You Think 401(k)s Are Hard to Manage? Try Health Accounts

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The idea of a consumer-driven health plan is daunting. Patients must

choose the right treatment, doctor and hospital, and hope that their

illness won't cause them financial ruin. New computer software may

help, but sorting out the information available won't be easy.

 

 

 

http://www.truthout.org/issues_06/022006HB.shtml

 

 

 

You Think 401(k)s Are Hard to Manage? Try Health Accounts

By Damon Darlin

The New York Times

 

Saturday 18 February 2006

 

Americans were handed - some might say had forced upon them -

control of their retirement funds 32 years ago with the creation of

the Individual Retirement Account. The 401(k), invented four years

later, cemented the idea that individuals must take more

responsibility for their financial future.

 

Now Americans may be pushed to take more control of another aspect

of their finances, their health care spending. They may face more

choices and more direct payment of costs. They will be urged to set up

Health Savings Accounts, a 401(k) for medical bills.

 

As anyone who tried to manage a retirement account in those early

years quickly discovered, managing money yourself isn't easy. There

were few tools to tell the amateur investor how to handle what were

hopefully called self-directed retirement accounts. Smart companies,

like Fidelity Investments, saw that opportunity and became giants by

helping consumers with the tasks. About 70 percent of American

households now have more than $6.7 trillion in some form of

self-directed retirement plan, according to the Investment Company

Institute, a trade group of mutual fund providers.

 

The idea of a consumer-driven health plan is daunting, because

most Americans have found it so difficult to navigate the present

system. The ill are swamped with hundreds of bills and statements and

there is little help available to understand them. They must choose

the right treatment, doctor and hospital and hope that their illness

won't cause them financial ruin.

 

The basic problem is the lack of consumer information. Imagine

trying to decide which mutual fund to buy without a clue about the

price until after the purchase. Most people find out the price of a

medical test or procedure only after receiving an " explanation of

benefits " and then only if they can decipher it. John M. Engler,

president of the National Association of Manufacturers, blurted out at

a health care conference in December: " We need Quicken for health care

and we need it now. We need to get the 1.0 version out there. "

 

Actually, not only is there a Quicken for health care, called

Quicken Medical Expense Manager, but Intuit, the maker of Quicken,

TurboTax and QuickBooks accounting software, has just released Version

2.0. The software isn't the panacea that Mr. Engler, the former

Michigan governor, had in mind, but it is a step in the right

direction to help those managing the mounting bills of a seriously ill

person.

 

There is a consumer market for such a $50 piece of software

because insurers have made bill paying so complicated. Is there a way

to become better informed about the choices available when you or a

family member gets sick? The short answer: No, not yet. Advice is

available on WebMD.com, and USNews.com ranks the best hospitals and

best health plans. But when it comes to prices, you get to see only

the information your insurer and doctors let you see. And it's hard to

change that because your employer, not you, picks the insurer.

 

" Consumerism has changed every facet of society, " said Ronald A.

Williams, Aetna's chief executive officer. " The one area that hasn't

been changed is health care. "

 

There are some signs that insurance companies see an opportunity

and want to seize it. Aetna, one of the biggest insurers, has created

a Web site that helps 500,000 of its customers with self-directed

plans understand some of the costs of medical care.

 

" Where companies like ours can add value is in information

technology, " Mr. Williams said. The insurer is in a unique position to

gather information about a patient as well as doctors and hospitals

and share that data so the patient gets better care at the right time

for less. " We asked ourselves, 'What do we have to invent?' " Mr.

Williams said.

 

Like most other insurers' sites, Aetna's is open only to its

customers. But the site is considered the model of clarity in an

opaque industry.

 

The Aetna site makes the explanation of benefits a bit easier to

understand than most insurance companies' statements. The online

explanation of benefits shows the " submitted charge " and the

" negotiable allowance. " But then it gives a bottom line: " Member

responsibility: $50. " You know what to pay.

 

That helps when it comes to bill-paying. How about help on what to

buy? Aetna makes some effort to expose costs to consumers. You type in

the name of the drug you are prescribed, the dosage and the state you

live in. The site's software compares the cost of the drug at a local

pharmacy to Aetna's own mail-order service. In the case of

20-milligram tablets of Lipitor, a cholesterol-lowering drug, the site

tells you that the retail pharmacy in California would charge $107.59

for a 30-day supply, and that you would pay $35 for it. It says the

mail order drug would cost $296.76 for a 90-day supply and you would

pay $70.

 

Aetna's calculator fails to take one more necessary step. It does

not spell out that the mail-order pharmacy is 33 percent cheaper. The

visitor has to do the math, and if he doesn't catch the difference in

days' supply, he may conclude that the local price is better and end

up paying more. The site does list alternative drugs - a 90-day

mail-order supply of 20-milligram tablets of Zocor, another

cholesterol-lowering drug, would cost more, $393.62, but would cost

the patient less, only $40.

 

The site uses data from WebMD Quality Services to compare

hospitals in the customer's area. For any given procedure, it uses

criteria like mortality, chance of complications and length of stay to

determine the best hospital. But it doesn't list the prices of those

procedures at the various hospitals.

 

A pilot program in Cincinnati will, however, give Aetna's

customers there online access to the actual discounted rates of 25

most common in-office services offered by doctors. " We've done

something unique, " Mr. Williams said. " It is about transparency on

cost and clinical effectiveness. "

 

The National Association of Manufacturers, a lobbyist for big

companies, says making consumers aware of prices is a necessary step.

" If we are going to make health care more responsive and more

consumer-friendly, " said Neil Trautwein, the trade group's chief

lobbyist on health care issues, " we will have to have better

information to compare price and quality. "

 

As Americans build up money in their Health Savings Accounts, the

funds become as much a retirement account as a kitty for medical

expenses. What consumers will need are more sophisticated financial

tools. Insurance companies " are missing an opportunity to help them

with their health care expenses, " said Eric G. Brown, the research

director for health care and life sciences at Forrester Research.

 

While the Quicken software doesn't help people compare prices, it

is a useful tool to manage expenses. And the reports it generates can

help in planning contributions to next year's Health Savings Account

or Flexible Spending Account. A bar chart tracks how close you are to

reaching your deductible limit or out-of-pocket maximum.

 

The software is created to tell you what to do when a piece of

paper from the provider or payer arrives and gives you the confidence

to pay only what you owe. " To be smart shoppers, they need a tool to

help manage decisions efficiently, " said Bruce Barnhart, the product

manager for the Quicken software. The program allows you to track

expenses for the entire family or for an individual. It also tracks

veterinarian bills.

 

When that dreaded explanation of benefits comes in, the user is

asked to enter the information into the program. It calculates the

" provider write-off, " and tells you how much you owe. If there is an

error, the program can generate a dispute letter that uses the

language of the insurance industry.

 

The one major problem with the program is that all the data must

be typed in by the user, as one did with the original Quicken

financial software. That wasn't a problem back then because we didn't

know any better. But now your credit card, bank and investment

statements can be downloaded every day into the financial program.

 

Automatic entry for medical software will arrive, just not soon.

Forrester found that nearly all claims coming from hospitals are sent

electronically, and nearly 60 percent of those from physicians'

offices are in digital form.

 

One day that data will flow directly to the consumer in electronic

form so that software can massage the numbers and provide insight into

costs. " We are still quite a ways off from this happening in health

care, " Mr. Brown said.

 

For those who are disciplined enough to enter their data

consistently, he said, the Quicken data becomes a complete electronic

health record. It can be the ideal place to look up prescription

histories, doctor's office visits or other medical events.

 

It's a start.

 

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