Economics, Health Care, Pethokoukis

Are high-deductible health plans helping slow down health care spending?

Credit: JPMorgan

Credit: JPMorgan

Real spending on health care services has grown at only a 2.1% annual rate since the recession ended, notes a new JPMorgan report. That’s about a full percentage point slower than the pace that prevailed in the decade before the recession began.

Does the economic slowdown explain the the decline, or are there non-macroeconomic factors at play? I wrote the other day about the latter: a) lots of breakthrough drugs from the 1980s and 1990s became widely available in generic form in the 2000s; b) health insurance plans became more diverse, giving consumers more choice, such as health savings accounts; c) the IT and networking revolution has improved disease management.

The JPM analysis focuses particularly on the increase in high-deductible, employer-provided health insurance, frequently paired with a health savings account. In 2012, 9% of workers with insurance from an employer were enrolled in a high-deductible plan — more than double the percentage from just three years ago. The product may be limiting consumer demand:

One circumstantial piece of evidence that this may be holding back spending is the composition of health care consumption. Higher deductibles may make one think twice about elective care for annoying but not debilitating conditions, whereas it probably won’t do much to deter one from visiting the hospital for a serious or life-threatening condition. Such a pattern appears in the recent data, as outpatient care has slowed markedly, whereas hospital care is expanding at about pre-recession levels. [See above chart.]

6 thoughts on “Are high-deductible health plans helping slow down health care spending?

  1. As an entrepreneur, we try to keep our health care costs down to an absolute minimum and assuming one is reasonably healthy and works to stay that way, the difference between low or no deductible and high deductible insurance are well worth taking some risks.

    With the high quality of medical (diagnostic) information available via the internet and pretty much unlimited access to prescription drugs in the country we live in, “self medication” for minor or nuisance aches, pains and illnesses is well worth the savings realized by opting for high deductibles. ($5,000)

    Dr. PDG

  2. We switched coverage to a BCBS HSA elegible plan (which incidentally, has moderate Out Of Pocket Maxs $10K and Deductibles ~5K, so it could hardly be called catastrophic coverage). We have saved thousands of dollars in net medical expenses since 2004 owing to (a) of course, premiums are lower, (b) plan contractual amounts (all you are responsible for) are significantly lower than stated costs protecting your pocketbook even when no insurance reimbursement is owed you, and (c) we have had the incentive and the credibility to question discretionary medical services (with litlle push back from providers) and to challenge bills where “bill coding options” have entitled the providers to be entitled to payments that could have been as low or as high as a factor of 4x for the same service.

    Incidentally, another post on your AEI site carries an article about how the Medicare Prescription Drug Program (another market-consumer driven toehold) is lileky behind the the down trend in Medicare costs (at least what is not driven by the economy).

    It is unmitigated gall for progressives to usurp the credit these small reforms have afforded us (Obama claims down trend is due to Obamacare, presumably driven by time travel between 2014+ and the recent past). But worse is that they are also likely to effectively kill the programs.

  3. Yes, high deductible/HSA coverage is cheaper than standard issue — $12k/yr for a family vs $15k in 2011. But, no, that doesn’t mean that consumer choice is controlling healthcare costs. Putting $5k at risk to save $3k only appeals to people who are reasonably certain they won’t lose the $5k. Self selection also explains why a private insurance alternative to Medicare will not save it. As insurers skim good risks, traditional Medicare becomes older, sicker and less tenable.

    But let’s say, for the sake of argument, that paying $200 for an office visit does convince Anxious Mom to treat junior’s sniffles with watchful neglect. Let’s also agree that such savings amount to no more than tinkering around the edges. The real money gets spent when doctors come out of the operating room to parlay with grieving relatives. The latter’s instructions almost always are ‘Do everything you can.’ The problem is fee for service. No one in that waiting room conference talks about what’s cost effective.’

    • “The problem is fee for service. No one in that waiting room conference talks about what’s cost effective.”

      If the problem is fee for service, the only conceivable solution is to disconnect the fee from the service. Service would be provided without discussion of costs or alternatives. Fees would be established by … some external party, with minimal interest in or concern for the actual costs involved with the service (time, education, skill, personnel, equipment, medicine, facilities, overhead, etc.).

      I fail to see how such a model would work towards drastic reduction in costs (without drastic reductions in quality care), rather than unrestrained surges in costs (with negligible increase in quality care).

      • One in six new doctors last year went to work for a hospital rather than into private practice. Putting docs on salary is a start. If I had a dollar for every unnecessary prostate surgery ….

        But only a start. Some 26 percent of Medicare expenditures occur in the last month of recipients’ lives. No one who has seen it would mistake dying in a hospital as quality care, or linger under aggressive, marginally effective treatment as quality of life.

  4. Interesting article in our local paper- according to Mayo men with high deductable plans are more likely to avoid treatment for urgent conditions, they cited kidney stones and irregular heart beat, in the emergency room. From personal experience I would concurr. My health care spending and consequently my insurance companies spending has dropped signifciantly because I now take a wait and see approach to medical issues.

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