December in DC
December. The month when thoughts for most DC residents turn to . . . that’s right. Healthcare benefit options for next year. This year, OPM is offering dental and vision care. Notice that I didn’t say “insurance.” Traditionally, the cost for dental benefits is about equal to the cost of dental care for most folks, so adding this option is questionable. Those who anticipate expenses for glasses or a root canal might want to do the math. However, after the deductibles, copays, and not-alloweds, you might be as well off with a Healthcare Savings Account.
What does all this have to do with efficiency? Well, if we want to induce dentists & optometrists to provide better service at a lower price (more efficient servcie), we have to give them some incentive. Under this new benefit, the patient receives a service, and either he or the third party pays the bill. (Usually both). So, where’s the incentive to be efficient? (See previous postings here suggesting that insurance is partly to blame for healthcare costs.)
It would be some different if OPM had said, “Here’s a list of providers who have agreed to give government employees a 50% discount on products and services.” Forget insurance premiums. Prove you’re a government employee, and you get the discount, but all payments are out of pocket. You’ll end up paying about the same.
What about the providers? Do they lose? Well, only if they can’t find a way to become more efficient and provide the same service at a lower cost for them.
And what would be the net effect? The unit cost of those healthcare services would decrease--not just for government employees, but for everyone. OK. It’s a small part of the bill for healthcare, but the lesson could be leveraged. The key ingredient is price pressure on individual healthcare services.
What does all this have to do with efficiency? Well, if we want to induce dentists & optometrists to provide better service at a lower price (more efficient servcie), we have to give them some incentive. Under this new benefit, the patient receives a service, and either he or the third party pays the bill. (Usually both). So, where’s the incentive to be efficient? (See previous postings here suggesting that insurance is partly to blame for healthcare costs.)
It would be some different if OPM had said, “Here’s a list of providers who have agreed to give government employees a 50% discount on products and services.” Forget insurance premiums. Prove you’re a government employee, and you get the discount, but all payments are out of pocket. You’ll end up paying about the same.
What about the providers? Do they lose? Well, only if they can’t find a way to become more efficient and provide the same service at a lower cost for them.
And what would be the net effect? The unit cost of those healthcare services would decrease--not just for government employees, but for everyone. OK. It’s a small part of the bill for healthcare, but the lesson could be leveraged. The key ingredient is price pressure on individual healthcare services.
