Conservatives now see peril of high deductibles

Staff Writer
Columbus CEO

(c) 2013, Bloomberg News.

The revelation that many plans in the Patient Protection and Affordable Care Act's health insurance exchanges have high deductibles has put many of the law's conservative opponents into a corner: Once in favor of high deductibles, these critics of Obamacare are suddenly worried about the risk to consumers. The data show why their new position makes more sense.

In economics, the principle of moral hazard holds that people who have insurance that is too comprehensive tend to spend more than they should, because they're protected from the cost of their actions. Many people, especially conservatives, believe that reversing the moral hazard can reduce health spending, because increased exposure to cost will make consumers more discriminating.

There's some evidence for this belief. From 1971 to 1982, the RAND Corp. conducted the largest-ever randomized controlled trial of cost-sharing. It showed that people who have plans with high out-of-pocket costs spend significantly less on health care.

This idea led conservatives to support high-deductible health-care plans, along with health-savings accounts and increased co-pays and deductibles. Until the exchanges opened, one of the biggest complaints from conservatives was that such plans were under attack by Obamacare.

Just last month, the Wall Street Journal's editorial page argued that left to their own devices, insurers would rush out "cheap, high-deductible policies, allaying some of the resentment that the ObamaCare mandate provokes among the young, healthy and footloose affluent." The editorial suggested that such people would opt for less coverage, because they didn't want to buy more comprehensive policies.

Now, conservatives are worried that Obamacare is becoming a "nightmare of higher premiums and deductibles," and that higher out-of-pocket costs will "force some to finance the costs of their care, a financially risky choice."

It isn't hard to think that conservatives' newfound concern over high deductibles has more to do with their views on Obamacare than anything else. But what matters is that concern is justified. High-deductible plans were never a very good idea.

Let's start with RAND's Health Insurance Experiment. That study didn't just find that people respond to higher costs; it also showed that they sometimes respond by making bad decisions. The explanation isn't a mystery: People who don't have medical training can be terrible discriminators between necessary and unnecessary care. For example, poor people who had hypertension in the study had higher mortality rates, strongly suggesting that they were less likely to seek necessary care.

There's plenty of good evidence that increased cost-sharing such as that seen in high-deductible health plans can lead to negative consequences for some patients. My own experience as a physician backs that up. I often find that patients have a difficult time getting the care they need. Research shows that moral hazard could be helpful, if it encourages people who might otherwise not obtain needed care to do so. Trying to reduce it with increased cost-sharing might actually do harm.

It's surprising to see those who have long disagreed with me suddenly reverse course and "fear" high deductibles. Well, better late than never. Increased cost-sharing depends on a belief that consumers are using too much health care, and that we need to find ways to induce them to spend less. But we also need to find ways to make sure people aren't skipping needed care because of cost. That seems like something liberals and conservatives finally agree on.

_ Aaron Carroll is a professor of pediatrics at Indiana University School of Medicine.