I’ve had two NBER papers that I am struggling to make sense with. These papers are critical health policy papers as they relate to high deductible health plans (HDHP). We’re going in that direction for a lot of health policy. My prior assumption is that high deductible health plans paired with a health savings account is appropriate for people with the means to save significant money and a reasonable expectation that they are insuring and saving against one time risk. As soon as those conditions are not met due to either low ability to save due to low income or known chronic conditions that would routinely incur costs at or above annual cost sharing limitations, high deductible health plans are massively inadequate. That is my prior.
So I just want to flag two papers that I’m struggling to make sense with together. They each make perfect sense on their own. I am struggling to put them together.
Haviland et al 2015 NBER 21031
Relative to control firms and the pre-offer years, firms offering a CDHP had an estimated 6.6, 4.3, 3.4 percent lower annual spending in the first three years respectively (p < 0.05 for each difference) (Table 3, column 1). In addition, the CDHP second pre-year trend coefficient is insignificant, supporting the assumption of a parallel trend in the absence of CDHP offer. In section 6.4 below, we discuss whether the post CDHP offer impact is changing over time controlling for differential composition of treatment firms over time.
Her team does a nifty piece of machine learning to balance covariates to address the possibility that the savings are merely an illusion of the covered population effect. I don’t have the statistical chops to say if their treatment makes sense but I’m glad that they are attempting to look at the case mixture. One of my big worries as we generalize HDHP learning from employer sponsored coverage is that ESI is a unique pool compared to public pools. ESI is younger than Medicare, wealthier than Medicaid and healthier than both. More importantly, ESI offers people with known high disease burden a lot of outs if the richness of their benefit package declines. They can get a new job. They can go on their spouse/domestic partner’s coverage. They can apply for Medicare and disability if sick enough. There are outs in ESI that are not present in other systems. This is my big worry about generalizing research.
And then the other paper:
Employees at the firm are relatively high income (median income $125,000-$150,000), an important fact to keep in mind when interpreting our analysis. In addition, post-switch there is no meaningful change in the relatively small rates of employee entry or exit from the firm. The required firm-wide change from free health care to high-deductible insurance constituted both a substantial increase in average employee cost-sharing and a meaningful change in the structure and complexity of that cost-sharing. We use this natural experiment, together with the detailed data described to assess several aspects of how consumers respond to this increased cost-sharing. First, we develop a causal framework to understand how spending changed, in aggregate and for heterogeneous groups and services. In doing so, we account for both medical spending trends and consumer spending in anticipation of the required plan switch.5 We find that the required switch to high-deductible care caused a spending reduction of between 11.09-15.42% for t0, with the bounds reflecting a range of assumptions on how much anticipatory spending at the end of t−1 would have been spent under higher marginal prices in t0. Spending was causally reduced by 12.48% for t1 relative to t−1, implying that this reduction persists in the second year post-switch….
We find no evidence of price shopping in the first year post switch. The effect is near zero and looks similar for the t−1 − t0 year pair (moving from pre- to post-change) as it does for earlier year pairs from t−4 to t−1. Second, we find no evidence of an increase in price shopping in the second year post-switch; consumers are not learning to shop based on price. Third, we find that essentially all spending reductions between t−1 and t0 are achieved through outright quantity reductions whereby consumer receive less medical care. From t−1 to t0 consumers reduce service quantities by 17.9%. Fourth, there is limited evidence that consumers substitute across types of procedures (substitution leads to a 2.2% spending reduction from t−1 − t0). Finally, fifth, we find that these quantity reductions persist in the second-year post switch, as the increase in quantities between t0 and t1 is only 0.7%, much lower than the pre-period trend in quantity growth. These results occur in the context of consistent (and low) provider price changes over the whole sample period.
The decline in expenditure is directly related to decline in utilization and not shopping. This applies to the sickest group of people who routinely would go over their deductible.
My brain crash on these two papers is the first paper is not seeing any catastrophic care costs bounce back in the out years while the second paper finds extremely inefficient and irrational consumption behaviors.
These are two papers I need to chew on.
We’re living abroad this year, and have to buy our own private insurance in our country. Monthly family premium just under 20% of my family ESI cost (which is just about the employee share, employer pays 80% of premium.)
Yesterday one kid broke his wrist. In and out of the ER in an hour including intake, X-ray, cast. No copay no deductible. We did have to buy a more permanent sling at the pharmacy for $13. In the US our ER copay is $200, and our ESI is platinum equivalent (no deductible.)
I think one reason for huge difference in cost is doctors are paid a lot less, although still high relative to others, because med school costs about $1k/yr so no doctors have education debt.
Price shopping? What exactly does the author mean by that? If the author means that a patient is going to first call the providers and find out how much they charge- well hahahahahaha. Good luck with that.
An elderly woman who just learned her husband has cancer is supposed to read up on all this, understand it, and make the correct decision. Of course, good luck to her getting info from the front desks of all the healthcare providers, as well as the folks answering the phones at the ins. companies.
@germy: As someone in this exact position, that’s a big assumption that you even have a choice of providers. Our policy network covers one hospital/cancer treatment center. Take it or leave it.
I wish you well and hope you successfully navigate all the nonsense they throw at you.
