We Need Affordable Health Care, Not Just Affordable Insurance

As the wheeling and dealing of getting a health reform bill passed takes center stage in news coverage [1], one aspect of the debate is not getting the attention it deserves: the affordability of health care.

The Kaiser Family Foundation outlined the issue well in Kaiser Health News [2]:

“As Congress continues to try to scale back the costs of health care legislation, some patient advocates, health care policy analysts and lawmakers fear the plan may be pared to the point of leaving millions of Americans with either inadequate benefits or large out-of-pocket costs...

“Karen Pollitz, a research professor at the Health Policy Institute at Georgetown University, says she's already worried that under the current legislative drafts, a person with a serious illness such as cancer or diabetes could quickly run up charges for thousands of dollars in deductibles, co-payments and co-insurance...

“Indeed, a report released last December by the Center for Studying Health System Change, a Washington research group, said that families experience substantial financial strain once they are paying more than 2.5 percent of their annual incomes on medical bills. For a family of three earning two-and-a-half times the federal poverty level, or $45,775 a year, that threshold would be reached once they spent more than $1,144 on health expenses.

“But Congress appears to be moving toward more cost sharing by patients. In a bill recently approved by the Senate health committee, insurers would be required to cover at least 76 percent of health care expenses incurred by the average plan member, and the Senate Finance Committee is considering setting the requirement at 65 percent. The House Democratic bill would set the ratio, technically known as ‘actuarial value,’ at 70 percent.”

So what happens when people have high out-of-pocket costs? It is not just a pocketbook problem. It is a health problem.

While some contend that making people pay more for their health care will force them to be more ‘savvy’ health care consumers, research shows it just pushes them to go without care.

The famous RAND ‘Health Insurance Experiment’ has been oft quoted by proponents on both sides of the argument, those claiming that higher cost sharing lowers the use of unnecessary care and those arguing that higher out-of-pocket costs leads to people not getting medically necessary care. So much so that RAND recently put out a review [3] of the study showing that in reality both are right:

“Cost sharing reduced the use of health services at all levels of effectiveness, from highly effective care to less effective care, and in roughly equal amounts among most groups of participants. Both the proportion of inappropriate hospitalizations and the proportion of inappropriate use of antibiotics were the same for cost-sharing and free-plan participants.” [Emphasis added]

As far back as 1993, the U.S. Congress Office of Technology Assessment put together a literature review [4] on the effects of patient cost sharing, in which it came to the same conclusion:

“This Background Paper examines the health services and economics literature to learn what is known about the effects of patient cost-sharing (that is, annual deductibles, coinsurance, copayments, and out-of-pocket maximurns) on patients’ use of health care services, on plan expenditures, and on patients’ health outcomes.

“It now seems obvious, but the HIE [Health Insurance Experiment] and other cost-sharing literature have plainly demonstrated that, on average, insured individuals seek medical attention less often when they have to pay an out-of-pocket portion of the cost.

“Although it is often argued that cost-sharing motivates people to seek information and make better decisions about their health care (i.e., to avoid the frivolous use of care), the HIE offers no supporting evidence for this. Instead it suggests that cost-sharing is a rather crude instrument for matching health care services with health needs. In fact, the experiment found that coinsurance deters individuals from seeking all types of care, even potentially effective treatment.” [Emphasis added]

Similarly, a study [5] published in the American Journal of Public Health found that:

“In comparison with a no-copay group, the low- and high-copay groups were less likely to have sought care for minor symptoms, but only the high-copay group had a lower rate of seeking care for serious symptoms... [H]ealth plans featuring cost sharing need careful monitoring for potential adverse health effects because of their propensity to reduce use of care that is considered necessary and appropriate.”

A report [6] by the Center on Budget Policy Priorities found this negative effect of cost sharing is more pronounced on people with low incomes.

“A substantial and rigorous body of research has demonstrated that low-income individuals are more vulnerable to the adverse effects of cost-sharing than other groups are. Cost-sharing policies that cause only modest reductions in health care use among middle-class individuals can result in more substantial reductions in health care use and lead to significant adverse health consequences among poorer individuals, especially those with chronic health problems.”

If we want health care reform to have a truly positive impact on the lives and health of everyone in the United States, we have to ensure that they will be able to afford the health care they need. Making people pay high out-of-pocket costs for their health care may reduce the cost of health insurance, but it actually takes us further from the ultimate goal of guaranteeing everyone has access to quality, affordable health care when they need it.