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eridani

(51,907 posts)
Tue Jun 16, 2015, 03:01 AM Jun 2015

High deductible plans discourage unnecessary care--and also necessary care

https://theconversation.com/health-care-cost-sharing-prompts-consumers-to-make-big-cuts-in-medical-spending-41657

“What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics” by Zarek Brot-Goldberg, Amitabh Chandra, Benjamin Handel and Jonathan Kolstad (43 slides):

http://eml.berkeley.edu/~bhandel/wp/BCHK.pdf

Giving consumers direct incentives to think about their health care spending is a cornerstone of health reform in the US and plays a large role in several national health systems around the world, such as in France.

An important prerequisite for these reforms to be successful is that consumers, who may or may not be making medical decisions in conjunction with physicians, understand the costs and benefits of different health care services. Our evidence suggests that consumers don’t seem to be responding to increased cost-sharing with nuanced expertise and instead reduce consumption across the range of medical services, some valuable and some likely wasteful.

Additionally, they reduce care heavily when sick and under the deductible, even when their true marginal price of care is very low.

Thus, while increased consumer cost-sharing can be an effective instrument for reducing health care spending, it may be a blunt instrument for encouraging higher value medical spending, especially relative to supply-side interventions that target physician incentives or interventions that reduce the use of high-cost low-value medical technologies.



Comment by Don McCanne of PNHP: A cursory glance at this article suggests that it is simply one ore study that confirms that high deductible plans decrease health care spending, and since you already know that you might be tempted to pass on reading today’s message. But don’t skip this one if you wish to better understand just what impact high deductibles really do have.

What is unique about this study is that it evaluated the patterns of the change in health care spending when a large firm switched about 85 percent of its employees from a PPO plan that provided first dollar coverage (no deductibles, no coinsurance, and $0 out-of-pocket maximum) to a HDHP (high deductible health plan with $3,750 deductible, 10% coinsurance, and $6,250 out-of-pocket maximum). The health care providers were the same both before and after the change was made. This is about as pure of a study as you could devise on this topic - the same employees, the same health care providers, but with a change to a high deductible with coinsurance and a new patient responsibility for up to $6,250 in cost-sharing.

As expected, spending abruptly declined - by about 19%. So was this a result of better price shopping, as the advocates of these consumer-directed HDHPs tout? No. Medical prices did not go down after the switch was made. These health care consumers did not shop prices.

What went down was the quantity of health care provided. In fact, the sickest employees reduced their use of health care services even more - by about 25%. The reductions in utilization were across the board - inpatient services, outpatient services, emergency room services, mental health care, drug purchases, imaging, and preventive health services. Most of these are beneficial services.

Another interesting finding is that those individuals with significant disorders who knew that they would reach their maximum out-of-pocket spending nevertheless reduced their utilization of health care services while they were still under the deductible. They did not need to reduce their use of these services since after the out-of-pocket maximum is reached, their marginal cost of additional health care is essentially zero. Their net costs are the same regardless of their utilization. It is likely that these sick individuals were needlessly forgoing beneficial health care services.

The author states, “consumers appeared to reduce consumption across a range of medical services, from low to high value.” Clearly policies that reduce the consumption of high value care are undesirable, and, for this reason alone, deductibles and coinsurance should be eliminated. But what about low value care? What is low value care? Is that the MRI that, in retrospect, turned out to be normal? Wasn’t there some benefit in excluding potential pathology? Attempting to ferret out low value care can be detrimental if it consequentially results in the blunt elimination of high value care as well.

Besides, how much spending reduction would we really see with the reduction in beneficial health care services that results from deductibles? Remember that the 20 percent of individuals with greater health care needs consume 80 percent of our health care services. Most of this spending is well above the maximum out-of-pocket costs and thus cost-sharing has very little impact on this spending. The deductibles might influence utilization for the other 80 percent of us, but that would reduce spending by only a fraction of the 20 percent of health care that we use. Anyway, is the amount of health care used by us low-utilizers really an egregiously excessive amount of care? We usually have a legitimate reason for going to the doctor.

In this article, Ben Handel states, “while increased consumer cost-sharing can be an effective instrument for reducing health care spending, it may be a blunt instrument for encouraging higher value medical spending, especially relative to supply-side interventions that target physician incentives or interventions that reduce the use of high-cost low-value medical technologies.”

Instead of using detrimental demand-side patient cost-sharing instruments to reduce spending, just think of what could be accomplished on the supply-side using a well designed single-payer monopsony for financing health care: global budgeting of institutions such as hospitals, dramatic reduction of administrative waste, negotiation of rates for services and products, bulk purchasing of pharmaceuticals, avoiding excess capacity through planning and separate budgeting of capital improvements, and establishing a global budget for the entire health care delivery system.

There is no need to assess financial penalties (deductibles and coinsurance) merely for accessing beneficial health care services. With a single payer system, patients simply obtain the health care that they need, when they need it. That's the way it should be.

