The psychology of high deductible health plans

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neurosphere
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The psychology of high deductible health plans

Post by neurosphere »

Hi all, I wanted to share a fascinating study related to HDHP/HSA insurance accounts.

There was a study published about a month ago by the National Bureau of Economic Research with looked at consumer health spending when switching from a traditional health insurance plan and an HDHP with HSA. From the plain language summary (http://www.nber.org/digest/dec15/w21632.html)
After years of providing completely free medical care to its employees, a large company switched to a high-deductible insurance plan that, in its first year, covered 78 percent of expenditures. The subsequent change in the spending patterns of employees suggest that textbook models of rational consumer behavior do not apply to demand for health care....

They note that even relatively well-educated and well-paid consumers in their data sample appear to act in ways counter to their financial and medical interests.
For anyone interested, I have a blog post about the study here: http://www.sotirioskeros.com/2015/12/12 ... alth-care/

I definitely have encountered examples (with both my financial planning clients and my patients, as well as personally) where details of their insurance has affected (for better or worse) their health care decisions.

I think this is a very important contribution to the field of consumer finance and behavior, and potentially adds another example of time when "non-mathematical" considerations might be important, perhaps analogous to buy vs. rent, loan reduction vs. investing, and DCA vs. lump sum investing.

Anyway, I'm eager to hear any thoughts on this study.

Neurosphere
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KlangFool
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Re: The psychology of high deductible health plans

Post by KlangFool »

OP,

In my honest opinion, the only surprise here is why are you are surprised by this? In general, people do not know how to shop around for anything. Let me tell you a story.

One day, I was at McDonald. The person in front of me was buying Chicken McNuggets. He was buying 20 pieces for about $6 or more. Meanwhile, if he looks to the right a bit at Dollar menu, he could get 4 pieces for $1. Basically, he could get the same quantity of the Chicken McNuggets from dollar menu at $1 or more less. But, he order from the main menu. Ditto, for many other items on his order, he could saved close to $10 if he just order some of the items from Dollar Menu. Now, if a normal person could not know how to shop in McDonald, what makes you think that they know how to shop wisely for something more complicated like medical insurance.

Just for the sake of research, I asked my daughter to survey her high school classmates on how many of them know about McDonald dollar menu. It turns out that many of them do not know.

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neurosphere
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Re: The psychology of high deductible health plans

Post by neurosphere »

KlangFool wrote:OP,

In my honest opinion, the only surprise here is why are you are surprised by this?
Hmm, not surprised hardly at all at the hypothesis/conclusion of the study. In my blog post, I admit that I have done exactly what the study found: that I forgo potentially necessary health care in order to "save a buck".

But I'm amazed at the quality and good fortune of this study which provided objective EVIDENCE regarding the conclusion. Assuming something as likely to be true and providing good evidence that it is indeed true are two very different matters. :D
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Re: The psychology of high deductible health plans

Post by KlangFool »

neurosphere wrote:
KlangFool wrote:OP,

In my honest opinion, the only surprise here is why are you are surprised by this?
Hmm, not surprised hardly at all at the hypothesis/conclusion of the study. In my blog post, I admit that I have done exactly what the study found: that I forgo potentially necessary health care in order to "save a buck".

But I'm amazed at the quality and good fortune of this study which provided objective EVIDENCE regarding the conclusion. Assuming something as likely to be true and providing good evidence that it is indeed true are two very different matters. :D
neurosphere,

<< In my blog post, I admit that I have done exactly what the study found: that I forgo potentially necessary health care in order to "save a buck".>>

This is not as bad people do not contribute to their 401K up to the match. In many cases, that contribution increased their take home pay and give them 100% return. Not contributing does not save their money in this case. But, they still do not do it.

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Re: The psychology of high deductible health plans

Post by dm200 »

I think it is more complicated than consumers unwillingness or resistance to "price shopping" for medical and health care. It seems to me that the US healthcare system is so comples and not logical that many folks just give up.

I regard myself as quite informed, but I would be really challenged to do this. In addition, it seems to me there are disincentives to such price shopping.

In some cases, high deductible plans (depending on the details) may incentivise participants to skimp on lomger term important expenditures that help longer term.
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Re: The psychology of high deductible health plans

Post by neurosphere »

KlangFool wrote:This is not as bad people do not contribute to their 401K up to the match. In many cases, that contribution increased their take home pay and give them 100% return. Not contributing does not save their money in this case. But, they still do not do it.
WHAT?!?! Do such mythical creatures actually exist??! (sarcasm, btw).

Sadly, I know this to be true. :(

NS

P.S. In my blog post I intentionally use the Boglehead wiki definitions and links regarding HDHPs and HSAs in order to drive some traffic to the site. As most of us are all well aware, the general public can certainly use the information/knowledge provided on Bogleheads!
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Re: The psychology of high deductible health plans

Post by dm200 »

Not healthcare, but for some reason I am reminded of the Jack Benny bit:

http://www.bing.com/videos/search?q=jac ... BFDBEB8875
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Re: The psychology of high deductible health plans

Post by KlangFool »

OP,

In my honest opinion, the more interesting question is why? Is it lack of motivation? Aka, it is not important enough for people to learn and know? Or, it is a lack of knowledge?

If we can answer this question, we can solve most of the problem in the world.

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Fallible
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Re: The psychology of high deductible health plans

Post by Fallible »

neurosphere wrote:Hi all, I wanted to share a fascinating study related to HDHP/HSA insurance accounts.

There was a study published about a month ago by the National Bureau of Economic Research with looked at consumer health spending when switching from a traditional health insurance plan and an HDHP with HSA. From the plain language summary (http://www.nber.org/digest/dec15/w21632.html)
After years of providing completely free medical care to its employees, a large company switched to a high-deductible insurance plan that, in its first year, covered 78 percent of expenditures. The subsequent change in the spending patterns of employees suggest that textbook models of rational consumer behavior do not apply to demand for health care....

