Opportunity Costs, Health Insurance, and the Madness of the American Way

July 12, 2011

As people debate healthcare in America, they throw lots of statistics around about things like money, and life expectancy, and quality of life indicators as they build their cases for or against the American way. Some focus on the fact that, at the top, people with good insurance (like me) have access to a staggering array of healthcare opportunities, clinics, and surgical and other treatment options. Others (like me) worry that we spend enormous money on healthcare all while getting relatively poor results and STILL leaving millions of Americans out of the mix.

Rather than revisit those debates today, I want to suggest that there is an under-appreciated problem in the American way of healthcare: the opportunity costs associated with “choice”—of insurance plans, of treatment options, of doctors and clinics.

Two recent events trigger my thoughts.

First, the State of Illinois recently decided to change its healthcare options for public employees. It eliminated a popular HMO—yes, there are such things—and replaced it with another option that is, presumably, cheaper for the state.

So far so good.

The thing is, when the State changed the options available to public employees, it didn’t really bother to check—or perhaps it didn’t care—whether the new HMO option had very many providers outside the Chicago area. (Most people in Illinois live in and around Chicago, and its needs tend to dominate state politics.) And, fairly predictably, it turns out that there really aren’t healthcare providers for the new HMO in central and southern Illinois.

As you might expect, this change set off a firestorm in downstate Illinois (as the Chicagoans refer to everything south of I-80). Thousands of people spent significant numbers of hours trying to keep the former HMO as an option. Others spent a huge amount of time investigating which insurance options they could take to respond to the change. My university (and presumably all state agencies) sent out numerous emails and sponsored multiple planning events to help people make an informed choice. (I didn’t use the popular HMO, so I was fortunately unengaged in this fight.)

I should add that much of this “choice” isn’t really informed at all. No one really knows much about doctors and plans when they make these choices, particularly if they are new to the area. For example, I picked my first doctor here because he was associated with the HMO I chose and was accepting patients. That HMO was dumped in a year—which was a good thing—but that necessitated another change, this time of both doctors and plans. The plan was good, but I didn’t like my randomly chosen doctor; I changed doctors to one I liked still in the plan only to see that doctor be fired from the plan for … wait for it … taking too much time with his patients. I then chose another plan and another doctor, this time one who was roughly my age, who I figured I would have for a long time. He left to go to private industry, and so now I have the doctor who took over his position, and since she’s fine if not exceptional I’ve chosen to stay with her simply because I’m too tired to go through all of this again.

All of that stress constitutes an opportunity cost: the time and energy people have to spend in order to learn about and then do something. It has both personal effects (dealing with all the hassles of making changes) and business effects: staff time is spent explaining things; employees focus on these issues rather than their jobs, etc. It’s “choice,” but it’s not “free.”

My second example is more personal.

As the date for Babyprof’s arrival nears, we—well, my wife—has had to spend a remarkably large amount of time trying to navigate the steps necessary to add our son to our healthcare plan, as well as to take advantage of the 12 weeks unpaid leave she can take under the Family Medical Leave Act. And it’s ridiculously complicated. There are forms to fill out—but those forms require the baby’s Social Security number. But you can’t get a SS number until you’re born. Which makes sense … but you have to get the enrollment form to the office in some relatively short timeline after the baby is born. And sure, you can take 12 weeks leave … but only if your doctor certifies that you need it, and HR certifies your doctor’s decision. Which requires that forms be filled out by the doctor … now, before the baby is born, and thus before one can actually “know” if someone “needs” 12 weeks leave.

And remember: I have GOOD insurance.

If we ever learn to think about things this way, we might actually have a serious conversation about healthcare in America.

9:32am | URL: http://tmblr.co/ZPUuPy710-MQ

(Notes: 15)