Tuesday, January 24, 2006

Lunchtime Notes: Dept. of Dubious Inflation Data

by Tom Bozzo

One of last week's winning Wednesday Whines, from Camera Obscura, noted the inadvertent transmission of the remarkably large sum billed to her insurer for a few seconds' gynecological procedure that you can read all about at your own risk.

Our insurer routinely provides us with such information, but I hadn't paid much attention to the end-of-year round of 'explanation of benefits' forms since we'd grossly underestimated how much we needed to contribute to our annoying flexible spending account. Then the copayment bill came for a variety of end-of-year visits, including the kids' well-child checkups and a gaggle of ear infection visits — $200, thank you very much. An interesting observation is how they billed a couple visits in which the kids had been doubled-up (i.e., the doctor peeked in both their ears): One tier of office visit charge for one, a second tier for the other (priced around 75% of the first). The pediatrician's effective hourly charge must approach that of Camera Obscura's gynecologist in this case.

The copayment structure, meanwhile, gives us an effective coinsurance rate of about 20% for the first kid and 27% for the incremental kid, which seems perverse as the actual incremental cost of the incremental kid is very low.

We are, like many employer-insured Americans, bearing rapidly increasing amounts of our health care costs out-of-pocket. Yet a graph of official consumer price (CPI) inflation for medical care at Angry Bear (a description of the BLS methods is here; their methods are supposed to measure changes in out-of-pocket expenses) suggests out-of-pocket medical care costs have moderated since the early nineties, and currently are barely exceeding official inflation in everything else but health care.

What I want to know is, who are the lucky souls who get to experience less-than-4% annual increases in their out-of-pocket health care costs?! For you see, in order to keep our premium inflation just in the low double digits, our out-of-pocket expenses have increased quite rapidly. Three years ago, those visits would have cost us $100; $150 in '04, and $250 this year. I'd think the rates of increase would be even higher for consumers in plans that had historically been more heavily employer-funded than ours, which would seem to be on the bow shock of the health care cost-shifting trend.

The methodological details are a bit mind-numbing, but I'm wondering where the real health care inflation has gone. Any takers?
I would promise to take this one, but the past several years have added children and seen this body failing apart.

Otoh, I have all the data, and can probably do some tracking, having realised yesterday (yes, 24 days into the year) that doubling my Medical PSA this year wasn't nearly enough, even if some very expected operations don't happen.
Ken, sorry to hear you're in line for some surgery.
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