Comment by ScottBurson | Hacker News Reader

Comment by ScottBurson | Hacker News Reader

My personal bizarre pet idea for bringing down healthcare costs: mandatory minimum copays.

The problem, by one analysis, is that patients have no incentive to weigh costs against benefits. That's a tough task in any case, and pushing it off to the insurers makes it harder, as the insurer has less information than either the patient or their doctor about their individual case. The result is that neither patients nor (often) doctors know what the services cost.

In fact price information has been so effectively removed from the system that in some cases nobody knows what the service really costs. tptacek posted a great example: http://news.ycombinator.com/item?id=4465845

The purpose of the mandatory minimum copay is to force price information back into the system. When patients have to pay some part of the price of every service, they will therefore have to know what those prices are.

All that said, there are obviously some questions and problems to be dealt with. For starters, what's the formula for how much people have to pay? On the large end, I would suggest something like (price in dollars) ^ 0.7. This means for a $10k service, the copay would be about $600; for a $100k service, about $3000; and for a $1M service, around $16k. Those numbers feel reasonable to me: big enough to make most people think twice about choosing a six-figure intervention, but not an absolute barrier if there's a good medical reason.

On the small end, though, that formula produces numbers that are arguably too large. A $200 service (if there is such a thing? maybe in lower-income rural areas) would have a $40 copay by that formula. This risks discouraging people from getting preventative and urgent care that they need. To correct for this we could simply subtract some fixed number from the result of the above formula. I'm not sure what the right number is, but somewhere in the $40 - $80 range, I would guess. (This provision could also be subject to means testing.)

Probably when I say "mandatory" what I really mean is "the government provides incentives to make plans with this property significantly cheaper than those without". I don't care that rich people will circumvent the rule if they want; I just care that most people are on plans with this property, so that, as I say, price information is forced to flow again.

Read Maclolm Gladwell's piece, "The Moral Hazard Myth"

http://www.newyorker.com/archive/2005/08/29/050829fa_fact?cu...

"For that matter, when you have to pay for your own health care, does your consumption really become more efficient? In the late nineteen-seventies, the rand Corporation did an extensive study on the question, randomly assigning families to health plans with co-payment levels at zero per cent, twenty-five per cent, fifty per cent, or ninety-five per cent, up to six thousand dollars. As you might expect, the more that people were asked to chip in for their health care the less care they used. The problem was that they cut back equally on both frivolous care and useful care. Poor people in the high-deductible group with hypertension, for instance, didn’t do nearly as good a job of controlling their blood pressure as those in other groups, resulting in a ten-per-cent increase in the likelihood of death."

Very interesting column! Thanks! I will think about it.

I like it! You know what else might help? Legalize price competition between hospitals.

Right now if you think your local gas station or restaurant is way too expensive or slow or otherwise incompetent and you'd like to build one right next door that will charge less, steal most of the business and possibly drive the older one out of business, you can just DO that. But not with hospitals. In most states you aren't legally ALLOWED to build a new hospital or expand an old one unless the area where you're building it is deemed "underserved".

http://en.wikipedia.org/wiki/Certificate_of_need

I'd be very worried about a system like this in that it discourages preventative medicine, which is much more cost-effective on the long run.

If people have a minimum copay, they're far more likely to hold off until treatment is urgent—and, thus, much more expensive.

Preventative medicine isn't actually more cost effective. If anything, doing more preventative medicine on the margin increases total costs.

http://healthcarecostmonitor.thehastingscenter.org/louiserus...

http://www.nytimes.com/2008/10/07/health/views/07essa.html?_...

Patients are the wrong people to drive costs down.

"Why are you re-canularising me? Why am I being charged for this extra un-needed canula procedure? Just leave the old one in" etc. Doctors can assess the research, and can decide whether the risk of infection from old canulas balances the risks of new canulas, and whether the cost is worth it or not.

Here's a radio programme (no longer available from the BBC website, but may be somewhere else on the Internet?) about an Indian hospital that does a lot of work to drive down costs. http://www.bbc.co.uk/programmes/b039yz53

http://www.bbc.co.uk/news/health-10837726

> "We believe that the only way is to build large hospitals - 100 or 200 beds are not going to be the solution for the current world health problem. We need to build large hospitals where hundreds of operations are carried out every day."

> And here in Bangalore, the theory appears to work. Despite the huge volume of operations, mortality rates are comparable with or better than those in Britain and the US, and costs are much lower.

Scott, you seem to have a surprisingly good handle on a fundamental problem with our healthcare system. Let's catch up offline :-).

- Your old co-worker

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