They note that even relatively well-educated and well-paid consumers in their data sample appear to act in ways counter to their financial and medical interests.
For anyone interested, I have a blog post about the study here: http://www.sotirioskeros.com/2015/12/12 ... alth-care/

I definitely have encountered examples (with both my financial planning clients and my patients, as well as personally) where details of their insurance has affected (for better or worse) their health care decisions.

I think this is a very important contribution to the field of consumer finance and behavior, and potentially adds another example of time when "non-mathematical" considerations might be important, perhaps analogous to buy vs. rent, loan reduction vs. investing, and DCA vs. lump sum investing.

Anyway, I'm eager to hear any thoughts on this study.
Neurosphere
Is it known how well the consumers were educated about the changes or how that was done?

I also wonder what is meant by "textbook models of rational consumer behavior do not apply to demand." What models do they refer to?
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: The psychology of high deductible health plans

Post by neurosphere »

dm200 wrote:Not healthcare, but for some reason I am reminded of the Jack Benny bit:

http://www.bing.com/videos/search?q=jac ... BFDBEB8875
LOL, a very appropriate clip.
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Re: The psychology of high deductible health plans

Post by baw703916 »

A more realistic example of Klangfool's anecdote as applied to healthcare would be the following:

There is a pack of 10 "chicken nuggets" on one side of the menu, 4 "chicken tenders", on another part, and 6 "chicken nibbles" somewhere else. The person at the counter can't tell you how much any of them will cost, or whether they are actually the same or different, but is happy to recommend whichever one she was given a free meal of this week. Next week, they might recommend a different choice, according to the whims of marketing.

As a rational consumer, what do you do?
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Re: The psychology of high deductible health plans

Post by Spirit Rider »

I have had HDHP/HSA plans for most of the last ten years. I feel this study completely misses the mark.

They are treating this as if health care shopping was equivalent to goods and/or services shopping. Nothing could be further from the truth. It is all but impossible to price shop for health care. First of all, try to actually get a price estimate for any non-trivial course of treatment. This is just doing it for budgeting purposes, not even comparative shopping.

They also glossed over the reduced demand for screening services. The implied that people don't know they are free or fear that free services will lead to costly services. I can testify to the minefield when having a colonoscopy. I worked hard to establish that all treatment would be covered as screening services and had zero ($0) cost share.

While they all (doctor, anesthesiologist, facility, etc...) gave assurances, no one would sign a document to that effect. Try six months of fighting over screening/non-screening charges, whether non-screening services were covered/non-covered charges., etc... It was surprising in all the mess, it was the insurance company who kept me informed and was the most reasonable. It was the hospital and the anesthesiologist who were the worst. The anesthesiologist was a lying criminal. My doctor was a man of his word, but wouldn't challenge the anesthesiologist even though he was present when assurances were made.

If they could change one equation in our health care system, it would be to make pricing transparent and deterministic. It is one thing to say that additional treatment could be required and complications could ensue, but to refuse to quantify the costs of anything leaves health care as one big black hole.
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Re: The psychology of high deductible health plans

Post by Quark »

Spirit Rider wrote:...They are treating this as if health care shopping was equivalent to goods and/or services shopping. Nothing could be further from the truth. It is all but impossible to price shop for health care. First of all, try to actually get a price estimate for any non-trivial course of treatment. This is just doing it for budgeting purposes, not even comparative shopping....

If they could change one equation in our health care system, it would be to make pricing transparent and deterministic. It is one thing to say that additional treatment could be required and complications could ensue, but to refuse to quantify the costs of anything leaves health care as one big black hole.
There usually is no way to figure out what a procedure will cost, which essentially defeats the who idea of consumers shopping for the most cost-effective providers. Then you have the problem of comparing quality. Even if you get transparent pricing, how do you judge quality - see for example, http://www.vox.com/2015/10/19/9567991/h ... opping-mri. Often you can't even get a definitive answer as to whether the procedure will be in-network, which is something you should always ask.

It's nothing like going to amazon.com and seeing choices with prices and reviews, with the option to return the item if it's not what you expected.

That being said, transparent pricing (including whether it's in-network) would be a nice first step.

These are important things to know when shopping for insurance and healthcare.
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Re: The psychology of high deductible health plans

Post by nisiprius »

Comparison shopping? Please. That's a joke. Anyone who's ever tried it has given up. I'm not even talking about questions about whether it is worth the extra cost to have your routine phragmatotomy done by the high-volume surgeon at the big teaching hospital ranked #1 in phragmatology, or by the general surgeon at the community hospital with the low infection rate.

On several occasions, I've tried to find the price of a procedure I was about to have. Not even to comparison shop. I was about to have a procedure done that had already been scheduled, by a specific doctor at a specific facility on a specific day. (Why? Because I had to sign something saying I was personally responsible if my insurance wouldn't pay and I was only 90% sure my insurance would pay). It was, as a matter of fact, an MRI. They pushed the form at me. I said "So how much does this cost?" Long pause, as if nobody had ever asked before. "We can't tell you that, sir." "OK, who can?" "Uh... would you like to speak to the billing department?" "OK." Billing department says "What is it?" I say "An MRI." "But what kind of MRI?" "An abdominal MRI." "But what procedure code is it?" "I don't know. Hang on." I talk to the people behind the counter. They don't know. They actually call the technician. He says that not only does he not know, but they don't actually know in advance, because some of the shots they decide to take are determined by what they see on the first shots they take.

In short, even under the very best of circumstances you don't know what a procedure will cost, because they don't necessarily know exactly what things they will do next until they are in the middle of the procedure.

Should they wake you up in the middle and say "Hey, I don't like the look of those lymph nodes, should we get those too? We have a special today, we can throw in the lymph nodes for just $1895.00?" Do you say "I think I can do better at Winnemac Hospital Medical Center, just sew me up and they can get the lymph nodes the next time they have me open?"