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drm604

(16,230 posts)
1. A lot of employers are now switching to high deductible plans.
Tue Jun 16, 2015, 07:22 AM
Jun 2015

The excuse is that it encourages wiser healthcare decisions. In reality, what it does is increase the burden on those who have unavoidable high costs, as this article points out. I suspect that some employers hope that it will encourage sicker employees to seek employment elsewhere.

My employer did this, and I'm one of the 20% with unavoidable high costs. When the woman from our benefits company gave a talk explaining that the new high deductible coverage would encourage wiser healthcare decisions, I had to sit there and bite my tongue. Surely they realize that what they are saying is nonsense, that very few people utilize healthcare frivolously, and that high utilizers aren't doing so out of choice?

Neurotica

(609 posts)
2. And a big problem with them is that you generally can't find out costs before undergoing procedures
Tue Jun 16, 2015, 07:55 AM
Jun 2015

So the whole idea of high-deductible plans encouraging people to become better health care consumers and to shop around is ridiculous.

We're under a high-deductible plan now with an HSA--still trying to figure out how we're going to manage this.

drm604

(16,230 posts)
3. I know that my yearly costs will be more than the deductible regardless of how I shop around.
Tue Jun 16, 2015, 08:11 AM
Jun 2015

In fact, the insurance company requires that I purchase my needed supplies from providers that they specify, so I can't shop around anyway.

All this does is shift the burden onto the sickest people. Anyone knowledgeable who says otherwise is lying either to themselves or to the rest of us.

Yo_Mama

(8,303 posts)
13. Yes, that's exactly what it does.
Tue Jun 16, 2015, 10:32 AM
Jun 2015

The persons most in need of medical services won't be able to access them.

The study authors seemed surprised that individuals didn't get needed medical care even though they knew they would exceed their deductible over the year - but that ignores the reality that the sickest have the highest costs anyway, and they just didn't have the money to pay the cost of the deductible.

The reasoning used may make sense in books, but in real people's lives,paying the mortgage, utilities and buying food comes first.

These plans don't block access to care for well-off health care consumers, but they do block access to care for moderate and low income persons and families.

The entire design of PPACA is a conspiracy to kill the poor.

LWolf

(46,179 posts)
5. It sure as hell discourages me.
Tue Jun 16, 2015, 08:51 AM
Jun 2015

I can't, for the life of me, figure out why there should BE deductibles and copays after paying a premium. How many times, in how many ways, should one have to pay for health care?

1939

(1,683 posts)
7. Insurance (except life) usually comes with deductibles
Tue Jun 16, 2015, 09:00 AM
Jun 2015

You could buy auto insurance with zero deductible for collision and comprehensive, but you would pay a much higher premium. You can also get a lower auto premium by accepting higher deductibles.

A health care plan with zero deductible and zero copay would have a much higher premium.

Government health care (Medicare) has a deductible and copay structure.

LWolf

(46,179 posts)
9. Which is exactly why health care
Tue Jun 16, 2015, 09:13 AM
Jun 2015

shouldn't be tied to insurance.

My auto insurance has not changed much in decades.

I've gone, in the last ten years, from health insurance with no copays or deductibles to a $1500 deductible and 20% copay, after paying a premium that is HIGHER than that for the better plan a decade ago.

I clearly aware that Medicare has a deductible and copay structure, since I help my mom pay her deductible and copays.

I'm also aware that, like insurance for everyone else, increases in copays and deductibles for medicare far outstrip inflation.

http://www.iasadmin.com/blog/wp-content/uploads/History-of-Medicare-Deductibles-and-Coinsurance-Amounts.pdf

http://www.usinflationcalculator.com/

I support not-for profit health care , free at point of service to all, paid for 100% by taxes.

 

hill2016

(1,772 posts)
10. but
Tue Jun 16, 2015, 09:25 AM
Jun 2015

wouldn't your taxes go up such that you end up paying the same (in terms of premiums, deductibles, co-pays) or even more to cover the uninsured or sicker people?

hobbit709

(41,694 posts)
11. My taxes keep going up and I'm getting less and less.
Tue Jun 16, 2015, 09:32 AM
Jun 2015

I'd like to see my taxes get me things that any civilized country should provide.

eridani

(51,907 posts)
16. Nonsense. All other developed countries have universal health care
Tue Jun 16, 2015, 08:52 PM
Jun 2015

And we pay 50% to 100% more to deny care to sick people. The fire department is paid for by everybody in the district, despite the fact that only a few have fires. Why should health care be any different?

Yo_Mama

(8,303 posts)
14. Medicare doesn' t have really high deductibles.
Tue Jun 16, 2015, 10:34 AM
Jun 2015

We are talking about very LARGE costs for most moderate to low income people. They can't pay the bill.

midnight

(26,624 posts)
15. Between hundreds of dollars for the monthly insurance rate, thousands
Tue Jun 16, 2015, 10:57 AM
Jun 2015

of dollars for the deductible and a 30 dollar co-pay I get to walk in and be looked at. After that, the meter starts, and hopefully nothing to expensive occurs.

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