Are High-Deductible Plans Bad for the Chronically Ill?

The Harvard crowd gets paid for this? Somebody should ask for the money back.

A new article in Health Affairs says it all right in the title — “Nearly Half Of Families In High-Deductible Health Plans Whose Members Have Chronic Conditions Face Substantial Financial Burden.” The article is written by four professors at the Harvard Medical School, one professor at the Harvard School of Public Health, and a “project manager” at the Harvard Medical School.

For all the bravado of the title, the study is extremely weak. First, it looks at the experience of a mere 151 families in a “high deductible” health plan, and compares it to 345 in a “traditional” plan. It defines “traditional” as a health plan with a zero deductible – a pretty rare beast these days. And all of the families are in Massachusetts, which is certainly an unusual environment. And it looks solely at people in employer-sponsored plans, not at people who make their own decisions about the kind of coverage they want.

The authors define “burden” as including anyone who pays more than 3% of income on out-of-pocket health care expenses. This standard seems to be arbitrarily low, considering that the country as a whole is spending about six times as much as a percent of personal income. Other researchers usually place the “burden” standard at 10% of income. (See, for instance, “Changes in Financial Burdens for Health Care,” by Jessica Banthin and Didem Bernard, Journal of the American Medical Association, December 13, 2006.) The article also describes as burdened, anyone who has made arrangements with a doctor or hospital to pay off a bill over time. Why that should be a “burden” escapes me.

The authors also fail to consider lower premium payments as offsetting the “burden” of higher cost-sharing in a high deductible plan. Sure, someone can buy a plan that includes no cost-sharing at all, but it will cost a whole lot in premiums. Somehow the authors are not remotely bothered by the burden of high premiums, even while they bemoan the burden of high deductibles.

Anyway, you get the drift. The authors sum up their study by saying:

“Families in high-deductible plans had significantly higher out-of-pocket expenses for health services compared with traditionally insured families, and lower-income families with chronic conditions in high-deductible plans were significantly more likely than those in traditional plans to spend more than 3 percent of income out of pocket for health care.”

They add:

“As expected, lower income was significantly associated with greater financial burden.”

Well, yes, since the cost of health care services are not income-adjusted, a lower-income family would be paying more as a share of income than a higher-income family for the same service.  And, yes, people with higher cost-sharing will pay more out-of-pocket than people with lower cost-sharing.  We needed a study to tell us that? People actually get paid for this kind of work? Let me throw in another shocker – people with higher health care needs spend more money on health care than people with lower health care needs! You don’t need to pay me for that revelation. I offer it at no charge.

More importantly, the authors completely miss the purpose of a consumer-driven health plan, which is precisely to expose people to the cost of the care they consume. Once exposed to these costs, they will change their behavior in positive ways. They will choose less costly alternative treatments, shop for lower cost providers, engage in more effective prevention programs, and become pro-active in their own care.

The authors concede this point when they write:

“Better information and tools may be needed to promote greater discussion and informed decision making by patients and providers related to the costs and necessity of health care services, to reduce burdensome out-of-pocket expenses associated with high-deductible plans while preserving appropriate use of health care.”

But they are about ten years behind the times in making that discovery. The research shows this is exactly what has been happening all across America when consumer-driven plans are introduced. Pity no one has notified Harvard.

Comments (11)

Trackback URL | Comments RSS Feed

  1. Stephen C. says:

    Thanks for this analysis. Some of the other blogs are touting this study as though it actually means something.

  2. Neil H. says:

    Don’t forget Cash and Counseling — the medicaid program for the homme bound disabled that allows patients to manage their own health care budgets. Satisfaction in these programs is in the high 90% range.

    The critics of high deductibles always forget that high deductibles create opportunities for patients to manage their own health care dollars.

  3. Lizzy says:

    Helloooo Harvard! Anybody home? Premiums do count toward the cost. When I started a high-deductible HSA, my premiums dropped to a fraction of a PPO plan. I do pay more out of pocket but, overall, I’m spending less and I’m covered for anything catastrophic. I shop and I price care options where ever possible. But, I must admit, “free” would be nicer and less of a burden. I’m just not expecting that any day soon.

  4. Devon Herrick says:

    I get frustrated reading reports about how the type of health plan (or the lack thereof) affects health. A health plan does not affect health; the behavior of people enrolled in the health plan affects health. A health plan is nothing more than a financial tool for managing medical costs and risks.

    There really should be no rule of thumb about the maximum proportion of family income that should be spent on medicine. People’s preferences, needs and conditions should dictate that. Why would spending 3 % of income on out-of-pocket medical care automatically create a financial burden? A person who prefers alternative medicine might want to have an inexpensive high-deductible plan for catastrophic medical needs and pay virtually all of their day-to-day medical needs out of pocket since many health plans will not pay for alternative medicine.

    This article is just another advocacy paper to bash the idea of insuring for major medical events and self-insuring for incidental medical costs. Apparently having to pull a dollar out of your own wallet when visiting a health care provider is anathema to many public health advocacy elites.

  5. Bret says:

    Good analysis. And this is probably the only place you will find something like this. All the other health care blogs think the study was just great.

  6. Larry C. says:

    Good post. Very helpful.

  7. Erik says:

    It seems that premium costs were left out because they studied employer sponsored plans where it is not that unusual for there to be zero deductible plans. It would also be the employer who gains premium relief when offering a high deductible HSA plan not the employee, the employee simply picks up more out-of-pocket costs which will inhibit usage based on income, not need, or being a more informed shopper.

    With all things being equal, if two employees have the same income; one is enrolled in an employer paid traditional plan while the other is in a employer paid HSA, the employee in the traditional plan will fare far better health and income wise than the employee enrolled in a HSA.

    The employer may pay a higher premium for a tradtional plan but he will have a healthier workforce which directly affects profit in a positive fashion. Win/Win

  8. They describe “high deductible” as being above $1,000 or $2,000 – which is in line with the federal government’s definition of an HSA-qualifying plan ($1,200 deductible for single, $2,400 for family in 2011).

    I think these are too low to be considered “high deductible” economically. The RAND Health Insurance Experiment began enrolled people between 1974 and 1977. It had a maximumn out of pocket cost of $1,000 per family, which I also think is too low. ($1,000 in 1977=$3,560 in 2009, inflated by CPI.)

    We have barely begun to experience the true power of consumer direction, which requires significantly greater direct payment by patients.

  9. John Goodman says:

    Erik: The economic evidence is overwhelming in support of what theory and common sense would suggest anyway: Employee benefits trade off dollar for dollar against wages. Higher premiums ultimtely come out of the employee pockets, not employer pockets.

  10. Jeff says:

    Good post. Health Affairs uncritically publishes a lot of crap.

  11. Bill says:

    I consider 750 a horribly high deductible. I could never afford that kind of out of pocket cost. I get 6 free office visits. After that I guess I curl up and die