I do not know whether a free market consumer model is a good idea for healthcare, but at the present time it's a bad joke. Even if you had transparent pricing, how do you compare the gastroenterologist who does the colonoscopy itself for cheap but makes it up by charging a lot if any polypectomies are needed, versus one who does expensive colonoscopies and cheap polypectomies?
Last edited by nisiprius on Sat Dec 12, 2015 6:46 pm, edited 3 times in total.
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Re: The psychology of high deductible health plans

Post by KlangFool »

Spirit Rider wrote:I have had HDHP/HSA plans for most of the last ten years. I feel this study completely misses the mark.

They are treating this as if health care shopping was equivalent to goods and/or services shopping. Nothing could be further from the truth. It is all but impossible to price shop for health care. First of all, try to actually get a price estimate for any non-trivial course of treatment. This is just doing it for budgeting purposes, not even comparative shopping.

They also glossed over the reduced demand for screening services. The implied that people don't know they are free or fear that free services will lead to costly services. I can testify to the minefield when having a colonoscopy. I worked hard to establish that all treatment would be covered as screening services and had zero ($0) cost share.

While they all (doctor, anesthesiologist, facility, etc...) gave assurances, no one would sign a document to that effect. Try six months of fighting over screening/non-screening charges, whether non-screening services were covered/non-covered charges., etc... It was surprising in all the mess, it was the insurance company who kept me informed and was the most reasonable. It was the hospital and the anesthesiologist who were the worst. The anesthesiologist was a lying criminal. My doctor was a man of his word, but wouldn't challenge the anesthesiologist even though he was present when assurances were made.

If they could change one equation in our health care system, it would be to make pricing transparent and deterministic. It is one thing to say that additional treatment could be required and complications could ensue, but to refuse to quantify the costs of anything leaves health care as one big black hole.
Spirit Rider,

+1.

Unfortunately, both me and my wife went through the same billing hell with colonoscopy. And, it is supposed to be covered 100%.

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Re: The psychology of high deductible health plans

Post by crit »

Neurosphere, perhaps you'll be able to provide an answer: what percentage of patients for a given procedure are in a position to shop for services?

In my experience, the most expensive services happen when you're in no position to shop, for example, strapped to a backboard. Shopping for CT scan prices for my burst vertebra - not gonna happen. You could even suspect that there is price gouging under those circumstances, like Uber's 'surge' pricing.

But back to the basic question: what percent of people undergoing an MRI, CT, cardiac procedure, etc. are non-emergent and in any position to shop at all?

The transitions around the ACA are such rich opportunities for data like the NBER study.
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Re: The psychology of high deductible health plans

Post by dm200 »

Let's look at this another way. Are there any examples (anywhere in the world) where "consumers" of health/medical products and services can "shop" or compare prices, quality, etc.?

While my health is a high priority and I do not avoid reasonable actions and steps in safeguarding my health, nonetheless I actually do try to make choices that do not incur unnecesssary services, especially if they are expensive (even if I am not paying the bill). More often than not, however, it is my experience (as a layperson, not a medical professional) that Physicians seem to order and push for more tests, scans, etc. than seems "necessary". I will say, though, that this seems to be less frequent (with Kaiser, Medicare) than with my previous primary care Physician.
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Re: The psychology of high deductible health plans

Post by jmw »

Your health is more important than the balance in your HSA or your wallet. Those asking for transparent pricing are missing the point. HDHP are bad news due to the strong tendency to self-ration healthcare because the high estimate for a mystery condition could be a four figure hit to the HSA or the wallet.

If you need to go to the doc, go to the doc. What are you going to do if the doc visit for a mystery condition could equal the deductible? CT scans, MRIs, and doctors are not cheap. You are already $300 or more in the hole with the doc, and he wants an expensive test before rendering any treatment. Do you really think you're qualified to determine whether or not that MRI is unnecessary waste? No, you are not qualified to make that decision. We had a thread a couple of weeks ago about someone complaining that doc prices are way higher than Medicare's generous reimbursement numbers (note sarcasm). Some will think long and hard before getting $300 in the hole and forget about the doc. This can prove to be more expensive in the long run, and could reduce life expectancy as well as quality of life.

Here is a way to have definitive healthcare pricing. Perform self-treatment. For example, use an OTC cream on a mystery skin condition and ask Dr. Google for advice. Do the skin cancer pictures match the mystery skin condition (as an untrained layman)? And the cost of self-treatment can be less than $10, albeit the effectiveness of self-treatment is VERY questionable. Now your HSA will grow unimpeded. That's what many people are doing today.

Unless you are broke, I suggest prioritizing your health over your finances even if the numbers favor HDHP/HSA during most years.
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Re: The psychology of high deductible health plans

Post by jmw »

dm200 wrote:More often than not, however, it is my experience (as a layperson, not a medical professional) that Physicians seem to order and push for more tests, scans, etc. than seems "necessary". I will say, though, that this seems to be less frequent (with Kaiser, Medicare) than with my previous primary care Physician.
In my experience as a longtime ex-Kaiser patient, Kaiser is quite reluctant on its own to perform expensive tests when there is a mystery condition that doesn't fit well with their groupthink treatment guidelines. I agree Kaiser is very good at controlling costs, but it is most definitely at your expense.
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Re: The psychology of high deductible health plans

Post by BigSaver »

Thinking about how my own behavior changed after switching to an HD plan, much of it was quite rational, even if I do say so myself!

When I had a lower deductible (employer) plan, I treated it like the benefit it was: I used it. Not frivolously, because who has time to waste at doctors' offices? There was a copay and the copay was worth it. Went to wellness exams, and went to see the doc for other conditions if something did not improve after a reasonable amount of time.

