The American Interest
Analysis by Walter Russell Mead & Staff
High Deductible Plans Creating Health Care Slowdown

obamacare

A new study released yesterday by the Kaiser foundation found that in 2013 health care premiums went up 4 percent for families and 5 percent for individuals. That’s down from the 10 percent increases we saw in the early aughts. Obamacare supporters have been quick to grab it as a political football, arguing that this data proves that premiums aren’t spiking in anticipation of the ACA.

But partisans on both sides agree that a big driver of the relative decrease is the rise of high-deductible health care plans. From the NYT:

“It’s part of what I see as a quiet revolution in health insurance, from more comprehensive to less comprehensive, with higher deductibles,” said [Kaiser CEO Drew] Altman, who added that that should appeal to conservatives. “The vision of insurance that they’ve always favored, with more skin in the game, is the one that’s coming to dominate in the marketplace.”

So, these savings have little to do with Obamacare either way. Instead, they stem from exactly the kind of high-deductible, catastrophic plans that the ACA seeks to limit. The data simply points to a very intuitive principle: one of the best ways to make overall health care spending go down is for more individuals to spend less on it. The Robert Wood Johnson Foundation found that these plans cut down on spending by 5 to 14 percent.

Obviously, high-deductible plans aren’t good for everyone, and there are a lot of questions surrounding financial security for those who rely on them. But for certain segments of the population, these kinds of plans make a lot of sense, and indeed younger employees have often shown a preference for them when given a choice. For them, and the economy as a whole, high-deductible plans are a good thing.

Published on August 21, 2013 5:15 pm
  • Andrew Allison

    Thumbscrew time: “this data proves that”

  • Parker O’Brien

    And Obamacare destroys another market solution to rising healthcare… ‘If you like your plan, you can keep it,’ rings more false every day.

    • bpuharic

      Yeah we have great ‘market solutions’ to healthcare in the US

      We ration by price. So the poor die.

      We have the most expensive healthcare in the world.

      To the right, that’s the free market in action

      • Jane the Actuary

        Sorry, but “ration by price” makes about as much sense as — well, a clever analogy escapes me but a rationing system to allocate goods & services with a fixed amount per person, or varying by predetermined criteria, is the complete opposite of a price-based system. (I checked wictionary.org for a handy definition, but, as a clear indicator of the everyone-can-edit nature of the system, one of the examples is exactly this “ration by price” political redefinition of the word.)

        • bpuharic

          How much medical care do the working poor get? Not much

          Price is a rationing mechanism. That’s one of its 2 functions.

          • Andrew Allison

            Nope, that’s its only function (sorry guys).

          • bpuharic

            Uh no. Prices also convey information about the availability of commodities.

            Sorry Andrew. Perhaps if you took a course in economics…

      • Tom

        Or, we can ration by bureaucracy. So the people who need stuff at the end of the year die.
        So much better.

        • bpuharic

          Sounds good to me. THere is no reason a terminally ill 94 year old gets better medical care than a 4 year old with asthma.

          • Tom

            End of the year, not end of life.

          • bpuharic

            Given the fact I’ve seen over 40 people die, the end of life happens. How we pay for it is an issue.

          • Loader2000

            Geez, the whole point of WRM articles is that both the current system and Obama’s solution both suck. The argument that Obama would have been able to create a better plan without Republican opposition rings hollow as well. There is always political opposition to every law in every democratic country. Every political party complains that if they just had unlimited power to make whatever changes they wanted for a year, the system would be near-perfect. However, this is foolishness. A single payer system would have nearly all the disadvantages that WRM talks about, and would be nearly impossible to walk away from once that became apparent. When Taiwan wanted to craft a national health care plan, they spent 4 years researching different health care systems form different countries before they produced their own system. Obamacare was an monster rushed into production with very little review or regard to what it actually contained. Rather than craft his own bill, Obama simply tossed to the 100′s of house democrats which means the bill was essentially written by 1000′s of lobbyist. If the ideas of his bill had been more popular in the first place (among voters), he wouldn’t have had to do that in order to get congressional votes. In short, it is a BIG Mess and it is HIS mess, not the Republicans mess.

          • bpuharic

            Uh..Obamacare was based on Romneycare which existed for a decade before Obama pushed it. And many of its features had been accepted for decades by moderate Republicans long before Obama. Richard Nixon had proposed a national healthcare plan that was more radical than Obama’s.

            The right in the US is SO radically right that they’ll cripple ANY plan that benefits the middle class since the right considers the entire middle class a parasite on the rich….witness Romney’s view that we’re all moochers.

  • Jacksonian_Libertarian

    Insurance is supposed to be something you purchase in case of a catastrophe.
    Without the patients having skin in the game, market forces cannot force improvements in the costs and quality of healthcare.
    Because Obamacare is an attempt to create a monopoly of the healthcare industry, prices will never improve, and quality will decline over time.

  • NCMountainGirl

    High deductible plans are genuine insurance. The idea that a third party payer is responsible for routine care and maintenance medications is merely the bureaucrats full employment plan.

    I’m fresh off an appointment with a defensive medication probationer who has been wasting time and my money for two and a half months. My test comes back each time stuck at the same number and she won’t increase my meds more than fraction. The stuff’s too sensitive. she tells me. That sensitivity must be why there’s no change despite four small increases in dosage.

