Tuesday, February 22, 2011

When High Deductibles Backfire, Or, Why Everyone Needs Access to Health Care

As Ezra Klein points out:
One of the cost control experiments we've been attempting in recent years has been to increase the amount that individuals pay upfront for medical care in the hopes that this will lead them to make wiser and more judicious decisions when purchasing medical care. The problem, however, is that individuals don't always begin making wiser and more judicious decisions when faced with higher costs. Instead, they just buy less medical care.
Klein points to this piece from the New Yorker, showing how low deductibles backfired and led to suboptimal health outcomes at a higher cost:
 The firm had already raised the employees’ insurance co-payments considerably, hoping to give employees a reason to think twice about unnecessary medical visits, tests, and procedures—make them have some “skin in the game,” as they say. Indeed, almost every category of costly medical care went down: doctor visits, emergency-room and hospital visits, drug prescriptions. Yet employee health costs continued to rise—climbing almost ten per cent each year. The company was baffled.
Gunn’s team took a look at the hot spots. The outliers, it turned out, were predominantly early retirees. Most had multiple chronic conditions—in particular, coronary-artery disease, asthma, and complex mental illness. One had badly worsening heart disease and diabetes, and medical bills over two years in excess of eighty thousand dollars. The man, dealing with higher co-payments on a fixed income, had cut back to filling only half his medication prescriptions for his high cholesterol and diabetes. He made few doctor visits. He avoided the E.R.—until a heart attack necessitated emergency surgery and left him disabled with chronic heart failure.
The higher co-payments had backfired, Gunn said. While medical costs for most employees flattened out, those for early retirees jumped seventeen per cent. The sickest patients became much more expensive because they put off care and prevention until it was too late.
This is why everyone needs access to health care - because a country can only minimize its health care costs by 1) preventing illnesses in the first place and 2) managing chronic illnesses effectively and cheaply. And a country can only do those two things if everyone in that country has access to decent health and preventative care.

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