For the past 2 years I've had a high-deductible plan, and I do things somewhat differently now:
(1) I'm switching PCPs to get a better in-network rate for all office visits. Not all in-network docs charge the same rate for the same type of office visit in the same insurance network. With an HD plan, I notice this stuff now.
(2) I challenge charges that are far off the pre-treatment estimate. For example, I needed physical therapy and was quoted $150 per visit. Actual charges were 3 X that, so I complained, and they agreed to honor the pre-treatment estimate.
(3) For non-urgent treatment, I ask for a pre-treatment estimate. And medical offices still act surprised, like they are not set up to do that for you. They say: "Well, that really depends on your insurance." me: "For my share of it, yes, but what are YOU going to BILL my insurance plan? You do know that, right?"
The actual bill is always higher than the pre-treatment estimate. I don't challenge it every time; only if it is significant or involves ongoing charges.
(4) I cancel future appointments that aren't helping me, or aren't worth it. After 4 PT sessions, I quit because they were not worth it even at the promised $150 per visit. I made progress after 4 and understood the exercises. And I looked for alternative medicine, which was especially appropriate for my condition (muscle related, non-injury). Before the HD plan, I probably would have continued PT longer. I did contact my PCP and explain why I was quitting that treatment. It's important that the PCP know, imo.
(5) I look at alternative treatments, like therapeutic massage for pain management. Not covered by insurance but affordable, and it demonstrates the importance of relaxing & stretching. I'm not talking about harebrained treatments & snake oil potions. My insurance company provides a list of alternative medicine providers, and I used one of them.
(6) I use tools provided by the insurance company. Had a free virtual doctor's visit for a minor problem one weekend. Worked fine for the situation. I also use the insurance co.'s cost estimator tools, with mixed results. Difficult to predict all treatment codes needed for a particular procedure. The tool does give me an idea as to which provider(s) have better in-network discounts.

Expenditures between non-HD & HD "consumers" will further diverge as HD plan consumers become more knowledgeable (forced to for the sake of their wallets). Knowledge is a good thing.
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Re: The psychology of high deductible health plans

Post by BigSaver »

crit wrote:In my experience, the most expensive services happen when you're in no position to shop, for example, strapped to a backboard. Shopping for CT scan prices for my burst vertebra - not gonna happen. You could even suspect that there is price gouging under those circumstances, like Uber's 'surge' pricing.
True, however, in those scenarios you're likely to meet & exceed your deductible, and maybe even your out-of-pocket. At that point, money is no longer my problem; I'm done paying, and the insurance co. pays the rest. I just need to stay in-network for them to pick up the balance. Money management comes into play up until then, and mainly before deductible is met.
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Re: The psychology of high deductible health plans

Post by newuser »

Spirit Rider wrote: If they could change one equation in our health care system, it would be to make pricing transparent...
+1

I am a physician and I cannot for the life of me figure out a way to get the patients an estimate on what a simple procedure is going to cost. The one exception is a cash paying patient who is getting a test in my office. Then I can quote the exact charge. Once the insurance companies gets involved then its a complete black hole...It depends on what hospital, what the insurance company negotiated rate is for the procedure, what the plan deductible is, what diagnosis code is used, what type of physician, how the physician bills (we don't even know how this affects patients bills most of the time), what that particular plan covers and doesn't cover. There is no transparency for anyone. If I as a physician who understands exactly what procedure is going to be done for exactly what indication cannot get an estimate, then I don't understand how any patient can navigate the system.
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Re: The psychology of high deductible health plans

Post by finite_difference »

KlangFool wrote:OP,

In my honest opinion, the only surprise here is why are you are surprised by this? In general, people do not know how to shop around for anything. Let me tell you a story.

One day, I was at McDonald. The person in front of me was buying Chicken McNuggets. He was buying 20 pieces for about $6 or more. Meanwhile, if he looks to the right a bit at Dollar menu, he could get 4 pieces for $1. Basically, he could get the same quantity of the Chicken McNuggets from dollar menu at $1 or more less. But, he order from the main menu. Ditto, for many other items on his order, he could saved close to $10 if he just order some of the items from Dollar Menu. Now, if a normal person could not know how to shop in McDonald, what makes you think that they know how to shop wisely for something more complicated like medical insurance.

Just for the sake of research, I asked my daughter to survey her high school classmates on how many of them know about McDonald dollar menu. It turns out that many of them do not know.

KlangFool
Maybe they just don't eat at McD's very often. That would save them a lot more money in the long run, considering how unhealthy the food is ;)

But I agree that not contributing the match in your 401k is madness :)

On topic, I personally do not use an HSA because I sleep better at night knowing I have great health insurance that is supposed to cover everything. It probably costs a bit more, but I would rather save in other areas.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
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Re: The psychology of high deductible health plans

Post by TheGreyingDuke »

Price transparency, good to have it. But there are other impediments:

1) People are not very good at determining when they need to go see a practitioner (I use that term as much primary care is handled by so called "mid-level" clinicians.) I can't tell you how many people will run to the doc for symptoms of a cold, no fever (and often insist on getting medicine!)

2) People are also not very good at assessing the quality of the care they received. Amenities, the one area of health care where the US ranks at the top of the world, will often trump actual clinical expertise. This includes what the office is like, how long you waited to e seen, the so-called bedside manner of the clinician. Sure you can look at the various ratings floating around but they are not the entire story and the reality is one often does not have a choice in the matter.

3) More care is not necessarily good care. Serendipitous findings that lead to further tests and procedures often makes on's health worse. I believe that less is often more. I am considering giving up the annual physical routine, it is the relationship with the clinician (I have had the same primary care doc for 25 years) that is important, in my view.
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Re: The psychology of high deductible health plans

Post by Alan S. »

Good luck with modifying the reimbursement system to reflect outcomes rather than payment for services using a few thousand different codes. Outcome determination is so subjective and subject to manipulation it would have to be limited to something easily determinable such as hospital readmissions.

