Deductibles?

Under UCC, deductibles have three effects. First, they limit the cost to the government budget in comparison to plans such as Medicare for All, which extend first-dollar coverage to everyone. Second, they serve the goal of fairness by requiring that people who can afford it to assume responsibility for their own non-catastrophic health care expenses. Third, together with coinsurance and copays, they define the cost-sharing zone of Figure 4, within which people face a direct tradeoff between spending on health care or on other goods and services. The third effect is the most controversial. The issue is whether the tradeoff created by deductibles induces people not just to spend less (which they do), but also to spend more wisely. According to many advocates of market-based health care, giving consumers “skin in the game” encourages them to compare the cost and quality of services from various providers, avoid excessive and inappropriate tests and procedures, and budget prudently to meet foreseeable medical expenses. However, numerous studies cast doubt on the idea that high deductible health plans (HDHPs) automatically make people better shoppers. For example, an NBER Working Paper by Zarek C. Brot-Goldberg et al. found “no evidence of consumers learning to price shop after two years in high deductible coverage.”14 The authors noted that consumers reduced quantities consumed across the board, including potentially valuable preventive care as well as potentially wasteful care such as unnecessary imaging. Similarly, a recent review of the literature in Health Affairs concluded, “Current evidence suggests that HDHPs are associated with lower health care costs as a result of a reduction in the use of health services, including appropriate services.”15 And a research letter by Jeffrey Kullgren and colleagues published by JAMA Network found that HDHPs were ineffective in inducing enrollees to set up health savings accounts, compare prices or quality of services across providers, discuss prices with their physicians, or negotiate prices.16 Studies such as these, which cast doubt on the most facile versions of the “skin in the game” argument, raise both technical and political issues for policymakers. The technical issues concern the extent to which the negative effects of high deductibles can be mitigated through better policy design. For example, although some consumers are reported to make no effort to obtain or act on price information, others who attempt to do so are frustrated by a lack of pricing transparency. Measures to make price and quality information more readily available to consumers could help. So could changes in training and incentives that encouraged physicians to discuss the relative cost effectiveness of treatment options.