Consumer-Driven Childbirth in the New Bronze Age
Birth rates fall during economic downturns — especially among lower-income women. A 2012 study found that birth rates declined 8% during the recession from 2007 to 2010. Presumably this was due to economic uncertainly, but could also be attributed to cost-sharing for a major medical event.
The out-of-pocket cost of having a baby is going up. High-deductible health plans (HDHPs) and their “Bronze” counterparts in Obamacare exchanges are expected to be the most common insurance arrangements for expectant mothers in the near future. A recent JAMA article discusses the implications of high-deductible health plans and rising out-of-pocket costs on expectant mothers.
Childbirth is the most frequent reason for hospitalization in the United States. Although Obamacare mandates that insurers cover birth hospitalizations, its only limit on cost-sharing is through relatively high annual out-of-pocket maximums. According to the article:
- Nearly four million women in the U.S. give birth annually.
- The average out-of-pocket cost for vaginal deliveries was $2,244 in 2010.
- Cost-sharing for women with HDHPs is twice as much as in traditional plans.
- Enrollment in HDHPs is likely to increase after the 2018 “Cadillac tax” on more favorable plans.
Should we be concerned about high-cost sharing for childbirth? Children are a blessing; not a medical affliction. Parenthood is a decision that most couples willingly make. This trend implies there is an opportunity for a movement towards responsible consumerism in childbirth.
Women are told to begin preparing for a pregnancy a year in advance. They should also begin planning on where to deliver a baby in advance as well. Childbirth is an example of how value shopping in health care can reduce prices since women and families generally have ample time to “shop around.” For instance, hospitals are the most expensive venue for any type of medical care — including for labor & delivery. But couples have other lower-cost options.
Indeed, health plans, employers and regulators should provide information on lower-cost options including birthing centers, nurse midwives and homebirths through comparison tools such as web-based price shopping platforms. In addition, many of the Bronze Health Savings Accounts plans don’t specifically inform enrollees that they qualify for an HSA, which would be instrumental in financing childbirth.
The rise of HDHPs greater incentivizes patients to behave like consumers and compare prices and look for lower-cost options. Policy makers and employers should empower families by providing transparent cost information and tools while encouraging medical savings.
This is a great example of where prudent consumers can make a difference and cut costs substantially. Childbirth became a profit center at hospitals. As more couples begin asking questions about prices and looking for way to limit their costs, they will seek out lower cost options.
Shopping around, including for non-hospital options, makes sense from an economic standpoint. The problem, as I see it, is that the consequences of being wrong are pretty severe. If there are serious complications, it would be nice to have a NICU on site. This is a different situation, in my opinion, from shopping for imaging or for a generic vs. a brand name drug. There is also the issue of where the OBGYN practices.
What percentage of childbirths are paid by Medicaid?
About 40 per cent of all childbirths are paid by Medicaid.
On this issue, I take a very different view from Devon or Barry.
I think there should be no coinsurance on childbirth and very low deducibles.
The spectacle of new young parents in debt has been with America for a long time, and I for one find it obnoxious.
It would not be very expensive to fix. The non-medicaid births total about 2.4 million each year.
Give each new mother a $6000 grant to cover out of pocket costs, and you are talking about maybe $15 billion a year.
We spend $15 billion on Medicare every eight or nine days. We can certainly free up that some in federal dollars to help young parents. As things stand, it surely feels like the awful stinginess we have toward the young in health care.
Bob,
I don’t have any problem with maternity benefits. What does trouble me is that so many people who don’t need them from males, especially young males, to older women don’t want to pay for them and resent having to pay for them as one of the ACA’s essential benefits.
Regarding Medicaid births, a disproportionate number are premature compared to the rest of the pregnant population. Women on Medicaid often don’t get adequate prenatal care, they are frequently non-compliant in following physician instructions and recommendations, and many smoke or abuse drugs or both and eat too much unhealthy food. This combination can result in lots of complications for the baby that can, in turn, create hospital bills that can easily run into seven figures and often do. The combination of poverty, lack of education, chaotic lives, irresponsible behavior, etc. creates all sorts of problems that defy easy solutions. The bills are a lot bigger than you suggest.
