According to a recent Kaiser Health News-NPR investigation, more than 100 million Americans are in debt for medical expenses. Additionally, more than a quarter of American adults who have this debt owe $5,000 or more. Not because they lack insurance, though. They’re underinsured, which is the most common cause.
The Affordable Care Act improved access to health insurance, as it was intended to do. Through the expansion of Medicaid and the establishment of health insurance marketplaces, it decreased the number of Americans without insurance. Unfortunately, it hasn’t gone far enough to shield people from escalating deductibles, co-pays, and co-insurance costs.
Out-of-pocket costs are necessary because people are less likely to spend their own money than the money provided by their insurance company. They are also meant to prompt patients to reconsider seeking unnecessary care. This moral hazard argument, however, makes the supposition that patients are rational consumers and that cost-sharing in the form of deductibles and co-pays improves their purchasing abilities. Research demonstrates that this is untrue. Instead, higher costs lead to patients forgoing care even when they are in need of it.
Cost-sharing isn’t set up with enough consideration to prevent people from switching from inefficient care to efficient care. Deductibles are absurd, to put it simply. Deductibles are used under the presumption that all medical expenses are equivalent and that the system should disincentivize all of them, beginning on Jan. 1. There is no reason why that should be the case. Winter is the busiest season for the flu. At the start of this year, we were experiencing an Omicron surge. It makes no sense to make that the time when people are most deterred from receiving care.
Co-insurance and co-pays aren’t much better. They assume that all patients should be treated equally and accorded the same standard of care.
Researchers examined how cost-sharing increases affected older adults, who are more likely to require care, in a National Bureau of Economic Research working paper that was published last year. These individuals are more likely to pay for and use drugs. Remember that Medicare, which the majority of people consider to be fairly comprehensive coverage, provides insurance to Americans aged 65 and over. However, the researchers asserted that a straightforward $10 increase in cost-sharing—which many would view as a relatively small sum of money—led to an approximate 23% decrease in drug consumption. Even worse, they claimed that it contributed to a nearly 33 percent rise in monthly mortality. In other words, the $10 increase in prescription costs for seniors caused deaths.
These seniors weren’t taking extraneous, obscure, or incredibly pricey medications. This research concerned medications used to lower cholesterol and high blood pressure. In fact, due to their demonstrated ability to save lives, they were regarded as “high value” medications. Furthermore, those who were more likely to have a heart attack or stroke canceled their prescriptions more frequently than those who were less likely to do so.
When it comes to purchasing health care, people are not wise consumers or logical spenders. Even for treatments that save lives, people use less care when you make them pay more.
In addition, a $10 increase in drug cost-sharing pales in comparison to the annual out-of-pocket costs for care that the majority of people incur. In 2021, the typical deductible for a silver-level plan on the ACA exchanges increased to $4,500. The typical deductible increased to more than $6,000 if people tried to purchase plans at a bronze level with a lower premium. Even after taking into account cost-sharing reductions for people who make less than 250 percent of the federal poverty level, the average deductible for silver plans was more than $3,100.
Employer-provided insurance isn’t much better than insurance purchased through the A.C.A. marketplaces. In the US, large companies’ insurance policies had an average deductible of more than $1,200. Small businesses paid more than $2,000 for it.
Just the deductibles are listed there. People must still pay co-pays and co-insurance after they have been paid until they have reached the out-of-pocket maximums. The A.C.A. limits these in plans sold on exchanges, which is good news. The unfortunate part is that they are absurdly high: $8,700 for an individual and $17,400 for a family.
Even after paying an average of about $5,000 in premiums annually for a benchmark individual silver plan, the vast majority of Americans do not have that kind of money sitting in accounts. One unexpected bill would cost less than $500 for half of adult Americans. Anyone who needs substantial medical attention will be required to pay the entire deductible, which equates to thousands of dollars, and, if they are seriously ill, they will probably reach the out-of-pocket maximum.
Americans have medical debt, of course. According to the Kaiser Family Foundation, the nation’s total medical debt is close to $200 billion.
It’s important to note that the price of healthcare in the US is so high that even high premiums fall short of covering the full cost without a sizable out-of-pocket expense. That doesn’t mean there aren’t any better cost-sharing options available. We could approach people with chronic illnesses differently, as many European nations do. It makes sense to attempt to discourage healthy individuals from receiving excessive care, but many people, including myself, require expensive care on a daily basis. Try as you might, you can’t get me to change my mind about that. The health system chooses what constitutes the least expensive, highest-quality care and makes it accessible without any out-of-pocket costs, which U.S. leaders might also take into consideration. Then, other options that might cost more or have less supporting evidence can be considered using cost-sharing.
In the event of unforeseen medical expenses, insurance serves to shield people from financial ruin. The amount they must pay must be lowered from six figures to five, but this is insufficient. Providing insurance to people is insufficient. Additionally, that insurance must be comprehensive.