Please note that this transcript may include errors.
Dan: Hey there. If you heard our first episode, you know I’m trying to figure out what health insurance my family can get for next year.
And, we’re lucky: One way or another, we’re going to be able to get some kind of health insurance plan.
But… according to this study I just read… we’re probably going to pick. The wrong one. Picking the right one is SO hard that the economist who did the study I read?
He says he’s in the same boat. His son is turning 26 this year so can’t stay on the family plan. Dad the economist will pick the new one, and…
George: Despite doing research on this, I’m truly dreading having to make this decision. I have no confidence that I’m going to make the right decision.
Dan: That gloomy outlook comes from George Lowenstein— he’s a professor at Carnegie Mellon.
Here is the story of how he and a couple of colleagues figured out exactly how screwed we are. (Oh, wait, first: I did find a glimmer of hope at the end, so stay with me.)
This is An Arm and a Leg— a show about the cost of health care.
A few years ago, George was doing some consulting work for a big company, and…
George: I can’t remember how it came about, but somehow it became clear that they would be willing to give me access to their employees’ health insurance choices.
Dan: When you’re an economist, this is like realizing that your client would be willing to give you access to a bunch of tickets to Hamilton or something.
Because this is a BIG company. George can’t tell me which one, but it has tens of thousands of employees. So getting this data was a chance to observe a LOT of people making big, real-life economic choices.
He was like, You bet. But at first
George: Well, I wasn’t sure what to do with the data.
Dan: He started brainstorming with a colleague.
George: I got a list of the plans that the employees were eligible to choose between—just a table of the different plans
Dan: There were 48 different plans— different deductibles, different premiums, different co-pays, percentages— hundreds of numbers. And his colleague, this other super-smart economist, just took it in, all at once. It was like a ‘Rain Man’ moment.
George: He looked at the table and I would say within 30 seconds a said, this is, um, this is a very strange table. because most of these plans wouldn’t make sense for anybody.
Dan: The plans. Wouldn’t make sense. For anybody. What does that mean?
So, we usually think about health insurance as kind of bet about what YOU are going to need in the next year: Think you’re going to need a lot of medical care? Maybe it’s worth paying more per month, because you’ll get more coverage— that saves you money in the end.
Or—and this is what a lot of us do— maybe you just want to pay less per month, and hope that nothing goes wrong.
But a lot THESE plans— MOST of them— weren’t a good bet either way. You’d end up overpaying, no matter what.
In other words, most of these plans objectively sucked.
George: I didn’t see it, but he saw it almost immediately.
Dan: He looked at the table and right away he was like, “Well, you know, what’s cool is, most of these plans suck”?
George: I don’t think he’s somebody would use the word “suck.” I wouldn’t describe him as particularly proper, but I don’t think that’s probably how he described it. But I’m sure he was really excited. … At that moment we realized that we had an interesting project on our hands.
Dan: George and his colleague had stumbled onto data that could test out one of those big ideas in economics…Do people make good choices when you give them all the facts?
They started digging through the data, to see how people responded to all these options. First question:
Did these people make good choices? Did they avoid the plans that objectively sucked?
Yeah, no.
61 percent of them chose plans that sucked. 61 percent.
George and his colleague were like, whoa. What exactly is going on here? Really, how can 61 percent of people be making a bad choice?
To start with, they wondered: do people even understand the choices they’re making at all?
So, They dug a little deeper. First, they set up a study where they just gave people a quiz on what they thought of as basic stuff: What’s a deductible, what’s a copay, what’s coinsurance, stuff like that.
George: We just asked them to answer some multiple choice questions. And people are just hopelessly bad…. The average person does not understand health insurance at all.
Dan:Yeah. Right. OK. That’s a problem.
BECAUSE… in this case? George and his colleagues saw there was ANOTHER obstacle to people making good choices… And that’s the menu they got for choosing plans.
George: The web interface had a whole lot of different problems. It was very difficult for people to see what things were costing them.
Dan: Basically it started by asking: What do you want your deductible to be? Okay, great. What do you want your copay to be? Okay great. Blah Blah Blah, more choices, and then you get to the end, and it’s like: here’s what your monthly premium will be.
George So let’s say you were curious about, well, what would the, how would my copay be different if I chose a different deductible? They had to go back and make all of those decisions for a different set of choices.
Dan: So it sounds like it was a little bit like let’s design your car, do you want, do you want Bluetooth, do you want a fancy rims? Hey, pick off the menu if you want this, you can have it, and then we’ll tell you the price at the end.
George: That’s right. And then if you want to know how much of the rims are costing you? You have to re-enter all of the information and change from “rims” to “no rims.” It was a very cumbersome website. And it gave an advice and most of the advice was bad advice.
Dan: So it was kinda like, “You want some rims? Chicks really dig nice rims.”
