Wellpoint Experimenting With Medical Tourism

Medical tourism is the term given to the growing practice of crossing international borders to obtain health care in an effort to save money. While it is a relatively new concept for Americans (to go abroad for care), it has been more popular in other countries because of;

• the high cost of health care and long wait times for certain procedures in one's 'home' country
• access to better technology and higher standards of care in the destination country.

Sounds like stories of socialized care in countries like Canada - but I digress.

Recently, Wellpoint (we know them better as Anthem) began a pilot program with one of its larger employer groups to study the effectiveness of medical tourism.

"What's different now... is that traveling for medical care is starting to move into mainstream insurance coverage. WellPoint, which is looking to expand its pilot program, is focusing on cardiac and joint-replacement surgeries that require about a two-week hospital stay. The choice to travel will be the patient's, and he or she they won't have to go to India, McBride said; there may be significant savings available from hospitals within the U.S."

Read the complete story here.

Maximum HSA Contribution To Rise In 2010

The IRS has released the 2010 cost-of-living adjustments for HSA contribution limits and for HDHP deductibles and out-of-pocket maximums. The IRS issued the new limits earlier this year in an attempt to help those people working with HSAs and HDHPs plan both benefits design and employee communications for the coming year.

You can see the new 2010 information here.

You can see the current 2009 information here.

Putting Butts In The Seats

Shortly after posting the last article about 'Big Stamp' and the Postal Service's decision to raise prices in the face of falling mail volume (sales), I read an article about Arturo (Arte) Moreno. Mr Moreno is the owner of the MLB Angels. It underscored what we said about what private companies do in the face of hard times. Here is an excerpt which brings home our point:

"Almost everything Moreno has done has been in the service of winning over fans and, as he says, "putting butts in seats." The Angels, with the best record in baseball last year, offer the third-cheapest visit to the park. He has cut ticket and food prices at Angel Stadium and dropped the price of draft beer from $8.50 to $6.50. Most teams charge $20 or more for souvenir caps. The Angels charge $7. In his first spring training in Tempe, Moreno couldn't understand why a section of great seats between third base and left field always remained vacant while people crowded into the section farther out in left field. Moreno walked over to the ticket vendors, who told him that people always asked for the cheapest seats. The outer section was $6. So Moreno cut the empty $12 seats to $6. "Now they're the first to go. Should it have been $8? Maybe. But now their butts are in there. They'll go buy a beer or a dog. We got them in the stadium."

Attendance at Angel Stadium in Anaheim was 2.3 million in 2002, the year they turned a wild card into a World Series victory over the San Francisco Giants. The stadium has cleared 3 million a season ever since. Last year's 3.4 million put them second to the Yankees in the American League.

By charging fans less, Moreno makes more everywhere else. The team has gone from a $5.5 million operating loss in 2003 to an operating profit (in the sense of earnings before interest, taxes and depreciation) of $10.3 million. Revenue has gone from $127 million to $212 million. The team now has an enterprise value of $509 million, almost three times what Moreno paid for it. In that time the Angels have more than doubled stadium sponsorship revenue to $26 million and cut a $500 million, ten-year deal with Fox Sports Network to put all 162 Angels games on television, up from 90 before."

Looking at the last two posts, you see two very different philosophies:
1. Increase prices to make up for declining sales - the government's decision
2. Cut prices to spur demand - the decision of private enterprise

Big Stamp - Another Reason To Be Cautious Of Government Run Health Care

As you are probably aware, the U. S. Postal Service increased the price for mailing a first-class letter by 2 cents to 44 cents effective last Monday, May 11th. I am sure you also remember last summer's gasoline prices that were north of $4.00/gallon. At the time, Congress (and many others) was blaming “Big Oil” for excessive profits and demanding investigations. There was even legislation called "The Federal Price Gouging Prevention Act" introduced in Congress. The legislation would make it a crime to "sell crude oil or gasoline at a price that is unconscionably excessive."

