Study is forcing economists to rethink high-deductible health insurance

They missed the real issue. There is no way you can actually price-shop. The providers and the insurance companies keep their final negotiated price secret. All they will let you compare is cash prices, or a select list of agreed-upon common services. It is absolutely impossible to get the bottom-line cost for any procedure to compare between providers. Beyond that, it also takes up too much time to find the medical code from one group, confirm with the provider that is the code they will use, talk to a third group to see what the cash price is, and then contact your insurer to make sure they actually cover that code.

It's a bit baffling, for someone living outside the US, why any reasonable person would have expected that sick people, of all people, would spend a lot of time comparison shopping.

The appendectomy example really underscores the insanity of the idea -- who in their right mind, when facing a burst appendix, would risk their life by stopping to do some in-depth reading of price lists to find the best deal on continuing to live?

Your only concern at that point should be getting yourself to the nearest emergency ward. It's crazy to think that you're supposed to stop and figure out if Big Al's Discount Appendectomies three towns over is having double-coupon Thursdays.

The pricing of healthcare is so opaque and full of subjectivity (Is this doctor good? How much do I need this?) I don't see how a patient can make an educated decision.

It's exactly like getting your car fixed if you know nothing about cars and engines. You go to a garage when you can't avoid it, you close your eyes and you pray you won't get fleeced. And if you find a garage you trust, you always go there and you don't shop around to 5 places to get competing quotes.

I think the opacity argument is beginning to shift. I was listening to NPR on my drive home the other day and some people have really started working on this very interesting problem.

There are now 3rd party companies that work with insurance companies that will show you the costs that they incur from specific providers. Not only that, but there's an economic incentive for you to skip on going to the highest priced location for drugs or a physician. An example is MRI costs. They differ wildly in costs for the exact same thing. Anywhere from $1K-$10K. There really isn't much difference in either company in terms of quality of service. So what happens is that the insurance company hedges their bet. They'd rather pay you a certain amount of money (say $100) to go to maybe a $2K place instead of the place in Beverly Hills due to their pricing.

So it's changing, but it's taking some time... Either way, it is a brilliant economic mechanism to solve the problem of rising costs in healthcare.

>Instead, both healthy and sick patients simply used way less health care.

>This raises a scary possibility: Perhaps higher deductibles don't lead to smarter shoppers but rather, in the long run, sicker patients.

Spot the leap. The author implicitly assumes health care usage/health care spending is correlated to health care outcomes, but there is _highly_ convincing evidence that that is not the case. So: has Sarah Kliff (senior editor, "Writing about health care.") never heard of the Oregon Medicaid health experiment, or is she just pretending it never happened?

Also the impossibility of price-shopping is obviously a huge problem.

I don't understand how health care "economists" can even imagine that Doctors are fungible commodities. Last I checked we're still using actual humans for the task, we haven't invented good, working medical droids just yet. From that perspective of course people aren't going to shop for a Doctor like they shop for a dishwasher: most people pick a general practitioner/family practitioner based upon their social culture. How many people's GP is an old friend or a family member? People develop attachments for their GPs. Their GPs are generally a part of their extended community. It's then their GPs that recommend their Specialists, typically through the GP's own social network/community... Shopping for a Doctor as if they were a dishwasher is a bit like trying to shop for a new pet or spouse on the Home Shopping Channel.

The article is based on an odd premise. It sounds like the employees in the study were given an HSA with a deposit equal to their deductible, so they could spend up to that limit without incurring any personal cost. The trick here is that an HSA should encourage you to eliminate unnecessary spending because you get to keep the money you save and bank it for bigger health care costs down the road. I'm 27 and healthy, had a really uninformative annual physical last year where my doctor bilked me for a totally unnecessary EKG, and as a result I skipped my annual physical this year and am banking the savings for a serious illness in the future. The study should actually look at whether people went to the doctor less over the long-run for serious issues -- like not going to the doctor for symptoms diabetes, which left untreated can cause much larger long-term costs to the system -- rather than whether they simply avoided "valuable" medical visits, which in this case as "preventative care" has unclear value.

