Articles of Distraction

[Angrboda]

A FUNDAMENTAL CHALLENGE of any insurance scheme is how to avoid what economists call “moral hazard,” which, in this context, refers to the potential of insurance to discourage responsible or cost-conscious behavior because insurance has insulated those who buy it from financial danger. Overly protective property insurance, for example, might discourage an owner from investing in updated smoke detectors since they know that fire damage will be covered by the insurer. Overly generous auto insurance might lead a driver to be less careful on the roads.

One way of combatting moral hazard is to make sure whoever has insurance remains responsible for some of the costs of misfortune. In health insurance, that can take the form of copayments, coinsurance, and deductibles. In the 1970s and 1980s, when rising health costs first became a major topic of national political conversation, both political and corporate leaders began looking for ways to increase these out-of-pocket costs, in the hopes that giving people more “skin in the game” would get medical spending under control.

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The theory is that with a combination of incentives and information, people can go around and shop for the best deals on health care—by, for example, seeking out cheaper sources of prescription drugs or MRI centers that will offer the lowest prices per scan. This, in turn, is supposed to force anybody providing medical care to compete on price and quality, unleashing market forces that would drive the entire system towards greater efficiency.

Pretty much every Republican talking about health care in the last few weeks has offered a version of this. “We empower patients to shop, to find the best deal for their dollar,” Cassidy said in a recent floor speech. “That drives competition and that lowers cost.”

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IT SOUNDS LOVELY. But scholars have now had many years to see how this approach works out in practice. “There’s loads of evidence on this, zillions of studies,” Sherry Glied, a professor and health economist at New York University, told me. “Essentially they show that no one shops.”

One reason, Glied explained, is the reality of what it’s like to get medical care. “Once you’re in the system and you’ve decided to go to the doctor, you pretty much do whatever the doctor says, and certainly once you’re in the hospital, you do whatever is recommended,” said Glied, who is the author of widely cited research on the subject. “When you’re in the emergency room, nobody says to you, ‘Would you like to have this CT scan or not?’”

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But the bigger worry for many experts is the possibility that shifting more costs onto individuals will lead them to cut back on care they need. When they don’t get the care they need now, they may end up spending even more for care they need later; even if they spend less, they’re likely to end up in worse shape medically.

“When people do have a high deductible, they cut back on the good stuff as much as they cut back on the low value stuff,” Tom Buchmueller, a health economist at the University of Michigan, told me. “Even when people are incentivized to be consumers, they are not very good consumers.”

The effects can be particularly tough on lower-income people, who are at once more likely to have serious, chronic conditions that need attention, more likely to be price sensitive about consuming health care, and more likely to have difficulty researching options for care and providers. So they’re the ones most likely to skip a doctor’s visit or recommended test—or split or skip prescriptions—to save money.

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THE ARCHITECTS OF THE AFFORDABLE CARE ACT actually tried to find a policy sweet spot—a way to put enough expenses onto individuals to promote some cost-consciousness but without making the out-of-pocket costs so high it discouraged people from getting care they needed or exposed them to overly punishing expenses.

That is why all but the most generous plans available to people through the Affordable Care Act marketplaces have substantial deductibles, well into the thousands of dollars, but preventive care is free and people at lower incomes can get policies with much lower out-of-pocket costs.

Even with those provisions, the high deductibles were a source of frustration and criticism when the Affordable Care Act first took full effect in 2014. It’s one reason Democrats were so eager to add extra financial assistance—which they did during the pandemic—and then renew it. With the enhanced subsidies, millions were able to “buy up” and get policies with lower deductibles and copays.

https://www.thebulwark.com/p/not-so-impr...s-rush-out