SECTION FOUR: New Health Savings Accounts
The project combines several concepts developed in other chapters, but is ready to be considered as a whole.
The problems of paying for the healthcare costs of the first year of life are relatively small financially, but create large unexpected problems throughout heathcare payment design. According to CSS, the first year of life accounts for 3% of total lifetime costs, while all of childhood up to age 21 only totals 8%. By contrast, the Medicare age group accounts for 50% of costs. But the little tail is wagging the dog.
Without any prior earning capacity, pre-funding the 3% is out of the question unless Congress permits transfers of some sort from others. Legally, that means the parents, but the parents are usually pretty young and impecunious themselves. All manner of matrimonial tangles can occur, but even in the life of a blissful young couple, paying off that heavy cost may take several years to work around. It is hard to believe this issue would not delay the next pregnancy or even sometimes put it out of the question. There is little question younger mothers have a much easier obstetrical time of it than if they wait until they can afford the cost. The whole concept of a "valuable" baby was largely unknown seventy years ago. In my day as an intern, if a lady miscarried, well, just wait a couple of months and have another. The present generation of mothers are aghast at such callous attitudes, but that attitudinal shift is why we once had so many orphanages, and today have so few. The high cost of obstetrics must have something to do with it. We hear it said that women going to work caused a drop in the birth rate, but there is little doubt some of this was the reverse.
The employer-based system of health insurance has some advantages, and one of them is to create family-plan health insurance. Having now lived through two economic depressions, I can be pretty sure the present epidemic of fatherless children will somewhat subside as the economy recovers. But no doubt the traditional family structure has been permanently modified, so the residual will probably be felt as a decline of the popularity of family insurance. With only one poorly paid and overworked parent to support a pregnancy's cost, the burden is much increased.
Birth and death are nevertheless the two medical costs which no one can completely evade. Hospitals understand this as well as anyone else. So, responding to the pressures of high hospital ingredient costs, the hospital financial officer shifts costs toward obstetrical and terminal illness care or its surrogate markers. Cost accountants have to be careful, because if they shift it to indigents who pay nothing, they will be cost-shifting themselves out of business. But if they can somehow identify insured obstetrical patients, they shift vigorously, and the employer will end up paying for it. So we see the response of putting ultra-high prices on the services, drugs and equipment of the obstetrical unit, just in case somebody, or some insurance, might pay for them. Within a DRG system which permits a 2% profit margin on inpatients during a 2% inflation, a hospital administrator has to do a lot of tap-dancing around the obstetrical issue, and many hospitals have just abandoned the service entirely.
And finally, the trial lawyers. The trial bar has treated each wave of healthcare reform like Austrian soldiers at the Siege of Vienna -- a failure to win any skirmish could lead to extermination of all their family, if not extinction of their civilization. Consequently, when lawyers hear talk of the concentration of malpractice lawsuits in obstetrics, they brace themselves for another charge of the tort reform Brigade. Any personal injury lawyer who reached this paragraph, needn't read more than five words to realize the bugle has blown, again. Slips and falls, and asbestos -- be hanged, those doctors are now after obstetrics. That's right, I am, although the real legal culprit is found in excessive awards for pain and suffering. Elected judges have a hand in that part.
It took me years of working in medical economics to realize how destructive malpractice suits against obstetricians can be. Although 80% of suits are won by the defendant, it raises malpractice premiums to encounter a succession of nuisance suits which fail. It's been some time since I was active in the field, but at one time I was told 80% of obstetricians had been sued, and many annual premiums for obstetrician insurance were over $100,000 a year apiece. If that's no longer true I am sorry; but I have the impression it is still true. In Florida, recently, annual malpractice insurance premiums for obstetricians briefly went over $200,000
The closest I can come to a conciliatory explanation, is this. Some years ago, a state law was passed and widely imitated, to the effect that a plaintiff for a child should be given extra years after the age of 21 for the statute of limitations to run. If the time to prepare a case for a newborn is extended 25 years, it is probably not surprising that records will be lost by then, adverse witnesses will have died or lost their recollections, and so cases without living defence witnesses will be uncovered. Impecunious and therefore judgment-proof defendants may become prosperous during 25 passing years. The doctor may have retired and thus lost a reason for patients to avoid suing him. Or the patient may have become divorced and need the money. And so on. So I have a lawyerly proposal for a lawyerly issue. Malpractice insurance comes in two varieties, claims made, and occurrence. In both cases, the incident must have happened while the insurance was in force. In the occurrence policy, it does not matter when the claim was made. But in the claims-made policy, the insurance must still be in force when the claim is made. The loophole may be closed by purchasing additional "tail" insurance, but after a while, it gets dropped.
Proposal 24: That a new form of "tail" insurance be devised for children and obstetrics, which covers economic damages but not "Pain and Suffering". Comment: the great majority of awards are not for economic damages, because that is generally covered by health insurance. The vast majority of spectacular awards are for pain and suffering, which cannot be measured, denied or remedied.
Proposal 25: That hospitals and others involved in cost accounting be encouraged to cost-shift the indirect costs of obstetrics, to other departments of a general hospital, to whatever extent is possible.