Reminds me of when I had my roof replaced. Got a satisfaction survey from the contractor 2 days later asking for a rating on a number of items. The following month when it first rained the roof began leaking. Any such efforts to determine subjective healthcare outcomes will certainly be gamed in different ways as those outcomes directly affect payment amounts. Would be nice if the idea was practical and the findings accurate, but I would not bet on that.
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Re: The psychology of high deductible health plans

Post by randomguy »

BigSaver wrote:
crit wrote:In my experience, the most expensive services happen when you're in no position to shop, for example, strapped to a backboard. Shopping for CT scan prices for my burst vertebra - not gonna happen. You could even suspect that there is price gouging under those circumstances, like Uber's 'surge' pricing.
True, however, in those scenarios you're likely to meet & exceed your deductible, and maybe even your out-of-pocket. At that point, money is no longer my problem; I'm done paying, and the insurance co. pays the rest. I just need to stay in-network for them to pick up the balance. Money management comes into play up until then, and mainly before deductible is met.

So how do you know if you are staying in network? When you are rolled in to the ER are you going to ask the doctor that is attending you if they are in network or not? And no going to an in network ER doesn't always mean the doctors working there are in network. Same thing for any surgery involving an anesthesiologist or an assistant.

There are some areas where price competition should be effective (i.e. drug distribution for chronic conditions. The insurance company could find the lowest cost and have them mailed to you.), some where it might be possible (in theory the insurance companies could be doing all sorts of pricing (MRIs at one place cost you 5 bucks, at another 15. Heck it could even be dynamic so that the machines are kept humming). And a lot where you have no choice (you are wheeled in unconscious after a car accident).
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Re: The psychology of high deductible health plans

Post by Herekittykitty »

Interesting article.

I thought the purpose of a high deductible health plan was to shift costs from the employer and insurance company to the employee and to dis-incentivize the employee from getting health care.

Looks like the employees studied were indeed dis-incentivized from getting health care as would be expected, but that rather than shift costs from the employer and insurance company to the employee - the employer and insurance company did get to shift costs from themselves - but the employees didn't accept the cost shifts to themselves, rather they chose to forego healthcare - to the possible but not certain detriment of the employee but with the same cost saving to the company.

For the employees that didn't use health care and didn't come down with any of the conditions that screening/preventative maintenance could have caught early/prevented - actually they came out fine. They effectively went without insurance and avoided all costs. So there was a positive reinforcement to them not to get health care. (Thus my comment that one purpose of the high deductible health plan was to dis-incentivize employees from getting health care.)

I would assume that at least some of the employees made the decision to forego healthcare because they hoped they would not get the diseases that preventative screening could find and could have been concerned about one screening leading to another and to procedures and so on that they thought they would have to pay for. And for those with medical conditions that resulted in using the amount of the high deductible in the past - maybe they hoped they would manage to stay healthy enough this time to avoid the deductible, figuring if they got really sick they would have to use it but otherwise took a chance and put it off as long as they could. For those without serious medical conditions but who just got sick, maybe they just stayed home and took more sick days rather than go to the doctor to see if anything could be done to shorten the illness. Or maybe some just worked while sick.

Also, maybe since there isn't a lot that is pleasant about the process of getting medical care, a person might be willing to do it anyway if it is paid for but not if they have to pay the entire cost. And they might resent having to pay the entire cost for awhile, thinking their health care benefits should cover at least some of it. Or maybe their budget doesn't include covering the entire cost of their health care up to a high amount any given month.

Or maybe they were just busy interviewing for jobs with companies offering good health care coverage. That's what I would have been doing. :beer
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Re: The psychology of high deductible health plans

Post by bottlecap »

Only surprising if you believe there in the strawman of "textbook models of rational consumer behavior."

The whole nature of the study has many flaws, but the inital assumption that people who have not had to be savy consumers for 50 years and an industry that has not had to compete on price for 50 years are suddenly going to morph into anything looking like an efficient market in a few years is nearing the absurd.

Even if this study involved the whole market and there were not other major outside discentives to accomplishing price efficiency, the expectation of drastic change in a few years wouldn't be realistic. The conclusion that HDHP's are the problem is also specious and at the very least begs the question.

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Re: The psychology of high deductible health plans

Post by baw703916 »

I'm not sure the behavior is really irrational.

If the price of everything in healthcare is unknowable in advance, then the only way to be sure of saving money is to cut one's consumption of everything, across the board. Which is what people are doing. Of course normally the reduced demand would tend to force down prices, but this is healthcare, after all.
Most of my posts assume no behavioral errors.
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Re: The psychology of high deductible health plans

Post by William Million »

I don't like any plan to creates incentives for me or a family member to forego healthcare. I have no interest in unnecessary healthcare, except perhaps the occasional massage.

However, if skin cancer runs in my family, I'm going to a dermatologist each year for a check-up (even if I can't detect any problem). Bogleheads are committed to increasing their savings, but this should never come at the price of foregoing healthcare.

From doctors to hospitals to insurance companies, I don't see any way to bring pricing transparency and consistency back to US healthcare. Many other industries have also moved away from consistent, transparent pricing. Hotels and airlines charge many different prices for the room/seat, often based on a model of determining how much they can induce someone to pay. While these industries are not as opaque as medicine, it's not Amazon.com comparison shopping either.
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Re: The psychology of high deductible health plans

Post by BigSaver »

randomguy wrote: So how do you know if you are staying in network? When you are rolled in to the ER are you going to ask the doctor that is attending you if they are in network or not? And no going to an in network ER doesn't always mean the doctors working there are in network. Same thing for any surgery involving an anesthesiologist or an assistant.
The thread topic is the psychology of high-deductible plans. The only thought process involved in an emergency scenario is that of staying alive, and if you're unconscious, there's none. The discussion has been about the psychology of choices, when one has the ability to make a choice.
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Re: The psychology of high deductible health plans

Post by truenorth418 »

Not many surprises here. I've had an HDHP for a few years, and I have become far more "cost conscious". Why wouldn't I be? I'm paying for more services directly out of pocket. However, this is completely different than "shopping around". How could I possibly "shop around" for anything? The way our health care market is set up, outside of a random flu shot or anything I buy over the counter at the drug store, there is basically no way to know what anything is going to cost.

