Lifetime Limits in Health Care Finance

The WSJ has a superb article on the shadowy world of “lifetime limits” on health insurance policies. It focuses on a man (Dawson) who “maxed out his plan’s $1.5 million lifetime cap halfway through his long hospital stay.” The hospital and doctors aggressively moved to collect the rest:

CPMC discharged Mr. Dawson on July 26, and Mrs. Dawson drove her husband home. As they entered their house, Mr. Dawson lost his balance and fell. Mrs. Dawson was trying to help him up when the phone rang. It was Ms. Beronilla, the hospital’s financial counselor. Mrs. Dawson says Ms. Beronilla . . . .told her the hospital would start billing immediately. With her husband still splayed out on the floor, Mrs. Dawson remembers replying: “Do what you have to do.”

The story foregrounds the sad state of privatized American health care: we frequently force people at their most vulnerable to negotiate with implacable bureaucracies. But a harder question for advocates of universal coverage lurks in the background: what are the limits of collective responsibility? I doubt many would be argue for state coverage of Dawson if his bill reached $500 million. One or two million dollars is far more reasonable, but what should the limits be?

Here is one helpful perspective on the issue:

The Segal Company, an employee-benefits consulting firm, says the average health-plan cap among companies it advises is $1 million a person — the same as it was in the 1970s, when the purchasing power of $1 million was the equivalent of nearly $6 million today.

The six million dollar figure has been used in cost-benefit analysis for regulations–that is, if a safety regulation will cost an industry six million dollars, and save one life, it can be deemed cost-effective. David Cutler has done good work on the “year-by-year” assessment of the value of life:

Cutler concluded that a 45-year-old American could expect to spend $30,000 over the course of his life on all forms of cardiac care and that, thanks to improvements in cardiac technology alone, he could expect to live three years longer. That worked out to $10,000 a year of added life. Cutler can rattle off figures to prove that Americans value life even more. (Air bags cost something like $100,000 per year of life saved, for instance.) But you don’t need to be an economist to believe that $30,000 for three extra years is a pretty good deal.

Of course, if there were an easy way to reallocate spending from “end of life” to public health measures, some of the former spending might be avoided, as one expert on public health argues:

[I]n the past six years, no health official has argued forcefully for social changes that would genuinely improve the public’s health on a significant scale. While we hear plenty about how personal “lifestyle” changes can make us healthier, health officials are not pushing for social fixes that would have even more powerful effects by limiting inequalities in wealth or their health-impairing correlates. They don’t demand reforms of the sort that would make us more like those developed countries (Denmark, France, etc.) where infant-mortality rates are more than 20 percent lower than ours and where life expectancy is longer — changes like more affordable housing, a guaranteed minimum income, a higher minimum wage, restoration of workplace-safety oversights emasculated by big-business-friendly government, or better and cheaper public transportation systems.

Indeed, Dawson’s story may well have reflected this situation. His staph infection appeared to be ignored for weeks, and “tort reform” makes it less likely that physicians and hospitals will have to worry about such misdiagnoses.

Nevertheless, even if these public health measures were adopted, and terrible cases like Dawson’s were avoided, health care costs are going to come up at some time. As the tobacco industry’s studies of the “cost-effectiveness” of smoking showed, from a cold-blooded accounting perspective, an early and quick case of cancer may end up costing far less than a protracted descent into Alzheimer’s. Therefore, advocates of universal coverage are going to need to clearly contemplate the idea of a “lifetime limit.” Though the Grover Norquists of the world will probably scream at the idea of having to spend millions of dollars to save a stranger, they might want to take a look at some leading economic work on the topic. As Hall and Jones note, “the optimal health share of spending seems likely to exceed 30 percent [of GDP] by the middle of the century.”

PS: Here is some provocative commentary from Philip Alcabes on the futility of many “responsibility for health” programs:

Officials badger us to quit smoking, exercise more, eat more fruits and vegetables, avoid drugs, use condoms, reduce our stress. We are all simpletons, it seems, and need to be reminded to act in our own best interests. . . . Apparently it doesn’t matter that, according to available evidence, most people who eat more fruits and vegetables to avoid dying of cancer would not have died of cancer anyway, or that the most likely cause of death for people who exercise more (heart disease or stroke) is the same as that for those who don’t.

That many people are too poor to afford the time or the expense of eating whole foods, exercising regularly, or reducing their stress is not part of the magical equation, either. Indeed, the matter of who can afford healthful behavior might be exactly why the behavior-change crusade is so compelling: If you can afford to shop at a farmers’ market, go to the gym, take a vacation, or live in a downtown apartment so you can walk to your office, then you are manifestly not a member of the unwholesome class. Your healthy behavior proves that you are a Worthy in the modern American moral register of health.

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