Cost-Benefit Analysis Vital to Choosing Health Care Plan

Article excerpt

Whenever you're about to make a major purchase, financial experts will suggest a cost-benefit analysis _ a fancy term for figuring out whether what you're buying is worth the amount you have to pay.

Nowhere is a cost-benefit analysis more advisable than when you're choosing among health care plans.

"A lot of people will spend hours figuring out whether they should buy a car or dishwasher, but they don't do anything when they're faced with a health care choice," said Colleen Murphy, associate at William M. Mercer Inc. in Los Angeles. "Over time, health care is going to cost you a lot more than a dishwasher."

How do you do the cost-benefit analysis?

First consider your health care history. Pull out all of your medical bills. How much did you spend on doctors last year? Did you have hospital visits, prescription drugs, drug or alcohol dependency treatments? Is your health care utilization likely to be similar next year?

The second step involves introspection. What do you want and need a health care provider to provide? Do you have children who require frequent checkups? Do you have any existing health care condition? Are there congenital ailments in your family? Are you at high risk for a serious communicable disease, such as AIDS or hepatitis?

What are your plans? Do you want to have children in the near future? Are there medical procedures that you need that you've put off, such as a tonsillectomy or having moles removed? How important are your current doctors and hospitals? Is there a particular doctor, specialist or pediatrician that you can't imagine giving up?

Finally, plot out your health care options. Chances are you'll be given at least two or three. A good way to do this is set up a grid with horizontal columns for each option, such as indemnity plan, health maintenance organizations, preferred provider organization, point of service plans or whatever you've been offered.

Under each plan name, list the main cost provisions. For instance, in the indemnity column you might have: $300 deductible, 20 percent co-payment, 20 percent co-pay for prescription drugs.

Under your HMO option, you could list: $0 deductible, $5 doctor's visit, $20 hospital stay, $5 per prescription. No reimbursement for non-plan doctors.

The preferred provider organization column might say: $100 deductible, 10 percent co-pay for plan doctors, 40 percent co-pay for non-plan doctors, $10 per prescription. …