I asked my dermatologist "what is this appointment going to cost me?". He said, "ask my office manager". I asked the office manager, she said, "ask your insurance carrier." I called my insurance carrier, and after waiting for 20 minutes, I was told "ask your doctor"! I had to wait until 2 months after the appointment already happened until the insurance statement came so I could know what it would cost me. :confused

I can think of no other market which is so complicated, so opaque, and so unfriendly to the consumer. When I take my car into the Jiffy Lube, there is big sign up front that tells me what everything is going to cost. When I ask my health care "professionals", nobody knows nothing. Ridiculous.

Is it any wonder I don't bother going to the doctor unless it is an absolute emergency?
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Re: The psychology of high deductible health plans

Post by neurosphere »

bottlecap wrote:Only surprising if you believe there in the strawman of "textbook models of rational consumer behavior."
I'm not sure there is a 'strawman' situation. The 'textbook' model in this case does not refer to how consumers actually behave. But the textbook models referred are those that start with the ASSUMPTION that consumers are rational, and then describe what the behavior would look like in that case of rationality. The article simply says, in one of the best studies of its kind, that this group of people did not behave according to some of these models. I'm not sure many are surprised, no. On the other hand, there are other models which show that if you give people a incentive (pay them) to do something (avoid health care), they will. So in that sense, one aspect of the behavior described does follow a "textbook" model. :D
The whole nature of the study has many flaws, but the inital assumption that people who have not had to be savy consumers for 50 years and an industry that has not had to compete on price for 50 years are suddenly going to morph into anything looking like an efficient market in a few years is nearing the absurd.
To be clear, I think the study is brilliant, and while it has its limitation, I'm not sure I would call it flawed. It's a retrospective observational study. And the authors analyze and describe the behavior of the people in this firm, pre-HSA and post-HSA, in a clear and methodical way. They don't attempt to explain the underlying reasons for behavior. They merely lay it out. It's all of us (me and others here) who are attempting to explain the behavior and the implications.
The conclusion that HDHP's are the problem is also specious and at the very least begs the question.
I need to go back and re-read some of the posts in this thread, but (for the sake of the research that was conducted) want to point out that the study never says that HDHPs are any kind of problem. They don't 'take a side'. They really just point out how people behaved, and they have done so in about as "clean" a way as any study could possibly do regarding this topic. I doubt there will be a better one, ever. I don't there will ever be a group of tens of thousands of people, who all had 100% FREE healthcare, who are all switched at the same time to an HDHP which was also (almost) free (because the employer contribution was a substantial share of the deductible and out of pocket maximum.
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Re: The psychology of high deductible health plans

Post by neurosphere »

dm200 wrote:I think it is more complicated than consumers unwillingness or resistance to "price shopping" for medical and health care. It seems to me that the US healthcare system is so comples and not logical that many folks just give up.

I regard myself as quite informed, but I would be really challenged to do this. In addition, it seems to me there are disincentives to such price shopping.
I agree with most of this. As I mentioned in the blog post, my own hospital would not give me any price information on office visits for my patients who see me. That included publicly available information (medicare/medicaid) which is found on the web, albeit in a VERY confusing format which took me (literally) hours to learn how to use.
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Re: The psychology of high deductible health plans

Post by neurosphere »

Spirit Rider wrote:I have had HDHP/HSA plans for most of the last ten years. I feel this study completely misses the mark.

They are treating this as if health care shopping was equivalent to goods and/or services shopping. Nothing could be further from the truth. It is all but impossible to price shop for health care. First of all, try to actually get a price estimate for any non-trivial course of treatment. This is just doing it for budgeting purposes, not even comparative shopping.
I hate to keep defending the study, but will keep doing so only because the study is brilliant, and the authors should be commended. There is no way for the study to "miss the mark", unless you disagree with they way they analyze the data. They simply describe the behaviors observed. E.g. what did people spend and how prior to the HDHP switch-over at their firm. The people did what they did. It just "was".

Any explanation about how or why this behavior occurred, or the implications or policy regarding the observations was not part of the study.

And I completely agree, it is (nearly) impossible to get price information for (just about) any procedure, test, or office visit.
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Re: The psychology of high deductible health plans

Post by neurosphere »

baw703916 wrote:I'm not sure the behavior is really irrational.

If the price of everything in healthcare is unknowable in advance, then the only way to be sure of saving money is to cut one's consumption of everything, across the board. Which is what people are doing. Of course normally the reduced demand would tend to force down prices, but this is healthcare, after all.
I think this is true. As I speculate in my blog:
Sotirios Keros wrote:I believe most patients simply don’t bother to shop around, as this study implies. It is much easier to avoid an office visit or other non-emergent procedure altogether (and thus save 100% of the cost), than to spend hours and hours of (potentially futile) comparison shopping to save perhaps 2% to 20%. Alternately, once one has decided to obtain care, it might be that cost is not the main factor, but rather other factors drive the decision, such as appointment availability, choice of physician, location, etc.
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Re: The psychology of high deductible health plans