George: That’s right. In a situation where the rims cost a ridiculous amount, and where you could go to your local rim shop and get the rims for much, much less.
Dan: So, George and his colleague decided to try ANOTHER test: What if the MENU was less terrible?
Like: What if we put all the numbers right in front of people? Didn’t work.
Then: What if we reduce the number of choices from 48 to just four?
Didn’t matter.
George: Yeah. We did all these things to simplify the decision for people and we never got people to make very sensible choices, no matter how simple we made the choices for people no matter how simple we made the choices.
Dan: UNTIL they did Which was to do. All the math, for people.
Because, just showing people the raw numbers—even when you gave them fewer choices? In order to compare those choices, they still had to do some calculating.
And— in order to even know what calculating to do— they had to understand health insurance— had to be able to pass that quiz that most people had flunked.
So George and his colleagues tried one more scenario. This time THEY did the calculations—factored in all the variables— the premiums, the deductibles, the copays— and just let people compare the answers.
George: We said, if you had very low healthcare spending and this is how much you would pay in total. If you had very high health-care spending, this is how much you’d pay in total. We showed them those two numbers for each of the plans and then it was obvious
Dan: And then, 80 percent of people made better choices.
George: We had to pretty much hit people over the head to get them to make the right choice.
Dan: Or, you could say: We just need someone else— someone who understands health insurance— to do the math for us.
… Which is totally. Reasonable. Because you know who else has trouble doing this math? Economists.
George: When I present this to the economics audiences, I’ll often put up a slide with the four different plans and I’ll say like, which of these four plans would you choose? And economists should be able to do the math in their head. And usually I get a range of different responses.
Dan: That is, a bunch of economists pick plans that suck. This is the math that his colleague was able to do in his head — when he looked at the choices— 48 of them— and was like, Most of these choices suck.
George: My colleague is very brilliant and like jumped out of the page at him, but most economists who are perfectly smart type dominant get it. You have to explain it to them. If economists don’t get it, what’s the chance that your average healthcare insurance shopper is going to figure it out? Pretty much. Zero.
Dan: Yyyyyeah.
I mean, this is not great news for me: I am your average health insurance shopper. I am actually shopping for health insurance, like right now. I asked George what to do, and he was like: Get help. But he’s not sure from who.
Because, of course, he could use the help too. He’s got his son to shop for And he’s expecting to screw it up.
George: I’m sorry to paint such a dire picture.
Dan: Yeah, well: This does suck. But I’m pretty resourceful— or at least pretty cocky. I think I’m going to find somebody to help.
Actually, I’ve got someone in mind.
Right after this.
OK, I’m going to ask Lynn Quincy for help here. She runs the Health Care Value Hub. It’s a non-profit program in Washington, DC, that compiles tons of information about how the health care system screws with us, and how we can get a little less screwed.
To start with, she says, George and I are not alone in dreading this task.
Lynn: People would rather do their taxes or go to the gym than shop for health plans. We’ve done a lot of our own qualitative research in this and people really want live assistance
Dan: And that’s because we know we’re bad at this.
Lynn: in some of the focus group work we did, even when people had the right answer, they weren’t confident that they had the right answer. They feel that there’s something in the fine print they probably missed, so people really want an expert to sit right next to them and help them say, this is in fact the right health plan.
Dan: And, she says, this is a smart instinct. Me, I walked in kind of over confident. I asked Lynn, can’t I just make myself a spreadsheet with the deductibles and stuff?
Lynn: Your health plan could have different deductibles. So it could have a general deductible, it could have a pharmaceutical deductible, it could have a hospital deductible, some of them might….
Dan: You’re making me feel like going to the gym or doing my taxes.
Lynn: Exactly. Full circle.
Dan: So, yes, we should all want expert help.
Unfortunately— as Lynn confirms— there really aren’t enough experts to go around.
But! All hope is not lost. Lynn says there is this thing out there that can help.,It’s this website, this too lthat does ALL THE MATH for us. — it was built to help federal employees pick health plans.
Actually, it turns out the same this tool has been rolled out on the Obamacare exchanges in a few states. Including Illinois, where I live.
Lynn: Oh, here it is Um, you know, this isn’t available for every state, but this is exactly where you’re shopping, right?
Dan: Yeah, yeah— I noticed it said 2016, though.
Lynn: Oh, did it? Well, that’s bad.
Dan: We take it for a spin anyway, just for kicks. First, there are some questions to answer— Lynn’s got the keyboard..
Lynn: You don’t use tobacco. You’re not a member of a tribe. Okay. I’m going to guess you’re not a pregnant woman, you know.
Dan: A few clicks later, we’re looking at a bunch of plans—and it shows what they’d cost me in an average year, and what they’d cost if I end up with big medical expenses.
