B.I.T.E. #8 — Skin in the Game!

Have you heard of the terminology consumer driven health care? (CDHC)  But do you really know what it means? I am going to devote a handful of  B.I.T.E.s from the EHI One Bite Connection over the next couple of weeks to educate people on this important concept. CDHC is similar to health care and health care reform in one important characteristic, it consists of a number of separate issues with many moving parts. It can be overwhelming when the average person with no background in health insurance or health care tries to wrap their arms around all the different components of CDHC. The EHI One Bite Connection will take a close look at each individual component one bite at a time as always to simplify for better understanding. If you will take the time to explore and understand each B.I.T.E. I will share over the next couple of weeks, when you look at them all together at the end you will see why so many of the experts agree that CDHC is the key to successful health care reform.

The consumers of health care must have skin in the game in order to reduce and control the increasing cost of health care in America.

What do I mean when I say “skin in the game.” Let’s look at a couple of examples to illustrate the power of putting your skin in the game.

#1 — Have you ever played a card game like poker or blackjack with three or four other players using poker chips that had no real dollar value? Do you remember how you would bet freely and take risky chances? How does your betting change when you start using your own money in place of plastic poker chips with no value? That is the effect of putting your skin in the game.

#2 — Cars: What if you gave your teenage son or daughter a 2007 Toyota Corolla and paid for their car insurance and paid for all their gas? How would they take care of this car versus if they bought the same car with their own money and paid for their own insurance and their own gas? How well they take care of that car will be in direct proportion to how much skin they have in the game.

#3 — Health Insurance: Scenario #1 — a person pays only $25 per month for their health insurance premium. They have a $10 doctor office co-pay feature, there is no deductible ($0), and 100% coinsurance with zero out-of-pocket cost.

Scenario #2 — the same person pays $100 per month for their health insurance premium. There is no doctor office co-pay feature, there is a $1000 deductible with 80/20% coinsurance and an out-of-pocket maximum of $3000. Once the person has paid out of their pocket $3000 the insurance company covers 100%.

Under which scenario will the person use more health care whether they need it or not? When there is skin in the game, the consumer will behave differently about how they spend their health care dollars because it is their money. Without skin in the game there is no incentive to be a wise and prudent shopper.

Without skin in the game by every consumer (including politicians and all government employees) there is no incentive to ask the question “How Much Does This Cost?” Without everyone asking this question of the system costs will continue to rise out of control.

Matthew Berrafato
Elephant Hunter