Tuesday, May 7, 2013

Reason to love NZ #58: A functioning health care system

New Zealand's public health system makes up about 18% of aggregate government expenditures. Add in $1.1 billion for ACC, the government-run accident insurance company, and you get about $15.3 billion all up, or about $3475 per capita. This is complemented by private insurance for those who wish to have private insurance; about 30% of the country subscribes.

Health insurance for our family of four costs $140 per month. It comes out of after-tax income and is not tied to any employer; if an employer provided health insurance, the fringe-benefit tax would apply to avoid the distortions that Americans crave. So losing your job only means losing your health insurance if you can't pay your premiums. We have a relatively high deductible, here called an "excess", of $2000. GP visits and prescription drugs are subsidised through the public health system but not entirely; we don't have a government services card provided to lower income Kiwis for greater subsidy. A GP visit costs about $40; it's cost us between $2 and $20 to fill a prescription script. We never bother saving the receipts because it's exceptionally unlikely that we'd ever reach $2000 unless some large event happened. We specifically wanted only a high-deductible emergency policy; such policies here are easily obtained because there aren't a bunch of crazy US-style mandates requiring coverage for a bunch of stuff we don't want.

Maternity is not included as part of private health insurance. With each of our two kids, the public health system covered the cost of the midwife of our choice; we supplemented that in both cases with a private obstetrician. The fixed-cost price for the first pregnancy was $2000; the second was $3000. In both cases we ended up with an emergency Cesarean provided by our hired obstetrician that involved no additional out-of-pocket expense or insurance claim. I expect that the public health system defrayed the costs of the emergency Cesarean.

A month ago, we had our first call on our private health insurer. On a Thursday, Susan fell rather ill. An evening visit to the 24-Hour Clinic was followed by a Friday ultrasound confirming gallstones. On Sunday, a physician from the 24-Hour Clinic called after having reviewed Susan's files and recommended antibiotics for inflammation that they'd missed on the Friday visit; I picked them up that afternoon. A Monday visit to the GP's office gave a Tuesday visit to the specialist surgeon. We called Sovereign, our health insurer, from the doctor's office at 12:30 PM, then faxed off some easily acquired paperwork at 1:00. Two hours later we had insurer sign-off for a Wednesday surgery at Southern Cross Hospital. Southern Cross is the biggest private insurer; our insurance is with Sovereign, but that wasn't a problem. The public health system also sometimes contracts for services at Southern Cross when there isn't enough capacity at Christchurch General.

The laproscopic surgery went well. Susan spent a night at Southern Cross Hospital and was home the next day; I ducked out of a Scholarships Advisory Committee meeting to run shuttle. We also have very nice scope pictures from the surgery. I wish I had asked about it earlier as the surgeon said that, with enough notice, we could have had a video. That would have been awesome; they just hadn't had the time to set it up since I'd waited too long to ask.

Our surgeon is contracted in by the public health system to perform surgeries for them; the public system would have had a couple months' wait. Because high-demanders like us are willing to pay extra to get things done quickly, the system as a whole gets more specialists who also can provide services to the public system. Similarly, our private obstetrician was also sometimes the duty senior obstetrician at Christchurch Women's Hospital. The public and private systems complement each other very nicely; such arrangements are entirely illegal in Canada.

Things I have never ever here had to do:
  • Worry about whether our preferred GP, obstetrician, or specialist takes the insurance that we have;
  • Have to take the insurance recommended by our employers;
  • Have insurance tied to employment;
  • Save receipts for reimbursement later on [we just mailed the bills to the insurer];
  • Add up total health expenditures for a tax form to get a deduction;
  • Wait in really long queues (Canada);
  • Pay tons for private health insurance.
The Oregon Medicaid Study, as I read it (or see Cowen here), shows that the expansion of Medicaid mostly helped by reducing catastrophic costs that can otherwise face families with big health surprises. I can believe that finding. America has decided to make it difficult to get inexpensive high-deductible insurance coverage. If we take anything from Oregon, it should be that cheap catastrophic insurance should not be barred by regulatory mandates that effectively turn it into a full-cost full-coverage policy. [Update: see also Ross Douhat; Josh Barro disagrees]

There are many medical conditions where the expected quality of service in America far exceeds what is here available; big places can afford the expensive machines with the high fixed costs. But, on average, boy do we prefer things here. 

If you're weighing up a move to New Zealand and considering the drop in after-tax salary, look instead to the rather smaller drop in after-tax, after-health-insurance salary here. We pay $1680 NZD per year for catastrophic coverage for a family of four. So this year, including the $2000 deductible from an unexpected event, we paid about $3700 for health care out of after-tax earnings.

9 comments:

  1. Thanks for the post. You touched on a sore point for me, please bear with the wall of text.

    As someone that runs a small employer in the US, I am very jealous of your system. Aside from the cost impact, I spend an inordinate portion of my time dealing with regulatory requirements peripheral or tangential to running my business.

    As a business, we have been covering most of the annual healthcare cost increases for our employees instead of providing salary or hourly rate increases. It's a terrible shame, since some of our employees (including me) get healthcare through a spouse's policy - and thus no pay increases at all.

