"HIGH" DEDUCTIBLES PUT INTO PERSPECTIVE

Health systems (hospitals) feeling the pinch of the new economy are at least in part ascribing their cash flow problems to difficulties collecting from patients insured by the high deductible health plans I often recommend. Allow me to offer some perspective.

In January of 1970 my father died. He had the same kind of brain cancer that Senator Kennedy now has. Dad had two surgeries over four months and was hospitalized most of the time before he succumbed. He was insured by a major medical plan with a $250 deductible and a lifetime limit of $50,000. I remember that so well because we actually worried about paying for his treatment if the cost exceeded his coverage. In the end, it did not.

Now adjust that $250 deductible by the consumer price index over 39 years (or if you really want a shocking calculation use a medical inflation index); to represent the same percentage of out of pocket expense, health plans today should have a deductible of $1500 or more!

What about the quality and cost of treatment for a malignant glioma in 2009 versus 1970. Senator Kennedy has already outlived my Dad but surely with a cost that would (again) be bumping up against the much higher $2-5 million lifetime limits of today's policies.

Health systems (indeed Medicare, Medicaid and we as individuals) face financial peril not because the insurance plans used to finance care have higher deductibles; they (we) are in trouble because we can not afford the underlying cost of delivering care.

Deductibles and coinsurance are actually very old plan design tools used to engage consumers in the cost of their care. Now that such engagement is actually happening, those health systems that deliver quality care at lower costs will survive and prosper despite today's economic conditions.