Lynn Oh there we go. Okay… Oh, so I’m actually surprised that can go this high.
Dan: It’s 15— Fifteen thousand and 16 dollars.
Yeah, Illinois has some really expensive plans.
And then we notice something else— that really-expensive plan? Whether I see the doc a lot or not… it’s more expensive than other plans. By like four thousand dollars.
Dan: … Like, in a NON-bad year… This is one of our plans. That objectively sucks. We’ve just found one
I mean, this is IT. This site is showing me real numbers.. The what-am-I-actually-liable-to-pay-for-the-whole-year numbers. This is exactly the information that George Lowenstein found allows us make good choices. And this exists.
It exists. This tool exists, and it works. It showed me— that’s an objectively more-expensive health insurance plan. It did all the math for me. All the stuff that made me want to go to the gym or do my taxes.
It even exists for Illinois, where I live. Except, not this year.
And what would it take to get it back?
A couple of days later, I’m talking to Robert Krughoff, the guy who made it. I want to know what it would take to make this tool available everywhere.
Dan: So what does it cost to make a version of this? Like for like if, if, if Illinois called you and was like, hey, we want you back, we want to do this again, what would it cost to do Illinois?
Robert: It costs us about, uh, well, it depends. It really depends on the state, how many, how many insurance plans they have in the state, uh, know other complexities in this state I would say it has ranged from a probably $250,000 for us to do a tool for a reasonably large state. But in some places it’s, it’s, you know, seven or $800,000.
Dan: So what, so what would it cost? What would it cost to do 50 states?
Robert: To 50 states?
Dan: I mean if warren buffett was to call you up and be like, I heard about this on an arm and a leg and I want you to do I, I’m, I’m, I’m paying for 50 states. A gimme your gimme your estimate?
Robert: Yeah, I would guess it would cost probably $5,000,000, something like that to do all 50 states knowledge.
Dan: REALLY?
Robert: Yeah. I don’t know, maybe ten million. but, but it was, I stay, I to do that. But if they did a, you know, I would guess it would be in that ballpark because you do achieve some efficiencies.
This sounds like a huge bargain to me. For ten million bucks, we could have this tool in fifty states? At least on the Obamacare exchanges. This thing that allows people to make good choices for health insurance? (Warren Buffett, if you’re listening…)
Meanwhile, if you live in states that Robert works with— Pennsylvania, New Mexico, and Vermont for 2019, plus Washington, DC. you’ve got his tool.
But otherwise, Robert confirms what Lynn and George said: Don’t try this at home:
Robert: Yeah, it doesn’t matter how smart you are. You can’t do it in your head.
Dan: So, what does all this mean — for me?
My state, Illinois, isn’t on Robert’s list— and I may end up shopping from someplace other than the exchange. Ugh.
Tell you what: I’ll be reporting on my family’s shopping experience in the next few weeks.
And I want to hear about yours. How are you figuring out what health insurance to get next year— or are you going to do without? (And if you’ve got a tip— other tools, resources, even if they’re just from your state or your employer— send me that too.)
Send an email— or a voice memo— to insurance at arm-and-a-leg-show dot com. Be sure to include your contact info— I may want to ask you some follow-up questions.
There’s also a spot on our website where you can tell your story— AND, bonus, we’ve also got links to resources you might find helpful.
Including this: Anna Jo Beck from Chicago wrote in after hearing our first episodes… she sent a link to a zine— a self-published booklet— that’s a health-insurance how-to. (She and her husband became experts when he got diagnosed with cancer. And: She says he’s fine now.)
It is smart and thoughtful, and it’s sprinkled with lovingly-captioned pictures of stuff like toddlers, kittens, and newlyweds— including a 98 year-old bride kissing her 94 year-old groom.
Dan: Anna describes these extras as
Anna Jo Beck: Some moments of cute, heartwarming distraction to keep you from wanting to totally give up hope.
Anna Jo Beck is “An Arm and a Leg’s” kind of health care nerd.
And speaking of not giving up hope: In our next episode, we head to the Renaissance Faire.
HAVE YOU MET ROBIN HOOD YET?
Folks who work in that world have made two and a half million bucks worth of medical bills disappear.
That’s next time on “An Arm and a Leg.”
Till then—take care of yourself.
This is An Arm and a Leg: A show about the cost of health care.
I’m Dan Weissmann. I produced this episode. It’s coming out just before Thanksgiving, and I have some thanks to give:
First, thanks to everyone who has shared about the show on twitter and facebook and instagram— I see you!
Second: thank you to folks who have sent in stories and reflections. I hear you. We’ll share some samples here in the next few weeks.
And: Thank you to some of our new Patreon supporters! You pledge two bucks a month or more, and you get a shout out in this spot. Let’s get started with that.
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To borrow a phrase from former Vice President Joe Biden, it’s a big fxxing deal.