    My wife has had 3 Caesarian sections (one unplanned but not an emergency, two planned since the ob-gyn prefers not to deliver vaginally after the mother has had a C-section). All were significantly more than US$ 3,000; we hit the out-of-pocket cap on our insurance for the year. At least we have a high deductible plan with a co-pay. The premiums are insane for the "traditional" insurance plans.

    On the other hand, my second child had a congenital heart defect diagnosed at 3 months. A murmur was detected on Friday by the pediatrician. A pediatric cardiologist performed an ultrasound on Monday. I was able to get him admitted to one of the top ten pediatric cardiology hospitals in the US the next day. Open heart surgery was exactly one week from detection of the murmur, but could have been sooner if necessary. Recovery was five days (kids heal fast).

    Since he was born in the same calendar year and I had already reached my out-of-pocket maximum, all his heart issues were covered by insurance. He is turning 3 years old this weekend, and all his heart related issues were corrected by the surgery.

    Resolving the billing was a nightmare, particularly one very aggressive company. Many health care providers use third party administrative firms to interface with invoice and collect from their patients / customers and the patients' insurance companies. Below is a brief story about our experience:

    In the US, every person is issued a Social Security number by the Federal government. Insurance companies use the Social Security number as a patient ID number, and will not process coverage payments without the number. It takes 2-3 months for a newly born child to be issued their Social Security number, so all payments are on standby until the number is issued. All health care providers and their billing companies know or should know about this time lag.

    The aggressive third party billing company sending invoices with a couple days of the child's birth, simply to start the clock. Fine. But, it begins threatening collections phone calls and letters 30 days after the invoice. We had to endure 3 months of harassment while our insurance company sorted our the bill and payment issues.


    The phone calls were not well received by a couple sleep deprived new parents, particularly when the child in question was getting ready for open heart surgery.

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  2. None of that sounds fun; I think I'd have wound up cancelling my home phone line and going email-only.


    NZ isn't free of silly reg burdens. But the volume is rather lower.

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  3. Unfortunately cancelling the home phone wasn't an option. My wife works from home and the landline is provided by her employer.

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  4. I'll add though, that this is treatment at a big (by NZ standards) city hospital. In rural areas, treatment is more problematic, eg my father-in-law was having massive problems with his machine for treating sleep aponea, the person giving him advice was doing so because her husband had one and thus she was the most experienced person with them at his local hospital. When he got in touch with the specialist unit in Christchurch and they gave him advice, things started going much better.


    Also the health insurance companies in NZ keep lobbying for it to be tax deductible.

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  5. You are talking about the low deductible "Bronze" insurance under Obamacare, not a high deductible policy.

    High deductible insurance is $10,000 or more for a family, and zero subsidies to any public health system. Other than bankruptcy to redistribute the wealth from the makers who provide services to the takers who were their patients....

    Medicaid is providing the care you can rely on in your NZ public health system. In general, single adults in the US do not qualify for anything like your public health care, although they must be treated if the can find an ER and wait, and they can initiate a transfer of wealth by not paying the ER bills, which means they create the NZ public health system, individual by individual.

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  6. High deductible is $10,000 or more. You have the low deductible Obamacare Bronze level plan.

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  7. Going up to $10k didn't seem to save tons in premiums. We have a $5k deductible normally with $2k deductible on our 'specialist care' add on, both of which together cost the family price listed above.

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  8. It sounds great, as an American, but I think it's an interesting question of how you get from here to there. We pay an outrageous amount of money for medication and care procedures, and it would VERY quickly eat up your catastrophic deductible if you even bother to see a doctor.

    I have a high-deductible plan through my employer (they offer a traditional PPO plan, but I preferred the tax benefits) so I actually see the prices of medication. I'm in excellent health but need prescription medication to avoid a significant family history of heart disease. My medications cost nearly $150 per month. With that plus monitoring costs, like making sure the medication doesn't kill my kidneys, I blow through my (theoretically catastrophic) yearly deductible in less than 9 months.

    I'm not even in ill health and I'm lucky to be able to afford this, and to be able to afford to use the HSA as a tax-advantaged retirement savings vehicle. But if I had a comprehensive plan, this would only cost me like $50 a month. I don't see how, without reforming what's wrong with the outrageous costs of insured procedures and medication, a system in which ordinary Americans would only be offered catastrophic coverage could be viable. Those kind of expenses would wipe out someone with kids or even the median household income in the U.S

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  9. New Zealand's Pharmac system is able to keep prescription medication costs down. We're there somewhat free-riding on American investments in R&D, but even absent Pharmac, the optimal drug price in a poorer country (like NZ) would be lower than in the US.


    Note though that drugs for a known and permanent condition aren't really the kind of thing that insurance is meant for, unless you want to move to a wholly different kind of insurance system where parents buy options against their yet-to-be-created kids' genetic risk. Insurance is meant to fix things so that bad luck-of-the-draw in the next period doesn't hurt as badly. Current insurance regs bundle proper insurance with large transfers based on health status. And maybe those transfers are a good idea anyway. But they're not the kind of thing that we should expect a functioning insurance market to provide on its own.

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