What IS Affordability?

So now attention is being been paid to the Senate Finance Committee memo linked to in The New Republic by Jon Cohn. In 4 mildly-worded pages, it lays out a fantasist's idea of health insurance affordability that only cossetted, in-the-tank boneheads like Max Baucus and his ilk (which is to say, your average well-insured legislator) could find “affordable”. The maximum premium cap laid out in this plan is 13.9% of income. Bear this in mind for later.

But the best thing about it is that it begins to quantify what has heretofore been merely a slogan. What does affordability mean?

There has been no secret about the model on which these changes would be crafted; it's the Massachusetts Mess, and a simple exercise worked out on its convenient Commonwealth Connector website offers anyone who wants it, the opportunity to be a Bay Stater for a moment. A moment, I'd add, that once past, you will wake from in sweaty terror, clinging in sheer relief to the knowledge that you are free from that nightmare, for the nonce at least. Let's take a look at what the plan offers to an older couple not yet ready for Medicare, making a decent but not excessive living of about $86,000 per year.

First, we know the couple will not be eligible for Commonwealth Care, which is basically a public option, because it is only open to couples making less than $43,716 per year. We also know, from using the handy “affordability tool”, that our couple makes $1000 per year too much for subsidies, and so is considered fair game for any insurance plan offered. (Better hope your income doesn't vary from year to year, or the headaches won't be the kind your prescription drug plan can fix.) So let's go straight to the private insurers.

The plan offers 3 levels: bronze, silver, and gold, just like Olympic medals. See that? Don't you already feel like a winner? First, be aware that out of pocket spending in all plans is limited, to a mere $10,000 per year. Whew! Dodged a bullet on that one, eh?

Let's examine the highest and lowest cost plans offered. First, Harvard Pilgrim Health Care:

$960.12 per month, or $11,521.44 per year. 13% of total income.

What do we get for this princely sum? Well, first, the deductible: $3500. Then:

Doctor visits: $25 copay for up to 3 medical care office visits per individual (or 6 per family); the next visits are subject to the deductible; then 20% co-insurance thereafter.

ER visits: $250 (watch those kitchen accidents!)

Hospital stays: Deductible first, then 20% co-insurance

Prescription drugs: Separate deductible of $500, then $15 for generics, 50% co-pay all others

In a bad year, if our couple should have to use up their deductible, the total cost including premiums would be $21,521.44, or 25% of total income. And that doesn't even include the co-pays, drugs, or other spending, which will raise that percentage much higher.

For the highest cost, leave it to Blue Cross Blue Shield of Massachusetts:

$2,293.73 per month, or $27,524.76 per year. 32% of total income.

Ah, but here's the diff—NO deductibles. None. Nada. Nil. The co-pays are rare and much more reasonable, and involve no nasty surprise balloon payments:

Doctor visits: $15 co-pay (no limits on visits)

ER visits: $100

Hospital stays: $100

Prescription drugs: $10/$25/$45

In a bad year our couple will not pay much more than their premium payments, or $27,524.76 per year. 32% of total income. In other words, the same amount that they paid out in premiums, not counting a few small co-pays that, unlike the "cheap" plan, will not add up to anything worth sweating.

The difference between costs of the plans in a worst case scenario year is about $6000. But the problem is that with those hospital and drug co-pays in the “cheap” plan, a serious illness or accident could easily end up bankrupting or impoverishing a family, while that $6000 will be mostly all the family with the expensive plan will have to eat. Another safety valve, that of preventive care, also gets cocked by the “cheap” plan. The family that takes it out gets raked over the coals by premiums, and finds the co-pays and hoops so onerous and difficult that it may forgo treatments altogether. So those who go for the lowest cost end up feeding the corporate beast with little security to show for it, and are 13% poorer for the privilege.

But don't take my word for it. Public Citizen looked at the real-life situations of Mass citizens this past February, who had very little good to say about it. People are still falling through coverage gaps, still finding themselves unable to access care, worse off with less money to spend as the insurance companies rake in profits from their captive market. This is not the model for national health care. This was an experiment, and experiments are done to learn from mistakes.

Let's learn from this one.