Lifetime Caps on Health Insurance
Wonks Anonymous is a faithful reader of the always informative Health Policy and Marketplace Blog although he seems to manage to disagree with it on many matters. The other day this blog reminded Wonks Anonymous of yet another quality lowering provision in health insurance policies, lifetime benefits caps. These caps absolve the insurer from paying more than a fixed amount, say one million dollars, in health care expenses for an individual no matter what. Costs on this order do not occur except in the most expensive medical catastrophes, for example burn cases, drownings and the most traumatic accidents. Health Policy and Marketplace Blog suggests that insurance companies should raise their lifetime caps to a more reasonable level, say $5 million, to allow for recent medical inflation.
Wonks Anonymous would like to suggest a better way. Why not eliminate the caps altogether?
First of all, a cap even as high as $5 million is quite insufficient to cover a real catastrophe. Wonks Anonymous is familiar with one case that paid out $5.5 million in 2001 and knows of a current case that is expected to pay out about $10 million.
Second, cases like this are very rare, rarer than super lotto jackpots. If my state lottery can provide for jackpot winners it should not add too much to my health insurer's costs to provide for rare medical catastrophes. Isn't this what the health insurance industry is telling us they want to do, provide catastrophic health insurance.
Finally we need to consider who is the insurer of last resort for catastrophies where the lifetime maximum is met. The injured party will, of course lose their house and other assets and go bankrupt. The remaining balance will be absorbed by the hospital that took the injured party in through their emergency room in compliance with EMTALA regulations. In this case the health care provider has become the health insurer, without the benefit of prepaid premiums.
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