EDIT: The answer to her question "Why wouldn't this group get the care they wanted, pay for it with the HSA, and just run through the out-of-pocket spending earlier in the year?" is that "the care they wanted" is treatment for a catastrophic illness later in my life rather than dubiously valuable preventative care right now. I'd rather skip a doctor visit for the flu and have more money banked in the future for cancer treatment or a heart attack.

  > In 2006, about one in 10 employees had a health insurance 
  > deductible over $1,000. Today? About half do.
  > To health economists, this sounded like good news; they've 
  > long theorized that higher deductibles would force down 
  > health-care costs. The idea was that higher deductibles 
  > would make patients become smarter shoppers: If they had  to 
  > pay more of the cost, they'd likely choose something closer 
  > to the $1,529 appendectomy than the $186,955 appendectomy 
  > (yes, some doctors really do charge that much). This would 
  > push the really expensive doctors to lower their prices so 
  > cheaper physicians didn't steal their business.

This seems so illogical that I think I must be missing something. Presumably, the patient pays the deductible out of pocket, and the remainder is covered by the insurance.

  Case A:  $1,529 appendectomy.  
  Patient pays $1000, receives "cheap" appendectomy. 
  
  Case B:  $186,955 appendectomy.  
  Patient pays $1000, receives "luxury" appendectomy.

Why would the "health economists" think that a patient be incentivized to choose the less expensive option? Rightly or wrongly, the frequent presumption is that more expensive services are higher quality. Why would a patient go out of their way to choose the lower priced option if they are paying a flat rate?

  > But when the researchers looked at why spending dropped, 
  > they found it had nothing to do with smarter shopping. The 
  > average price of a doctor visit wasn't dropping.
  > 
  > Instead, under the high-deductible plan, workers just went 
  > to the doctor way less. The paper finds that "spending 
  > reductions are entirely due to outright reductions in 
  > quantity." Workers did use less "potentially wasteful 
  > care," like imaging services, but they also cut back on 
  > "potentially valuable care," like preventive visits.

Clearly the incentive is for the patient to avoid costs that are less than the deductible. Lo and behold, the patients chose to avoid costs that are less than the deductible (doctors visits and preventative care), and to ignore cost in cases that are higher than the deductible (surgeries and emergencies). How can this be construed as a surprise?

There was a recent Planet Money episode about a company that will shop around for medical care for you and give you a cut of the money that the insurance company saves:

http://www.npr.org/2015/10/09/447098694/why-most-people-don-...

What a big shocker! You are telling me that a sick person would not try and spend many hours comparison shopping for doctors with poor metrics for quality and low pricing info and then make a possibly large upfront payment based on a guess? That they would just say - forget it; and get much sicker?

Universal Medicare with single payer systems is the way to go as most of Europe and Canada seems to have figured out decades ago.

this is the only industry in the US that has an anti-trust exemption. So they can charge people differently for different services and they do not have to publish prices.

I think if the employees in the study were given a web interface that is required for booking any appointments, they could get better results. The booking interface could show all qualified specialists that work with their plan, and they could also display prices for specific treatment or average costs for a visit to each particular specialist. So instead of forcing people to price shop, they get to see the prices at the point of booking.

We are about to switch to high-deductible only health insurance plans here at work (they had a PPO and an HMO but they're getting rid of them). I already avoid seeing the doctor more than I should. I don't need even more reason to avoid them. Ugh. This isn't good.

The study isn't forcing anyone to do anything.

High deductibles save health insurance companies billions. We already know that health insurance companies own congress: that's why we don't have a sane socialized medicine system in the US. So high deductibles are here to stay. The only thing that's going to change that is consumers becoming more savvy; economists have no power here. They should, but they don't.

