Health Exchanges: No Free Lunch

There is no such thing as a free lunch.

Milton Friedman (1912-2006), Conservative economist

I recently did 12 interviews with participants in direct pay independent practices for my book Direct Pay Independent Practice – Medicine and Surgery (Kindle, Amazon.com).

Two things surprised me about the interviews:

One, the repetitive claim by direct pay practitioners that health exchange-inspired plans,now held by 7.3 million Americans, 80% of whom have received subsidies, were the best salesman for direct pay care without 3rd party involvement.

Two, the customers for these plans were a mix of patients – the insured, the uninsured, the rich, the poor, the young, the old, those covered by employers, those covered by government.

How could this be?

ObamaCare, with its exchanges offering subsidized federal care, was purported by some policy makers and big government enthusiasts to be a free lunch- a free ride on the federal dollar for those who could not afford health care.

Well, as it turns out, the health exchanges have a catch. The cheapest plans, the Bronze and the Silver, have a hook. The hook is high out-of-pocket costs in the form of high deductibles and co-pays.

For those of you not in the know, out-of-pocket costs are costs paid with your own money rather than money from another source (the company you work for, the insurance company, or government.)

And co-pays, short for co-payments, are paid for by you, the beneficiary, of the health service, in addition to payment made by the insurer.

In the U.S., co-payments for health exchange plans are defined by the insurer policy, of which there are many, by the person for a medical service or policy. Co-pay amounts vary from $20 to $50 for a doctor visit, $50 to $150 for an emergency room visit, $20 to $50 for a prescription, depending on whether the prescription is for a generic or brand name drug.

The big stick in the federal ointment, however, are rising deductibles. For Bronze plans, deductibles average $5,081 for individuals and $10,386 for families. For Silver plans, deductibles are $2907 for individuals and $6078 for families.

The federal government “protects” individuals from soaring deductibles by placing a limit on deductibles of $6350 for individuals and $12,700 for families. And the government has a maximum of out-of-pocket costs of $6500 for individuals and $13,200 for families.

To many consumers, who often must pay co-pays and deductibles before receiving the service, these federal ceilings are un unpleasant surprise , even when subsidies cover much of the cost and even when employers soften the cost by partially covering the deductible and co-pay. The high deductibles and ubiquitous co-pays smack of an shell-game.

Consumers are beginning to understand new rules of the health exchange game, as set forth in detail in “Unable To Meet the Deductibles and Out-of-Pocket, “, Abby Goodnough and Robert Pear, New York Times, October 18, 2014). This understanding may be why many of these consumers are turning to direct cash-only care as a less expensive, less complicated, and more convenient alternative.