People often think about holiday stuff at year-end. And this focus makes sense. As a society, we enjoy a ton of holidays falling in November, December and early January.
But you know what? With the Affordable Care Act now in full force, most businesses also need to spend time over the holiday season (and before year end) thinking about their employee health insurance programs.
Which explains (or at least sort of explains?) why we’re doing a blog post that connects the Breaking Bad television series and its principal character, Walter White, with the recent news that Healthcare.gov, the biggest Obamacare exchange, is going to offer fewer PPOs and more HMOs.
We want to explain why this maybe isn’t a bad thing, even if it seems like a bad thing…
An Extended Case for a PPO and Spoiler Alert
We briefly described the difference between HMOs, PPOs, and EPOs in our article on health insurance basics. But understanding this difference is really useful. Accordingly, I want to talk more about why PPOs seem attractive–and why they maybe don’t actually make as much sense economically.
And here’s how this all connects to Breaking Bad: The importance of the difference among these types of plans can be well illustrated with by the example of fictional TV character Walter White.
A misconception among people who didn’t pay careful attention to the series Breaking Bad was that Walter White was diagnosed with lung cancer when he didn’t have health insurance, and it was his lack of insurance coverage that meant (spoiler?) he had to start selling crystal meth to pay for his medical bills.
But Walt did have insurance. The issue was, in his own words, “I don’t have… great insurance.”
Why didn’t he have great insurance? Well, Walt had an HMO plan.
So he went to see a doctor in his network, who performed a series a tests. The doctor’s diagnosis was lung cancer. The prognosis? Best-case scenario: with chemo he lives a couple more years.
When Walt’s family finds out about his illness, they quickly determine that the network doctor isn’t good enough. Walt’s sister-in-law, Marie, knows who the best oncologist in town is, one Dr. Delcavoli.
Of course, the best oncologist in town isn’t in Walt’s network. Which is unfortunate. This top-tier doctor has a more optimistic opinion on Walt’s illness, but sadly that prognosis and the relevant treatment doesn’t come without a cost; the first visit alone is $5,000 out of pocket. His total out-of-pocket costs add up to $90,000.
This (among other reasons) is why Walt started making crystal meth. It wasn’t because he didn’t have health insurance. It was because once he and his family were staring death in the face, they decided that the HMO’s doctor wasn’t good enough. What they wished they’d had all along was a PPO that would have shouldered the cost of Dr. Delcavoli’s treatments.
The Case for Cutting Costs
Does a PPO provide you with better insurance? Well. that’s the big question. And Walter White answered in one way.
But here’s the rebuttal you’ll often hear from the pro-cost-cutting crowd: Most of this extra spending we do on health care in the U.S. isn’t buying us much.
In this interview with the PBS Newshour, for example, Harvard economist David Cutler explained a lot about why our country’s health care costs so much, and he did so in pretty good detail. There are many different reasons, but here he sums up the big idea we’re concerned with in our discussion:
[T]here’s a lot of gray area where it’s not clear if you need the open heart surgery or not, and in the U.S., people will get it and in Canada, they don’t. The interesting thing about it is that life expectancy or one-year mortality after a heart attack is the same in the two countries.
Cutler goes on in the article to discuss different things that Massachusetts has been trying to reduce “wasteful” health-care spending. This includes higher co-pays when patients go to more expensive health-care providers for routine procedures and higher out-of-pocket costs for patients who want procedures that aren’t clearly medically necessary.
You can see that this cost sharing makes cancer treatments for people such as Walter White more expensive. Experimental medicine? You’ll need to pay more for that. Choosing the most expensive doctor in town when it’s not clearly necessary? You’ll need to pay more for that.
This is the sort of thing that doesn’t make the Marie Schraders of the world very happy. But as Walt himself said when she suggested a supposedly better (though out-of-network) oncologist, his treatment would likely be “expensive, unpleasant, and ineffective.” And he was right.
And one final relevant comment. In the series, Walter lived several seasons. But the real reason Walt lived so long under Dr. Delcavoli’s treatment wasn’t because that’s how it usually happens in real life; it’s because Breaking Bad was a successful TV show that needed a decent number of episodes.
More Detailed Information Is Available
This past spring we published a monograph (downloadable as a PDF) for other CPA firms trying to help their clients deal with the Affordable Care Act’s complexity. If you’re a client of our CPA firm, we are happy to provide you with a complimentary copy of the monograph. Just call us.
If you aren’t a firm client but rather are a CPA, know that we’d be happy to sell you a copy of the monograph for $100. Roughly 60 pages in length, the monograph outlines everything you need to know to advise small-business clients on the elements of the Affordable Care Act they must know. The monograph also includes useful appendixes, which provide sample health plans, sample W-2s that show how an ACA-compliant W-2 should be prepared, sample client letters, and sample handouts you can use to help clients learn the new law. (Need more info? Click here.)
In summary, this relatively short whitepaper should save tax practitioners and their clients hours of learning time by describing the ACA issues that one needs to understand if one operates in the world of small business.
Money-Back Guarantee
As with all of our publications, the “Small Businesses and the Affordable Care Act” (Obamacare) monograph comes with a money-back guarantee, so if you purchase it then for whatever reason find it’s not what you need or what you expected, simply email us your refund request. We will happily issue you a refund, no questions and no hassles.
But the REALLY important question here is… why is Walter White green with cotton balls stuck to his head?