Economists might be surprised. Actuaries are not. In most actuarial health cost models, cost sharing induces changes in utilization, not cost-per-service.

Health insurance in America is actually about managing cash flow rather than managing an insurance policy. After extensive research and data investigations, you'll discover that the actuaries at insurance companies are fantastic at what they do: you'll usually end up spending the same amount out-of-pocket in a year no matter the plan--the question is just would you rather spend more at the beginning of the year on lower premium plans, or spread out costs evenly throughout the year on higher premium plans.

A few associates and I are working on a (very very alpha) tool for plotting out actual expenditures for all plans for which you qualify, giving you a report of where you'll spend the least based on your expected health events. The tool saved me over $4,000 this year by guiding me towards a better health plan than what I had originally picked out when I switched to self employment.

If interested, check out http://lucentary.com/ (but please keep in mind we're still fleshing out an MVP!).

This was obvious. The whole point of high deductible plans and PPOs is to push costs onto patients who then don't choose care unless it is absolutely necessary. Preventative care suddenly becomes $400 a visit instead of $40.

Sounds like the "economists" didn't think too much the first time around.

I understand that the economists who made this study are not the ones calling the shots on the (bad) way the health insurance business is conducted, but man, they're pretty dense if you take the article at its word.

"To health economists, this sounded like good news; they've long theorized that higher deductibles would force down health-care costs. The idea was that higher deductibles would make patients become smarter shoppers: If they had to pay more of the cost, they'd likely choose something closer to the $1,529 appendectomy than the $186,955 appendectomy (yes, some doctors really do charge that much). This would push the really expensive doctors to lower their prices so cheaper physicians didn't steal their business."

Even the sloppiest and most cursory examination of human behavior refutes this line of thinking-- patients don't shop around for life-saving medical procedures because they need them urgently or semi-urgently, meaning locations close-ish to home are the only choices, if there's even more than one choice that accepts their insurance. For plastic surgery, sure, whatever. For a bypass? No. I guess this gaping hole in their analysis went unnoticed or somehow explained away by their insufficient economic model.

"The new paper shows that when faced with a higher deductible, patients did not price shop for a better deal. Instead, both healthy and sick patients simply used way less health care."

I would expect to see more plans converted to high-deductible plans after a finding like this percolates through the insurance companies. This behavior is health insurance working as designed: unused, making a fat profit for the insurers while the patients scrape by until they're in critical condition and can't refuse care for the sake of cost-cutting on their end. This system is evil, and it is intentionally evil for the sake of producing more money.

""I am a little bit surprised at just how poorly patients were able to do when looking at very similar products, like MRI scans, and with a shopping tool," says Kolstad, an economist at University of California Berkeley and one of the study's co-author. "Two years in, and there's still no evidence they're price shopping.""

This man is a fool of the highest order, truly an overflowing septic tank of stupidity unparalleled in obliviousness even when compared to a slime mold. How are patients supposed to understand comparisons between medical procedures? "A shopping tool" would be too simplistic, anyway. You need a real doctor to answer questions about care choices.

"Workers' health spending dropped, and did so quickly. Average per-patient spending fell from $5,222.60 in 2012 to $4,446.08 in 2013. That's about a 15 percent decline in a single year — and it held true across all types of health services. Between 2012 and 2014, there was a 25 percent drop in emergency room spending, an 18 percent decline in physician office visits, and a 6 percent decrease in mental health services."

Great job, the patients have been made sicker as a result of cost-cutting measures. Looking forward to seeing more high-deductible plans.

Finally, there is no "shopping around" in the sense these economists mean. Try getting a straight itemized quote for a given medical procedure before you get it. Try comparing that with someone else's quote for the same thing. At this point, you've probably wasted a few weeks on the phone/email trying to finagle these things out of the horrendous systems in place. Then, you can cross reference the results with your insurance benefits, and see how badly you're going to get fucked. Yeah, right.