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The Paradox of the Healthcare Slowdown


One of the biggest pieces of recent health care news is the slowdown of US spending. We’ve noted that among the biggest factors contributing to this is the rise of high deductible plans, but those plans also have a dark side. The WSJ looks at the high out-of-pocket costs these plans can force on consumers: 

At businesses with fewer than 200 workers, for example, employees pay an average of $1,715 a year out-of-pocket to cover their deductibles—the amount the insured pays before coverage kicks in. That is almost double the average outlay by workers with individual coverage offered by larger employers, according to the Kaiser Family Foundation.

About 58% of insured workers at small firms have annual deductibles of $1,000 or more for employee-only plans, according to Kaiser data. For employees opting for family coverage, the typical deductible ranges from $3,000 to $5,000 on average, insurance brokers say.

This combination of factors leads to a paradox: the surest way we’ve yet seen for bringing down overall health care spending often means bringing spending up for individual. Even as costs go down overall, individuals feel like they’re paying more. Of course, this is exactly why these plans create savings: if consuming health care costs you more in a high deductible plan, you use less. But occasionally you really just do have to go to the doctor, and when you do, the out-of-pocket costs can bite.

It’s a tricky problem without a clear solution, but it does suggest that any consumer-directed reform to the system is going to have to offer subsidies to counterbalance the coverage gaps in high deductible plans.

Update: Some readers have noted that in many cases you can ultimately save on a high deductible plan, and that subsidies might both be unnecessary and also counter-productive to discouraging consumption. However, there are still cases in which a struggling family with a high deductible plan could be wiped out by medical expenses that are actually necessary. In those cases, targeted subsidies that allow the family to survive even while still keeping prices high enough to discourage consumption seems appropriate. This is meant to be a general principle, not a detailed policy suggestion.

[Photo of stethoscope and money courtesy of Shutterstock.]

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  • gerald

    To me, the solution for high deductibles would be Health Saver Accounts with roll-over from year to year. The older versions demanded that you empty the account at the end of the year or lose the money: The fact that it was the LAW that demanded that means we should have a) found out who wrote THAT into the LAW and made sure they got fired and never allowed to hold political office ever again, and b) changed the LAW.

  • Corlyss

    “Even as costs go down overall, individuals feel like they’re paying more.”
    The user don’t care if someone else’s costs go down, even the government’s, if he has to pay more for the system than he was, it’s not going to seem “fair.” (Organized whiners will get their congressmen to change the legislation to exempt them or provide more subsidies, just like they always do, and the rest of us will be stuck paying even more for less.)

    “any consumer-directed reform to the system is going to have to offer generous subsidies”

    That’s fine with the Dems and RINOs. But what are they going to do when we no longer have a Defense Department (because all the money has been syphoned off to take care of the old, the disabled, and other non-producers, more of which we are creating with every ‘fix’ of the the law)? Pretty soon, with the way the Dems run the system, 100% of citizens will be eligible for some kind of relief, and nobody will be producing anything.

  • Jacksonian_Libertarian

    You are ignoring the Tax Free Health Savings Accounts that are a part of the High Deductible Health Insurance, that you put your deductible into every year, and from which you pay when you need medical care. If you don’t use up your deductible in one year the excess is still in your account to be used in the next year. Also, when you go on medicare at retirement, any money in the HSA becomes part of your retirement.

  • lukelea

    What you want to insure against are catastrophic medical expenses running into the tens or even hundreds of thousands of dollars that can bankrupt a family. Several thousand dollars might hurt but, with financing, should be manageable. Hospitals and doctors should be willing to work with such families, as many are already today if you ask.

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