Monday, October 31, 2005

Big Bad Deductibles

From Jonathan Cohn
According to a survey of large employers released just two weeks ago by Hewitt Associates, the consulting firm, out-of-pocket medical expenses alone is costing workers an average of $1,366 this year, up from $708 in 2000. And that figure is just the average. People who use a lot of medical services this year will likely pay more--in some cases, a lot more.
Italics mine

These stats -- not the sob stories that accompany them -- are the more convincing reasons to be solidly against CDHC (Consumer Directed Health Care) and all the nifty cost shifting devices that accompany it. Honestly -- a 93% increase in four years. Someone want to enlighten me as to what percent of Americans see their salaries increase 93% in four years? I can tell you this -- the median US household income was unchanged for at least two of those years of increase -- 2002 and 2003.

I just don't see how any of these "directives" are anything resembling a solution if they just price people out of health care altogether. I'm sure demand for all that expensive innovative technology will be sky high if hospitals start emptying because no one can afford health care.


At 11/01/2005 6:01 AM, Anonymous Martin said...


There is a rational basis for these high deductible plans, but it does presuppose certain positions that neither you nor I adhere to. In particular, to the extent that one beleives that moral hazard is responsible for a significant portion of the increase in health care spending in this country then increasing the cost-sharing component of health care is a rational decision since that will provide an incentive for consumers to reduce their utilization of health care. Alas, there is some fairly strong evidence against the moral hazard argument. One of the better arguments is that if the moral hazard argument holds water then there shouldn't be many people who use too little care, but we know that there are (both the RAND Health Insurance Experiment and other studies have showed that people often do not see doctors when they should). On the other hand, we also know that many people do go to the doctor when "they don't have to," but such studies often use clinical judgements that implicitly reject the principal agent relationship inherent in most conceptions of a physician--i.e. the patient isn't supposed to know when he or she needs care, rather the patient tries to do the best he or she can and see the doctor. The last argument against the moral hazard issue is pure common sense... would you rather see the doctor or a movie? 'nuff said.

You should, though, check out some of the HSAs being used in California. They are working on a new twist that combines some parts of a fee for service plan with the HSA ideas to make all preventive care free and provide a free annual physical so that the HSA component only comes into play with notionally more elective components of health spending, so the argument becomes a little more internally consistent by saying that moral hazard is a bad thing, but too much cost sharing can cause consumers to use too little care (again the RAND HIE showed this to be the case).


At 11/01/2005 6:22 AM, Blogger Kate said...


Good comments. Obviously there are rational reasons for high deductible plans. One can see how they will hold down costs (although history has shown that it will almost certainly be temporary). But they accompany excessive (in my eyes) amounts of risk and cost shifting.

If we're going to have high-deductible plans, they should absolutely include paid-for preventative care. But these plans simply do not make sense for people who are really sick or people with chronic conditions (can we say diabetes?). That's my concern -- this does nothing for people who need care the most but make life more expensive.

At 11/01/2005 12:34 PM, Anonymous Trapier said...

Kate -

Yes, HDHPs lead to 93% increase in out of pocket expenses...but the premiums are much, much lower.

Recalculate the total cost (high out of pocket + low monthly premiums). That's the significant number, and it isn't as scary.

Martin -

You're misquoting the RAND HIS. The co-pay group did use less medicine than the complete coverage group, but there was little or no difference in their health outcomes. If I skip out on expensive care, and it doesn't affect my health status, then is that care really "necessary"? The answer is no.


At 10/13/2010 3:51 AM, Anonymous Online Kamagra said...

Hewitt Associates released large numbers of employers in just two weeks ago because the consulting firm, out-of-pocket of workers medical expenses. If he not take any action on that then company will get very big loss.

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