Mandated Benefits - A Time to Reassess?

As Illinois seeks to rebuild its business economy and dig out of a $13 billion dollar budget deficit, mandated health benefits are a place to look. Visit http://www.insurance.illinois.gov/healthinsurance/mandated_benefits.pdf to learn about our State’s thirty-seven mandatory benefits, some of which became effective as the economy was tanking. These benefit mandates put financial pressure on State businesses and drive up the social burden for the overall cost of healthcare. Illinois Medicaid is a comprehensive health plan and, as such, has an even broader array of benefits, offerings, and coverages. Benefit redesign is worth a hard look as attempts are made to determine what society at large should be covering for each other, versus what should be the financial burden of the individual or family unit.


To pick on just a couple examples, infertility coverage rises near the top for me. My wife and I were beneficiaries of infertility benefits for two of our children. Wanting children and not being able to have them has many painful and emotional ramifications for couples and can wreck a marriage for some. That said, the average cost of one person entering treatment for IVF, GIFT, and ZIFT, runs about $35,000 per year. Because older Moms are more likely to receive the benefit and are more likely to give birth prematurely, there is the additional cost of neonatal care associated with growing and feeding a premature infant, further increasing the social burden. When should the cost of these wonderful benefits be supported as a pooled resource of either tax dollars or employer contributions, vs. a direct cost to the individual? That’s the question not being asked, even with benefits that are not even close to a life or death issue for the beneficiary.

Our State has both a mandated “serious mental illness” benefit and a separate benefit requiring HMO’s to cover inpatient and outpatient mental health services as minor as short-term counseling with a psychologist. While not necessarily a big cost item in the overall cost structure of health care, the same question of who should pay what, emerges. Autism spectrum disorders, a long list of disorders resulting in a wide range of disabilities from very mild to severe, has a benefit category of its own for individuals under age 21, with a benefit up to $36,000 per year. Benefit design and unit cost are the primary drivers of over 85% of health care costs. The matter of what society pays for and what the individual pays for is a serious matter of consideration.

Recently I read about the practice of embryo adoption due partly to the large number of frozen embryos which otherwise are likely to be wasted. What a great potential solution for a childless couple who want the experience pregnancy provides. And, since adoption costs are not yet a mandated benefit to be covered by insurance carriers, no drain on the social insurance fund as well. Then the question surfaced, “Will the insurance carrier pay for pre-implantation genetic testing so I can be assured no major malady awaits”? The best answer for today may be, “The non-implanted embryo is not yet a member”.

Health care costs are very high and are arguably the biggest challenge we have is bringing cost under control. Many of today’s costs are created by discretionary decisions which are not critical to prolonging life nor critical to reducing functional disabilities that make a workforce more productive. Through mandated benefit designs funded by large social pools of money, our society has been moving toward a socialized system for decades. The time has come to reverse the trend, rebalancing by redefining what costs are supported by the individual, vs. what costs are supported by the social pool. Rationing is not a choice. Rationing is a reality handled most equitably through balancing what should be the cost to the individual vs. what should be a cost against a social fund. Many socialized systems around the world are confronting The Tragedy of the Commons. Whenever there is unrestricted demand for a shared finite resource, ultimately the resource is doomed through rational over-exploitation. The community and the social pool of resources ultimately suffer, resulting in a loss of the resource to all. Today, Congress seems to be moving toward a solution where payment denials occur for poor outcomes allowing for more benefits to become available for others. As we’ve seen through analysis by the CBO, some projections can be made to look favorable for bending the overall cost trends, at least in the short term. But without a focus on the basic question of who pays for what, particularly around discretionary services which often find their way into mandated benefit regulations, less service, not more, will be the ultimate outcome. Thoughts?