    Ive been injecting myself with insulin for 25 years. I’m convinced if insulin was developed today the risk management types and lawyers who increasingly run our held care systems would decide it is too dangerous for patients to self test and administer.

  • Bart Hall

    I’m a 64 yo farmer with a $10K-deductible for my wife and 2 yo daughter. It costs us $3K per year in premiums and my wife has a cancer history.

    The greatest value of such policies is the negotiated rate for in-plan providers. An ER visit last month billed out at about $11K (including specialized scans, etc.) set us back under $1,400 out of pocket. Not enjoyable, but manageable, and much better than it would have been were we self-pay.

    Add in full preventative coverage, including all the baby’s doctor visits and immunizations for two years and in a year like this one we’re way ahead on the deal (compared to the alternatives). In an average year our benefits from the insurance probably come to 50 or 60 percent of the total premium.

    I guess in Democrats’ minds it’s just not “fair” of us to garner a financial advantage by eating healthy, getting lots of exercise, not smoking, and so on. Obama’s idea of “fair” is that we cover costs for immense inner-city walruses barely able to waddle from the couch to the toilet … which then disappears until they manage to heave themselves up off it.

    • bpuharic

      Yeah the black folk really hurt you don’t they…havin’ all them welfare babies

      The more I see of WRM’s readership, the more I’m convinced there’s a significant Klan component.

      • Anthony

        bpuharic, I think what you’re observing with some of these pronouncements are unconscious (or perhaps conscious) verbal attempts to rationalize predilections and gullibility. As a thinking person bpuharic, you are prone to make distictions, to analyze, compare, reflect and seek out difficulties in proffered propositions whether flattering or promising to you or not. For many bpuharic, cognitive dissonance is best handled by stereo-typing, denigration, hostility, resentment, etc. (grimly punitive toward any sort of deviation from fixed norm). You are an observant Via Meadia contributor.

        • Andrew Allison

          “As a thinking person bpuharic, you are prone to make distinctions, to
          analyze, compare, reflect and seek out difficulties in proffered
          propositions whether flattering or promising to you or not.”
          Surely you jest?

          • bpuharic

            Yeah the klan objects to being told that being a klanster isn’t racist

        • bpuharic

          “inner city walrus’?

          Apophatic racism.

          • Anthony

            To quote an intelligent man: Res ipsa loquitur.

  • Boritz

    *** one of the best ways to make overall health care spending go down is for more individuals to spend less on it.***
    Free people with money spend it as they damn well please. This is an apt description of our grandparents and our parents. We and our progeny, no.

  • Anthony

    “…Afforable Care Act: It’s not for everybody. About 150 million Americans get insurance through their employers. Obamacare’s insurance reforms have basically nothing to do with them. Almost 100 million more get their insurance from medicare or medicaid or some highly subsidized government-insurance program. Obamacare doesn’t much matter for them either. Discussions about premiums under Obamacare are about the 8 percent of Americans expected to get nongroup health insurance through Obamacare’s new marketplaces.” The new group market is tough to navigate for the sick and elderly members of the 8% (premiums, deductibles are high) but can ACA a priori be blamed for that.

    • Clayton Holbrook

      New rules and regs for things such as pre-existing conditions and extended mandatory coverage for young adults effects all people that get their coverage through their employer. As a result employers are adjusting their coverage, so many of the 150 million folks whose coverage is employer based are effected. Part of the way employers are adjusting their coverage to make up for additional costs caused by Obamacare is to shift people to cost saving high deductible plans.

      • Anthony

        Recognizing attributed new rules and regulations, still ACA can be conveniently correlated to all rising health care cost going forward; yet, nothing is operational until Oct. For me, ACA too straightforwardly blameworthy since for most Americans the Act may not matter much one way or other.

  • Jane the Actuary

    Well, that was a disappointment! I looked at the article and the report, and they don’t include enough data to determine whether the leveling off of premium increases is because catastrophic plans manage to control costs more effectively than traditional plans, or whether the shift to catastrophic plans means that employers are simply providing less benefit. There was no way to compare apples-to-apples because the only historical data was on a composite basis, rather then showing catastrophic vs. HMO vs. PPO plan costs this year vs. last. (And a link to the 2012 survey redirected to the 2013 edition.)
    Catastrophic plans are part of, but not the entire, solution. http://janetheactuary.blogspot.com/2013/07/catastrophinc-health-care-plans.html

  • lukelea

    re: Obviously, high-deductible plans aren’t good for everyone

    That assumption may need to be re-examined. Some families may not have the resources to pay the deductible. However, hospitals rarely if ever deny services that are medically necessary. Usually they are willing to work out payment schedules, or even forgive a big part of the money owed if the family can demonstrate an inability to pay. As for routine medical needs — shots for the children, etc. — families that cannot afford to go to a private physician can often get such services at the local public health provider, at least in my town, if they cannot afford them in any other way. Also keep in mind that families that cannot afford high deductibles also cannot afford the higher monthly premiums on low-deductible plans.

    It seems to me that it was a fundamental mistake for ObamaCare to insist on low-deductible plans since the primary purpose of national health insurance is to protect families against catastrophic medical expenses that lead to bankruptcy. To say nothing of the notion that the best way to contain medical costs is to give consumers a powerful incentive to shop around for the best deals.