They Underestimated. Again

Robert A. Heinlein Power Quotes

Also, "Don't underestimate the other guy's greed"--Frank Lopez in Scarface

I spent the today and will spend much of the time over the next several weeks talking with people about why health insurance rates are going up and/or benefits are being cut.  Calling it "greed" and "stupidity" might be a little bit harsh, but it shouldn't be surprising.  Anyone who thought that we were not going to have huge increases in health insurance cost is naive.  If people are given the opportunity to get something for nothing or for less than fair market value, they will.  Not everyone, but enough of them that there will be huge cost overruns.  It's human nature.  It's about survival.

If you haven't seen it in the news, the big "underestimation" of expense this past year was in relation to specialty drugs.  Even though there are a small number of people taking them, the costs are very high.  Before the Affordable Care Act, insurance companies were able to control for expenses by declining people who were likely to need them.  Now that the insurance companies can not decline an applicant, why would a person suffering from something like Hepatitis C apply for coverage with the lowest possible deductible and get the prescription to cure it?  He or she would be stupid not to.  If you were in that situation, do you honestly think you would care that you doing that would cost the insurance company tens of thousands of dollars?

I don't know the solution, but I do know that costs will continue to be underestimated.  Why?  Because the public moves much faster than the government and the insurance companies.  As long as there are dollars to be had, someone will find the way to get them.  It's simple supply and demand. It's already started with pharmaceutical companies coming up with "better" more expensive drugs.  They can afford to manufacture them because there is a way for them to get paid.

History repeats itself.  We don't even have to look back very far.  When Medicare Part D started in 2006, I rarely worked with people with high drug costs.   Most of my Medicare customers took no or few prescriptions, and mostly generics, because without insurance coverage, they either couldn't or wouldn't spend that much.  The exceptions were severe diabetics and those who had retiree group insurance with prescription benefits.  A person who was on "a lot" and/or "expensive" medications spent $50 to $100 on them.  I remember looking at "the donut hole" (coverage gap) of $2,250 and thinking, "Nobody uses that much in a year, or if they do, they'll be dead before long".  The vast majority of the consumers I spoke to said the same thing.   Most of them said that they'd never meet the $250 deductible.

Flash forward 10 years.  Going into 2016, even though the threshold for getting into the coverage gap is up to $3,310, a large number of my customers reach it before they get halfway through the year.  It's not unusual for people I talk to to have a drug cost (before insurance) of $500 or more per month.  The health of the people isn't any different, as far as I can tell, than people of the same age 10 years ago.  The difference is that  someone else is paying the bulk of the cost.  It's not just stupid, it's not just greedy.  It's just human nature.

History repeats itself.  Costs are going to keep going up.  Stop underestimating.