Obamacare and rising deductibles: A dialogue
David Goldhill, whose Wall Street Journal review of Ezekiel Emanuel’s book on healthcare policy was at the heart of our post this week on Obamacare’s effect on rising deductibles, takes issue with my interpretation of the trends and how the Affordable Care Act will influence them in the future.
Goldhill, who is president and CEO of the Game Show Network, is a serious student of the healthcare landscape. His 2013 book “Catastrophic Care: How American Health Care Killed My Father -- and How We Can Fix It” is a sober and worthwhile examination of the American healthcare system, as seen through the prism of one family’s experience.
In the email to us excerpted below (with Goldhill’s permission), he expands on the points questioned in our post and by Galen Benshoof at theincidentaleconomist.com, or TIE, a website devoted to healthcare policy. Goldhill’s argument is a model of reasoned criticism of the ACA, and he deserves his say at length; my further thoughts follow at the end. First Goldhill:
“There’s a good deal of evidence that companies are responding to the ACA expansion of insurance value -- and the future risk of the Cadillac tax -- by increasing deductibles. The best known is the PWC [PriceWaterhouseCoppers] study that showed the number of companies considering HDP [high deductible plan] only options almost tripling in one year. I see this response as well as an employer -- and as part of employer health care associations. Far from being an unusual viewpoint, I think there’s something of a consensus that this is occurring. See for example, the first sentence of this NEJM [New England Journal of Medicine] piece. ‘The Affordable Care Act (ACA) will cause a major expansion of high-deductible health insurance, a fact that has received little attention but has substantial implications for patients, health care providers, and employers.’ Reasonable people can disagree as to how meaningful our early knowledge of ACA’s effects is, but I don’t think they can argue -- like TIE does -- that there’s simply no evidence for the acceleration of this trend.
“The Incidental Economist piece, and your own, seems to ignore that in addition to the growth of HDPs, the level of deductibles has risen so fast that what is now considered a reasonable deductible was very recently considered a high deductible. You note the preponderant numbers that have enrolled for silver plans; these ‘low’ deductibles are almost identical to the ‘high deductibles’ our company plan had just last year. As employers, our insurer never even offered us the option of plans with deductibles as high as the silver plans, where deductibles as you know are much higher than the averages prior to the opening of the exchanges.
“You repeated TIE’s statement that the trend toward HDPs had actually slowed. Did you notice this 0.6% ‘slowdown’ was the result of comparing 2 1/4 years of data to 3 years of data on an absolute basis, and that the data used ended in March 2013? Is there such a thing as Obamacare defensive derangement syndrome? I would have commented on TIE and saved you the trouble, but for some reason they didn’t allow comments to this post.
“Of course, the strange thing is that far from ‘blaming’ the ACA for the acceleration of HDPs, I wrote in the review that this has the potential to be a good thing (in combination with a pro-consumer, pro-competition regulatory system, but that’s for another day). My fundamental argument is that we need expansion of the cash economy to bring real industrial discipline to health care, which makes it just weird to treat my prediction as somehow ‘deranged’ opposition to the ACA.
“But it is correct to say that such a result is unintended and unanticipated, as your own piece makes clear (‘Indeed, one of the goals of the ACA is to relieve the economic pressures that prompted employers to jack up deductibles on their employees toward this level every year.’) And if this had been more than a short book review, I could have added that the legislative history of the ACA makes clear that its supporters were highly skeptical of the value of HDPs, disregarded suggestions to make the playing field with traditional insurance more level, and even sought to mitigate some of the effects of existing high deductibles by making certain types of care deductible free for all policies.
“I must admit I find it surprising how closed many ACA supporters are to disagreement. I share many of the goals of ACA’s supporters -- universal coverage, elimination of excess care, discipline of cost inflation. But you’re right that I have written with great skepticism that the ACA can accomplish any of these; I think the legislation is so poorly designed, contains industrial incentives so skewed, and relies on so many outdated assumptions that it is likely to make things worse. I know that the extreme political passions aroused by the ACA made listening to opposing ideas very difficult for ACA’s sponsors. And while I hope the law is successful, I worry the dismissive attitude towards those who have very different views of how our health economy really works lengthens the odds of achieving society’s goals.”
All right. My response to a few of Goldhill’s points.
The core issue under debate is not whether deductibles are rising: they are, and they have been for years. The question is whether, or how much, this can be blamed on the ACA. To put it another way, if you have a trend that has been happening for years under conditions A through F, and it continues after you’ve added condition G, how much can you blame G? I’d argue that the impact of the ACA was swamped by the impact of pre-existing factors in causing rising deductibles prior to 2014, when the ACA’s most important provisions kicked in; as for 2014 and later, it’s too early to know. Yes, the ACA was designed to relieve some of the economic pressures forcing deductibles higher, but that will take years to play out.
Goldhill makes the reasonable point that deductibles can be a good thing by prompting people to think twice about marginal or unnecessary care, and that what are now considered acceptable deductibles (say $1,000 to $2,000) used to be regarded as “high” deductibles. He alludes to the fact that deductibles policy was debated in the drafting of the ACA. But the truth is that the debate was inconclusive, in part because the evidence on the effect deductibles have on healthcare spending is inconclusive.
A deductible of $1,000 may constrain family spending on unnecessary services, but there is strong evidence that a much higher deductible -- say $5,000 or more -- may discourage necessary care, too. The drafters eventually decided that the key in making health plans affordable is the premium, so that’s where most of the attention is placed: Everyone has to pay a premium (unless their income is low enough to warrant a complete subsidy), but a much smaller percentage of consumers ever pay even a portion of their deductible and an even smaller percentage consume all their deductible in any given year.
In any event, the real target of skepticism in the legislative debate was catastrophic coverage, which carries much higher deductibles, sometimes $10,000 or more. Since the financial exposure this places on people could be ruinous and turn their costs into expenses of the community, catastrophic plans are sharply discouraged by the ACA -- they’re allowed only for people under 30 and for older Americans who can’t find a more comprehensive policy at a reasonable cost relative to their income.
A minor point: I didn’t repeat TIE’s statement that the trend toward HDPs has slowed, or rely on the data Benshoof cited for that assertion. What I wrote is that the breakdown of plans selected by ACA enrollees shows they’re favoring those with higher premiums and lower deductibles, which suggests consumer resistance to HDPs.
The debate continues.