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Cashing out

"Cashing out" Continued...

Issue: "Big mouth on campus," March 12, 2005

That's why Daniel Cosgrove is switching. A physician and medical director at the WellMax Center for Preventive Medicine in La Quinta, Calif., Dr. Cosgrove for years carried a pricey health-care plan for himself, his wife, and their three children.

"I had this full-on private insurance-$900 a month, and we never used anything all year except for a few vaccinations," Dr. Cosgrove said. Now his family is opting for a high-deductible, low-premium HSA-linked plan. "Now for less than $5,000 a year, I can get catastrophic coverage . . . and use the money I'm saving to cover the deductible or pay for preventive care."

Similar to HSAs, Flexible Spending Accounts (FSAs) are another option that allows individuals to put aside a portion of their before-tax salaries to pay for medical expenses. FSAs are employer-established benefit plans that don't require a high-deductible health-insurance policy. Although no statutes limit contributions to the accounts, some companies cap them at $2,000 to $3,000. Money left over in an FSA account, however, cannot roll over from year to year-if you don't use it, you lose it.

Another option, called a Health Reimbursement Account (HRA), allows employers to set aside funds to reimburse employees for qualified medical expenses. HRAs provide "first-dollar" coverage-that is, they cover all medical expenses until HRA funds are exhausted-and unused funds roll over at the end of the year.

Meanwhile, families of all income levels could save money with a health-care provider like Robert Berry. The Greeneville, Tenn.-based physician is among a fast-growing group who are cutting ties to insurers altogether and accepting only cash for medical services rendered. The goals: To improve patient care, rein in out-of-control costs, and end their own feelings of indentured servitude to insurance companies.

Dr. Berry launched the PATMOS EmergiClinic in 2001. PATMOS, the isle of the Apostle John's exile, serves both as a reference to Dr. Berry's Christian faith and as an acronym for "Pay At TiMe Of Service."

A former medical missionary, Dr. Berry first considered opening a cash-only clinic while working as an emergency room doctor at a Greeneville hospital. He remembers treating patients who weren't sick enough to be in the hospital, but who checked into the ER because they had no insurance and nowhere else to go.

"I left ER medicine to start a clinic primarily for the uninsured of my community," Dr. Berry told the Joint Economic Committee of Congress during testimony last April. "My motivation was simply to try and flesh out in my own life an answer to the age-old question: Who is my neighbor?"

Dr. Berry's neighbors come from as far as 200 miles away to take advantage of care at prices like those advertised in his clinic's folksy brochure: Sore throat, $35. Sports physical, $50. Stitching up a simple, one-inch cut, $95 (additional inches, $25 each).

He jokes that most services at his clinic cost "somewhere between an oil change and a brake job." He is able to keep his fees low because he receives what he actually charges, instead of relying on lowball insurance reimbursements that often didn't even cover his costs to provide care. Also, by not accepting insurance, Dr. Berry doesn't have to pay a small army of administrators to process claims and hound insurers for payment. If he were to accept insurance, he estimates his overhead would triple.

Clinics like Dr. Berry's, combined with other health-care payment options, could drive down medical costs overall by forcing providers to compete. For example, a patient spending his own money for a lab test may be more likely to shop for the best price.

Prices already are falling at clinics associated with SimpleCare, an alliance of more than 1,600 "pay-as-you-go" doctors across the country who charge lower fees when patients pay in full at the time of service. For instance, SimpleCare has negotiated with major labs for test prices that are 50 percent to 70 percent lower for cash patients than for those with insurance, according to Lori Swanz, vice president of the Seattle-based consortium.

Despite such potential savings, Americans are lukewarm to the idea of cash-only clinics-or high-deductible health plans, according to EBRI. While more than half of those surveyed believed their health care would improve if they had more responsibility for their medical decisions, only a quarter said it would improve if they had to shoulder more of the costs.

But the average annual combined cost per worker of employer-sponsored plan premiums and associated co-pays is more than $2,500, according to Hewitt Associates, a human-resources consulting firm. That's about the same amount as the maximum annual contribution to an HSA. Ms. Swanz points out that many patients, particularly those relying on Medicare, are locked out of certain, potentially lifesaving preventive care anyway.

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