Barry and Bob,
Here in Dallas the county hospital district indigent care provider, Parkland Memorial, is very good at delivering babies of at-risk mothers for a low cost (with very good outcomes). Parkland mainly uses nurse midwives. I don’t know the exact number of babies delivered there. I’m sure it’s changed since I toured the facility. But it was around 13,000 babies annually the last time I checked. It can be done for less than the typical cost. Most of the babies Parkland delivers are Medicaid, but Parkland will (quietly) offer package prices to women who ask.
Nurse midwives have results that are better than the average because they won’t tackle a case where the results are in doubt. As more women ask these tough questions (like how much does that cost), facilities will spring up to provide the service. As the JAMA article said, childbirth is the most common reason for a hospital admission. It should not require an expensive hospital stay. Furthermore, there is no reason why it should cost $12,000 or more.
Devon,
What’s the (quiet) cash price at Parkland for those who ask? Just curious and is that for an uncomplicated birth with assistance from a nurse midwife?
As I understand it the package prices are based on income scales.
Note to Devon:
Thanks for the good info, but once again I ask — why do we expect pregnant women to ask the tough question of ‘how much does this cost?’ We do not expect seniors to do this, by and large. The Medicare bureaucracy has many flaws, but it can and does challenge hospital costs all the time.
I think America has a bad habit of making patients into the kamikazes of cost control — in part because legislators are too beholden on campaign contributions from medical providers, and in part because in some states there is frankly not much tradition of protecting consumers from much anything.
I think America has a bad habit of making patients into the kamikazes of cost control…
I will have to remember the phrase “kamikazes of cost control” so I can use it in the future!
I tend to subscribe to the view that America has a bad habit of not requiring patients to participate in cost control. The only reason patients attempting to control costs could be compared to kamikazes is our convoluted health care system. If people routinely asked about prices, hospital business offices and clinics would get so tired of the distraction they would post package prices. Going to the grocery store is not a harrowing experience. The collective efforts of millions of consumers over time have sent a powerful message to grocers, for example, that consumers demand straightforward pricing and quality merchandise. It doesn’t require kamikaze consumers; yet we all benefit from the collective action of others.
Patients are precisely the people we want to hold down costs. I’ve often said 200 million consumers can do more to control spending that a few thousand bureaucrats. Actually, I don’t believe politicians and bureaucrats are in any kind of position to effectively ascertain the market clearing price for 7000 tasks that Medicare pays for. Without knowing the market clearing price, it’s impossible to create price controls that don’t distort the market.
You make a good point about consumer power, Devon.
I probably have some personal hangups in this regard.
I would never ask my doctor about costs, I feel it would harm our relationship — I want to trust him or her completely.
Most of my life I have been in HMO’s. I was delighted to pay one premium and not to ask about costs at the time of service.
I once used a chiropractor who was not in the HMO. At the end of the session, the dr asked me for a check.
I was frankly mortified and never went back again.
It does take all kinds, I guess. But I will not give up my preferences without a fight.
Bob,
I trust that you are certainly not the only individual who feels that way. I would refer to what you are describing as an informal financial veil, of sorts that is more or less unique to the health care industry. As Devon’s grocery store metaphor suggests, empirical intuition says lifting that veil would unleash market forces that increase competition and decrease prices, which should be the primary objective. We don’t have a health care crisis; we have a pricing crisis.
Note to Barry:
You are correct that males and older persons resent paying extra for their health insurance, now that maternity care is mandated coverage.
This is a perfect illustration of what is wrong with so many mandates.
With mandates, the cost of a social improvement is shoved down onto other insurance buyers. (in this case, other buyers in the individual market)
The alternative is to use universal income or payroll taxes to pay for items of social welfare. For example, the cost of helping old people who are poor is paid for by the broad social security tax — instead of there being a surcharge on every private annuity. In a number of countries (and a few of our states), the cost of providing paid family leave for young mothers is covered by a tiny increase in the broad Social security tax –rather than forced on each employer who has an employee in that category.
Of course, to spread costs in this way requires a willingness to increase broad taxes. The lack of such willingness forced the ACA to dump all costs onto private insurance buyers only (though employers got a few tax increases as well.)