OT, but Richard, someone very far downthread had the idea that Democrats provide insurance to Party members. I have read enough from you to know insurance is insanely complex and this is probably ridiculous. However, it is very seductive to let the shitgibbons that will not accept help twist in the wind while we insure ourselves.
What do you think?
Gin & Tonic
@Glidwrith: One problem is that there is no way of determining who is a “Party member”. It’s not even as “rigorous” as AARP, where you have to pay dues to get a membership card – anyone can call him/herself a Democrat if he/she wants, without any cost or obligation, or even associate just for convenience. We saw this earlier this year, when a non-Democrat even ran for the Democratic nomination for President.
@SP: michael moore made an entire movie out of this.
basically that’s the key. reduce student debt and the whole problem goes away.
@Gin & Tonic: have dues then. and the dues go to a fund to pay a salary to candidates while they run for office to contest rethug seats.
i love this idea so much, i want to marry it.
Richard, is it possible that there is an unspoken collusion taking place here? Or is this a case where it would takes years of data to actually allow a better understanding of the numbers and trends. I kind of look at health care like a giant drug test trail on America… it may address the major issue its trying to treat, but the unexpected consequences of symptoms or interactions with the reality of behavior (other drugs being taken and lifestyle choices) are leading to some pretty crappy outliers on the fringes which can only be sussed out after years of use.
you can’t price shop as a consumer. Our insurance company made a deal with a lab, that’s the closest thing I can thing of as far as price shopping. I can choose to go to the ER, like we used to be forced to do in this area, or I can go to one of the providers that uses the Ins. Co. lab. I assume the ER is considerably more expensive.
I have confronted my doc about things like x-rays. He was going to have me x-ray my finger until I asked him if he would do anything other than immobilize it. He agreed that he wouldn’t and that I didn’t need an x-ray.
I am reliably informed that there has been a shooting at THE Ohio State University this morning: 9 people injured, shooter dead.
Sister Rail Gun of Warm Humanitarianism
@Pogonip: Two additional people arrested, classes cancelled, parts of campus still on lockdown.
@Sister Rail Gun of Warm Humanitarianism: I knew that stupid Michigan rivalry would not end well.
@Eric U.: Yes, good points, Eric.
Health care price-shopping is impossible. Here in WV, for 2017 our only provider just cut the number of plans from 12 to 6, and they all sliced the in-network providers into Standard/Enhanced/Preferred tiers with different coinsurance rates among the various plans. I like my current doc and will keep going to see him regardless of what tier he is in, but choosing a plan is difficult at best.
I have been trying for years to make sure my docs understand the cost vs. benefit of what they are suggesting. The good ones will listen and work with you, like yours did. The bad ones just get affronted that you dare to question their god-like judgment.
What country, unless it’s a state secret?
I think that there may be other things going on with HDHP–especially with institutions with higher income employees. My employer got rid of it’s high end PPO (which had great network and pretty open access to specialists) and replaced it with a HDHP with similar network at lower cost. Choice was either keep the broad network as a HDHP or switch to a HMO with more limited options. Most people kept the larger network and went to a HDHP, especially if they had preexisting conditions and doctors networks that they wanted to use. So the older/sicker employees who had been in the PPO moved to the HDHP account rather than the HMO. Younger healthier employees were already in the HMO. It turned out that even with the higher deductables there was a really big savings in total amount of premiums paid. So even though I’m liable for more out of pocket costs from my HCSA, the total going out of my paycheck each month (HDHP+max monthly to HCSA) is less than I was paying for the PPO.
This line of thought is so ridiculous I can’t believe people push it with a straight face. And yet I have heard it parroted back at me by people who only seem to realize how stupid it is the moment I start asking them questions.
We don’t know how much it will be, when we will need it, or how to evaluate the possible different approaches, but we can totally “shop” for it!
@Gin & Tonic: At the moment this is sort of true. I don’t have time to look right now, but I read there was a court case which determined a Party can say who and who isn’t a member. I think it was actually Republicans that had the case and won. They are private entities, so why not?
I don’t have a good guess of why one place saw 3% lower and the other saw 15% lower. Anecdotally speaking, when my (high-paying tech sector) employer changed from a no-deductible PPO to HDHP, I saw a lot of people start rethinking their spending in minor ways. I don’t see big changes–there’s no “I’ll just nurse this broken leg along.” But: I’ll skip the doctor’s visit for this flu and spend an extra day at home drinking soup.
I see people optimizing around deductibles: wait for a year that has a real health crisis before you get that bump removed. Get Lasik the same year you get pregnant.
In most cases, this won’t increase catastrophic care needs. In most cases, the effects will be slow, or minor. An analysis of sick days might see a slight increase; the distribution of health use probably shifts around some.
And while we’re given tools to ‘shop’, the number of times that people DO is really low. (And when you do, half the time you get screwed anyway: the ‘low priced’ hospital turns out to bill separately for the — oops, out of network! — anesthesiologist.)
huh, people don’t act like bad economics models think they should. That is unlikely to make the evening news.
Lady’s living in the wrong neighborhood to be both racist and homophobic. http://chicagoist.com/2016/11/28/video_woman_who_berated_staff_at_mi.php