Post by MildlyEccentric »

nisiprius wrote:Comparison shopping? Please. That's a joke. Anyone who's ever tried it has given up.
I totally agree. My doctor wanted me to get a PET scan. I called the imaging facility to get a price. They told me I would have to contact my insurance company. I called my insurance company and they told me they couldn't give me a price. I spent hours going round and round trying to get a price for the ordered procedure between the provider and the insurance company and eventually gave up. Also, its interesting to note that my doctor had no idea as to the procedure cost although I don't fault my doctor for that. My doctor was simply attempting to provide me with the best care possible. Ultimately, I decided to forgo that test based on my understanding of the risks and likely benefits.
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Re: The psychology of high deductible health plans

Post by neurosphere »

nisiprius wrote:Comparison shopping? Please. That's a joke. Anyone who's ever tried it has given up. I'm not even talking about questions about whether it is worth the extra cost to have your routine phragmatotomy done by the high-volume surgeon at the big teaching hospital ranked #1 in phragmatology, or by the general surgeon at the community hospital with the low infection rate.
The employees in the firm were given access to a comparison shopping tool. I would love know know what tool that was. It would be useful to know whether the tool provided valuable information, whether anyone attempted to use the tool, etc.

I do know that my current insurance company will give me the contracted, in-network price for an office visit with most physicians in their network. However, there are 3-5 "levels" of office visit, and one can't know in advance which level will be billed. But at least I can find the lowest and highest amount I can be charged. On the other hand, if the doc wants to perform an EKG in the office, now I'm stuck. Neither the physician nor I can easily know what I will be charged, and the cost may be much higher than the office visit itself.

NS

(On a related but side note, I had to have a pre-employment physical for a new job in a hospital many years back. I'm instructed to put on a gown and wait for the MD, but instead someone comes in to do an EKG. Hmm, ok, i 'm not sure I wanted or needed an EKG, but I let them do the EKG. Doc comes in, says EKG is normal and btw, what are you here for? I certainly didn't need an EKG that day, and I was put in a position of making it difficult to refuse. I was literally half-naked. That' was 10-15 years ago, and it still makes me mad)
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Re: The psychology of high deductible health plans

Post by Kenkat »

United Healthcare has an online service that will give you pricing on particular procedures. I fairly recently had a checkup with my physician and I felt that cost was very much in play in his discussions with me. Without getting into too many particulars, a more in-depth heart check was appropriate. He chose to do an EKG in office which he said would be very inexpensive and referred me for a stress test. There were two different stress tests, one with imaging and one without. He said lets do the one without imaging as the cost was not too bad, compared to the imaging based test which he said can get pretty expensive. I was able to use United Healthcare's website to get estimates of the cost of the test for different providers and while the referred provider was not the cheapest, it was close enough to confirm my decision to go ahead with the recommended provider. The estimate of the procedure turned out to be very accurate. And I turned out to be fine, but better to know for sure. So, in my case, I do see changes in approach to healthcare costs and pricing.

Oh, and the McDouble is my go to item from the Dollar Menu...
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Re: The psychology of high deductible health plans

Post by BW1985 »

I tell ya, after reading all these stories I am NOT looking forward to getting older and requiring medical care.. I didn't even factor health care into my recent job change, just knowing that they had it was good enough for me. I'll be sure to evaluate this just as much as salary and other benefits next job change..
Chase the good life my whole life long, look back on my life and my life gone...where did I go wrong?
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Re: The psychology of high deductible health plans

Post by BigSaver »

newuser wrote: I am a physician and I cannot for the life of me figure out a way to get the patients an estimate on what a simple procedure is going to cost. The one exception is a cash paying patient who is getting a test in my office. Then I can quote the exact charge. Once the insurance companies gets involved then its a complete black hole...It depends on what hospital, what the insurance company negotiated rate is for the procedure, what the plan deductible is, what diagnosis code is used, what type of physician, how the physician bills (we don't even know how this affects patients bills most of the time), what that particular plan covers and doesn't cover. There is no transparency for anyone. If I as a physician who understands exactly what procedure is going to be done for exactly what indication cannot get an estimate, then I don't understand how any patient can navigate the system.
Are you able to tell your patients what you will be submitting as charges to the insurance company? That information would be helpful in and of itself. From there, they can compute their out-of-pocket based on remaining deductibles if any. At least it would be a worst-case figure. Additional in-network discounts might lower it further, and would be a nice surprise. I personally would be glad for just that information. It's a start.
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Re: The psychology of high deductible health plans

Post by Dandy »

In theory high deductible health insurance makes sense. Imagine if car insurance covered everything including oil changes and tire rotations for little or no out of pocket. The insurance company would have 10 times maybe a 100 times as many claims and the premiums would be raised to cover the oil changes and the extra administrative expenses.

People tend to take better care of their car than of themselves. In the case of high deductible insurance if they have a pain or symptom they will tend to think it will pass instead of forking over $80 or $100 dollars for an office visit - if they can get one that day. If it were a $10 copay they might go. Not always the best logic but very much human nature. That is why it is good if most preventative expenses should be free or cheap. Flu shots, occasional check ups etc. prevent/spot big problems that might also affect others like family or coworkers and also drop the overall medical expense growth and premiums.
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Re: The psychology of high deductible health plans

Post by Ninegrams »

One of the problems with HDHPs that I see is that people who have them consider what premium money they've saved( vs. a lower-deductible plan ) to be an earned "bonus" that they don't want to part with come hell or high-water, and that can be dangerous to one's health.
I think anyone who chooses to get a HDHP needs to pair it with not only good current health, but a focus on maintaining health via exercise, good diet(real food) and annual or semi-annual checkups. Additionally, educating oneself on the basics of how the medical industrial complex works ( or doesn't ) and even a layman's knowledge of human anatomy should be a priority. And at the very least know how to find good information on the web so as to make as reasonably informed decisions as one can. Health insurance companies are offering more tools for self-diagnosis and e-docs who can answer some questions without having to do an office visit. Contrary to popular wisdom, it's been my experience that the insurance company ( mine at least ) is more helpful and in my corner ( relatively speaking ) than the hospital or other providers.
The medical industry isn't there for your health, it's there to make money for it's own continuance, one should never forget that.
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Re: The psychology of high deductible health plans

