning to get breast cancer. I did everything right – had children before I was 30, nursed them a year, maintained a reasonable weight, exercised regularly — but I did.

    I wasn’t planning to have a mastectomy for my breast cancer either. When you’re a 32B lumpectomies and mastectomies can turn into the same thing.

    So there I was having a cancer I didn’t expect to have and a surgery I didn’t want.

    I was glad that breast reconstruction was covered in my HMO plan. Maybe my HMO would have covered that if there hadn’t been a law, maybe not. It wasn’t a feature I considered when I picked that plan because it wasn’t something I thought would happen to me.

    I realize that mandated coverage drives up prices, but who knows what’s going to happen to them?

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