Deductibles with Major Health Expenses
Ideally, coverage for major health expenses should come with a deductible amount even though the amounts of these claims well exceed this deductible. The reason is that we don’t want to over-insure ourselves, and the insurance should be only covering the portion of the expense that we cannot bear without a lot of hardship, not the entire amount.
People very often object to deductibles, especially when they are for more than nominal amounts, and for major medical events they do tend to be on the higher side. This is because they don’t tend to see health care insurance as involving costs, because these costs are usually hidden from them by their employer who administers their plan for them and allocates funds to it as part of their overall compensation, or by the government in the case of public health insurance.
All things being equal, not having deductibles for any claims, including major medical expenses, would be ideal, but things aren’t equal at all here. In theory, any policy could completely waive deductibles, but this would simply cost more, and the additional cost would be higher than the expected benefits received because this is how all insurance works.
If your employer bore the costs of this, this doesn’t mean you got it for nothing, as this would affect their ability to compensate you as your total compensation would go up by the additional amount it required to have the deductible waived or reduced. It is much more reasonable in fact to have the deductibles and have them fairly high in fact, at the threshold that people could bear themselves.
Managing This in a Public System Setting
With public health care systems, not having deductibles ends up getting paid for in the end by higher taxes or increasing public debt, neither of which are desirable.
This is something that public health care needs to look at as well in order to make the system more efficient. With private group coverage, we can assume that those who are employed with a certain company will have a certain financial capacity to handle deductibles, but with public health care plans, we can’t just assume this as some people are going to be more indigent and unable to afford even small ones.
While we may and perhaps should look to reduce or eliminate this obligation in a public setting among those without the ability to bear the costs of deductibles, even in a welfare state, this should be administered according to one’s financial means, and we don’t give social support payments to those who are well off.
What we should be looking to do is to use deductibles as long as people do have the capacity to manage them, using things such as minimum income levels to waive these requirements and anyone above that would be subject to the requirement to pay a share of the costs.
This sort of thing would cause quite an uproar among many people though, and the main reason for this is that they do not realize that this reduces abuse and whenever that happens, they end up paying for it.
It would certainly help if government coffers weren’t seen as a bottomless pit where savings on health care spending would not make a material difference in their taxation rates, but other approaches such as rebates for people who use the system responsibly or infrequently could be considered to make the benefits of all of this more transparent and tangible.
We could even look at things such as a form of the health spending account that private systems use, where funds could be saved up and then used on things like preventative care or could be saved up to pay for future deductibles if the need arises.
This would encourage people to spend more responsibly on medical expenses and we could also integrate a scheme to allow them to use this money for preventative purposes, spending that would serve to reduce the load on the system in time.
How Major Medical Insurance Affects Demand and Price
Due to technical advances, more and more interventions are possible that cost more and more money. Normally, there would be some pretty strict limitations on this from an economic standpoint, just like there is for a car that costs half a million dollars where very few people can afford to buy such a thing,
This would also be the case for a lot of medical procedures if not for health insurance, which does of course facilitate spending on a lot of things that are way beyond patient’s ability to pay for them. In some cases, they may exceed someone’s ability to pay over an entire lifetime, depending on their income.
Some hospital stays these days can cost a million dollars or more, and if you made $3000 a month, a typical amount in developed countries, it would take your entire salary for over 27 years to pay for this. That of course is out of the question as you would need money to live on and most of your salary in fact, but if you were able to set aside a third of this, probably the most that would be realistic, it would take you over 80 years.
Spending for major medical events goes way up as we age and elderly people constitute the majority of this spending. This certainly presents a problem with pricing this coverage and in fact it is well beyond what is reasonable and social programs administered by governments are required to ensure that people are taken care of at least minimally.
Costs keep going up and up and far faster than income is, and this has resulted in an escalating crisis with regard to the amount of money that is spent on health care. Health care providers as of yet anyway do not have much of an incentive to be that cost efficient as insurance companies pay the rates they charge and therefore there’s not much need to improve in this area.
This cannot go on escalating forever though and we will at some point reach saturation, where health care insurance ends up costing so much that reform will be driven a lot more from those who pay for it, creating a lot bigger market for more efficient health care providers.
Our conventional medical system is designed to intervene at the crisis level and really isn’t that concerned at all with preventing these crises or attempting to resolve them at an earlier stage where doing so would be far less expensive, and the implications of this is the amount that we spend on major medical interventions and treatments eats up more and more of GDP.
The health care industry is of course more than happy to get a bigger and bigger share of the pie and up until now people feel the need to pay these higher and higher costs and pay more and more, but at some point, we will need to re-think this, out of necessity.
We do know that the demand for major medical expenses is extremely inelastic, meaning that the price going up really doesn’t affect its demand very much, so the solution isn’t to just tell people that you are just going to have to be satisfied with not having your life saved if the need arises and the costs of saving you are too great, even though this may make economic sense.
The only realistic way to manage the demand for these very expensive events is to look to reduce the need for them and therefore bring down the total costs of them that way. This is what functional medical practitioners seek to do, managing people’s health much more proactively, and intervening at the beginning stages of illness, not when things have reached the point where the much more expensive interventions become the only option.
People are generally taking more responsibility for their health these days and while we have a very long way to go to reach the ideal or anything approaching it, this is at least encouraging, and the emergence of alternative media in the information age has provided people access to more ideas outside the conventional system.
We are therefore in a better position to decide for ourselves what approaches we wish to take, whether that is one of pure neglect and just waiting for something very bad to happen where we will require very expensive treatment, to taking full responsibility for our current and future health and being much more proactive in managing it and especially learning how we may do so more effectively.
We are the ones who have created the monster of conventional health care spending and the simply massive amounts of money that we spend on major medical treatment in particular. If we are able to extricate ourselves from this mess, and avoid reaching the point where major medical coverage will simply become unaffordable to many of us, we will need to seize the initiative and stop relying so much on reactive health care and instead become much more proactive.
Major medical coverage is extremely important and very much needed by everyone but we do need to seek to reduce the number of these incidents that occur and unless we do so effectively, we are headed toward even more trouble.