Post by trsk »

Best health insurance I know is to follow the evidence on good nutrition.
See new book "How Not To Die" by Dr. Michael Greger; or see the website: www.nutritionfacts.org. 6th leading cause of death - seeing your doctor. If you include hospital mistakes, etc, it is 3rd leading cause of death.
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Re: The psychology of high deductible health plans

Post by dm200 »

Are you able to tell your patients what you will be submitting as charges to the insurance company? That information would be helpful in and of itself. From there, they can compute their out-of-pocket based on remaining deductibles if any. At least it would be a worst-case figure. Additional in-network discounts might lower it further, and would be a nice surprise. I personally would be glad for just that information. It's a start.
Based on what I have seen in the EOB, I think doing this would make things worse. Those "gross" numbers might even cause heart failure.
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Re: The psychology of high deductible health plans

Post by bottlecap »

neurosphere wrote:The 'textbook' model in this case does not refer to how consumers actually behave. But the textbook models referred are those that start with the ASSUMPTION that consumers are rational, and then describe what the behavior would look like in that case of rationality. The article simply says, in one of the best studies of its kind, that this group of people did not behave according to some of these models.
I just question the usefulness of anything that where the hook is "textbook models of rational consumer behavior do not apply" to the "demand" of anything. The summary doesn't tell us what those textbook models are, of course, so that technically could mean anything.

But "textbook models" are usually straw men in that they tend to consider only price and quantity and assume full information/efficiency. They do not approximate real life and aren't intended to. Then when the models don't measure up, people think that there is something wrong with economics or assume that a particular behavior is not rational.

Now, I would guess that these researchers are more insightful than that, but they did use the words "textbook models" of "rational consumer behavior" do not apply to "demand for healthcare." The very assumptions of textbook models as applied to health care would have made you suspect that very outcome.

The study does pan the HSA in the summary you linked to. Other than taxing healthcare benefits as income, I don't know what the solution is, but concluding that the HSA may be too "blunt" an instrument isn't quite right. It is probably that it, alone, is not sufficient to overcome all of the other disincentives to efficiency that we've created.

It is of note and I'm glad you posted it, although I can't seem to find the actual study. I just try not to fall in love with studies, or summaries of studies, especially when the "textbook" standard is so low.

JT
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Re: The psychology of high deductible health plans

Post by neurosphere »

dm200 wrote:
Are you able to tell your patients what you will be submitting as charges to the insurance company? That information would be helpful in and of itself. From there, they can compute their out-of-pocket based on remaining deductibles if any. At least it would be a worst-case figure. Additional in-network discounts might lower it further, and would be a nice surprise. I personally would be glad for just that information. It's a start.
Based on what I have seen in the EOB, I think doing this would make things worse. Those "gross" numbers might even cause heart failure.
I think I could tell my patients the "CPT" codes I might bill, for example, for a follow-up visit, an MRI or EEG etc. They could then ask their insurance companies what they might be charged for those CPT codes, and the patient/consumer could decide whether they want to spend that money and/or they could ask me for more information regarding the pros/cons of having that procedure performed.

NS
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Re: The psychology of high deductible health plans

Post by newuser »

dm200 wrote:
Are you able to tell your patients what you will be submitting as charges to the insurance company? That information would be helpful in and of itself. From there, they can compute their out-of-pocket based on remaining deductibles if any. At least it would be a worst-case figure. Additional in-network discounts might lower it further, and would be a nice surprise. I personally would be glad for just that information. It's a start.
Based on what I have seen in the EOB, I think doing this would make things worse. Those "gross" numbers might even cause heart failure.
This.
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Re: The psychology of high deductible health plans

Post by celia »

KlangFool wrote:One day, I was at McDonald. The person in front of me was buying Chicken McNuggets. He was buying 20 pieces for about $6 or more. Meanwhile, if he looks to the right a bit at Dollar menu, he could get 4 pieces for $1. Basically, he could get the same quantity of the Chicken McNuggets from dollar menu at $1 or more less. But, he order from the main menu.
I rarely eat at McDonalds, but just phoned one near me. They don't have a dollar menu. The order sizes for chicken McNuggets is:
6 / $3.19
20 /$5.00
40 /$8.99
80 /$15 (I think)
The nuggets are the same size in whichever quantity you order.

Compare this to a restaurant where we eat sometimes. They have a Senior menu and some (most?) of those dishes are also on the regular menu, but the Senior price is less. However, the amount of food for Seniors is also less. But you can't tell that from reading the menu.

So in both cases, the price is proportional to the amount of food AND service. (Although you may get more food when you order 80 nuggets, it is the same labor to cook 6 McNuggets as 80.)

So, to be an informed consumer, should you start asking questions (and slow down the line and possibly embarrass the party you are with)? This is where I think the psychology comes in!

On a former employer health plan, massages were covered and were apparently free. After a few people found this out, they started passing the word around and more people went to get them. Some employees didn't think that it was right to encourage others to get something they didn't need. As it turned out, the "free" massages just increased the premiums for everyone for the following year!
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Re: The psychology of high deductible health plans

Post by celia »

neurosphere wrote:I think I could tell my patients the "CPT" codes I might bill, for example, for a follow-up visit, an MRI or EEG etc. They could then ask their insurance companies what they might be charged for those CPT codes, and the patient/consumer could decide whether they want to spend that money and/or they could ask me for more information regarding the pros/cons of having that procedure performed.
OR, they might want to go ahead with the procedure but find another doctor first (say, if a cost savings is needed for them). Of course, this might involve another doctor appointment (with charges) to get the second opinion and more pricing data.

So, the patient has to guess if the cost of getting a second opinion will be less than what he might save on the procedure(s). Perhaps the insurance company can also tell him the "going rate" in his area.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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