It burdens patients who need care the most
By Elise Gould
Economic Policy Institute, May 8, 2013
A number of different health care policy proposals that have emerged in recent years share a common goal: make households directly pay for a larger share of most health expenditures by encouraging higher deductibles, higher copays, or higher co-insurance rates. The rationale of such proposals is that too-generous insurance policies (either those provided by employers or public insurance such as Medicare) distort the prices consumers face, and that removing this distortion would allow patients to choose their health care more wisely, hence slowing health care cost growth.
This brief argues that this is a flawed strategy for health care cost containment. The health care market is unlike other markets; thus, forcing increased cost sharing on American households is a deeply inefficient strategy for trying to contain health care costs. Forcing Americans to pay a higher share of health costs will not induce them to shop around and compare prices when they are experiencing chest pains or their child is suffering from an asthma attack. Further, consumers of health care are in no position to second-guess their doctor when she tells them an MRI is better than an X-ray (and hence worth the higher price) to diagnose a condition. Lastly, unlike other markets, prices of health care services faced by consumers bear very little relation to providersā cost to supply these services. Hence, these prices provide little to no information for consumers looking to judge the relative efficacy of various health care interventions.
In addition, increased health cost sharing is unlikely to make American health care more affordable to those currently unable to afford it, and will instead likely place the largest burdens on those who need care the most.
Most cost-sharing proposals lead to higher out-of-pocket medical costs, hitting those who require a high degree of medical care especially hard. The short-term cost savings achieved as patients respond to increasing out-of-pocket burdens may be realized by reducing medically necessary health careāa penny-wise, pound-foolish result.
Most cost-sharing proposals are poorly targeted for containing overall system costs. They miss the expensive cost drivers. Any cost containment would be driven by reduced medical care, not reduced prices.
* Not all moral hazard is inefficient
* Cost sharing can lead to medically and economically inefficient decisions
* Cost sharing is a poorly targeted cost-containment device
http://www.epi.org/files/2013/increased-health-care-cost-sharing-works.pdf
Comment:
By Don McCanne, M.D.
A major objective of health care reform was to slow the intolerable escalation in health care spending. Most of the pilot initiatives included in the Affordable Care Act (ACA), such as accountable care organizations and bundled payments, will likely have very little impact on our national health expenditures. But one important policy approach – the subject of this EPI brief – began before ACA was enacted and is probably responsible for most of the slowing in health care spending that was not directly due to the recession.
That policy is placing a financial burden on individuals who need care, especially through higher deductibles, but also through other forms of cost sharing. The impact of this policy is expressed well in the title of the brief: “Increased health care cost sharing works as intended – It burdens patients who need care the most”
Talk about a flawed policy! We are attempting to cover as many people as possible considering the limitations of ACA, and yet, at the same time, we are expanding the use of policies that keep patients away from care that they should have – by erecting these financial barriers. We are increasing the spending on private insurance plans while reducing the spending on health care by preventing insured people from getting the care they need!
How many times do we have to say it? Many other nations provide first dollar coverage – not charging any fees when health care is accessed – yet they have been much more effective in slowing cost escalation. You do not have to expose patients to potential financial hardship to bring costs under control.
This is one of the most important flaws of ACA (and there are many of them). It not only allows, but it actually encourages, through low actuarial value plans, the expansion of these financial disincentives to obtaining health care. If you read the full EPI brief, you will understand better why we must abandon this approach. Unfortunately, the author provides only a couple of feeble suggestions as to alternative approaches, but you will not find in the brief what we really need to do.
It is astounding that when it comes down to the obvious – that we need a well designed single payer national health program – so many knowledgeable people in the policy community choke up. Let’s let them know that it is okay to say it: WE NEED A SINGLE PAYER NATIONAL HEALTH PROGRAM!
I guess we really don’t have to shout. But we should explain to our colleagues and the public at large the reasons contained in this EPI brief explaining why cost sharing is harmful to our health and how it leads to financial insecurity. Then we can explain, in a calm voice, how we can fix this by improving Medicare (partly by including first dollar coverage) and then providing it for everyone. Naw. They’re not listening. We’d better shout.