In the last 90 years, the cost of gas has increase 8-1/2 times from $.25/gallon to $2.16/gallon. Even at last summer's high prices, the cost of gas increased figuring last summer's increase, the cost of gas was 16 times the cost of gas 90 years ago.

In that same time span, the price of a first-class stamp has increased 21 times it price in 1919 of $.02. Even compared to the Consumer Price Index, the cost of a stamp has increased at almost twice the rate. The chart below illustrates these figures (Click on the chart to see a larger version).

To look at it a different way, if stamp prices had increased over time at the same rate of gas prices, a first-class stamp would only cost only 17 cents today instead of 44 cents. Or if gas prices had risen over time at the same rate as stamp prices, the cost of gas would be somewhere around $5.30.

It should also be pointed out that the price increase by the Postal Service is in response to a reduction in the volume of mail being processed (or 'sold'). So with declining 'sales', the Postal Service increases prices!? Compare that to what private companies do in the face of reducing sales. Do they increase prices? No, they cut prices to try and spur demand. That is Econ 101 (trust me, I was an econ major in college). That is why we saw a company advertising their entire stock of dress slacks as “Buy ONE, get TWO free!” before Christmas last year, and why we hear a company advertising that you can now buy a lake front lot for $139,000 when the one beside it sold for over $250,000 (wouldn't you hate to be that guy!)

Private enterprise fuels innovation. Look at UPS and FedEx. Do you think the USPS would be offering overnight delivery if these private carriers had not done it first? Do you think UPS or FedEx would hike prices to make up for declining volume? Does anyone besides me think that FedEx or UPS could make a profit delivering mail?

And politicians wonder why we don't want them involved in our health care?

I Am For Universal Health Care (Forms)

Finally, the health insurance industry has done something right for a change. The Bureau of Insurance, in conjunction with the carriers doing business in Virginia, has developed a universal employee application for small group health insurance. For those of you who have ever had to fill out multiple applications in order to get multiple competitive quotes to find out that you are not going to switch carriers, you understand what I am talking about.

Now employer groups in Virginia can get their employees to fill out one application and get underwritten rates from multiple carriers. If a group ends up wanting to move to a new carrier they have to then fill out that carrier's applications, but that is much better than the old way.

Our only question is, what took so long?

The Goldent Years Of Retirement - A Recent Phenomena

The chart above is from the Bureau of Labor Statistics and it displays the decreasing median retirement age for men over the last half century, from almost 67 years in 1950 to less than 62 years by 2005, a decrease of more than 5 years. During the same period, male life expectancy has had a significant increase of almost 10 years - from 65.47 years in 1950 to 75.2 years in 2005 (data from Centers for Disease Control). As a result of those two trends, the average expected time in retirement for men has increased from 0 in 1950 to 13.5 years in 2005.

Some observations:

1. It's only been in the last 50 years or so that the average male lived long enough to enjoy any time in retirement. For all of human history before the 1950s, the average male worked his entire life and died before reaching retirement age. When it comes to expected years in retirement, there has never been a better time to be alive.

2. The Social Security system was designed in the 1930s when the average male wouldn't ever collect any retirement benefits. Now the average male receives over 13 years of benefits. And we wonder why it is going bankrupt? Perhaps the failure of the system is not in the plan itself, but rather in the failure to change the plan as needed to compensate for these changes.

3. While not directly related, the increase in life expectancy can be partially credited to better health care. Ironically, this same increase in life expectancy can also be partially blamed for the increase in health care costs. What used to kill us (heart attacks, strokes, cancers, etc.) can be prevented/treated - but at a cost. Not to mention the increased cost of future care because we are still alive. As a client said to me after surviving cancer but having high health premiums, "Given the alternative (being dead), it is not a bad problem to have."

4. Given the recent performance of the stock market, one wonders if the median retirement age will start to creep back upward.