Fastest Clinic Day EVER! We are headed home!!!
3 hours. 3 clinics. Probably about $6,000+.
But that means we hit our deductible today!
— isTrumpCareDead? (@IsTrumpCareDead) January 17, 2018
That Tweeter is the mother of Savannah, an adorable four year old, whose internal plumbing is a bit off.
But she’s ONLY alive because of the Affordable Care Act.
Her medical bills, at age 4, top $2,000,000.
Her list of preexisting conditions is extensive.
She’s the poster child for high risk. pic.twitter.com/9idbzgCyJ3
— isTrumpCareDead? (@IsTrumpCareDead) January 15, 2018
They are insured primarily through a private policy with a $6,000 individual deductible and Medicaid picks up some of the rest. Her daughter is guaranteed to have significant medical needs for the rest of her life.
Deductibles, for most people in reasonable health, are an incentive against getting care. I have a deductible for my insurance at work which means I am paying the first $1,000 dollars for non-Primary Care. For little things a deductible is supposed to give me an incentive to say that I’ll take Motrin and drink some more tea instead of going to the doctors to get it checked out or that I will go to an off-site MRI facility instead of getting my knee scanned at the hospital. A deductible chops off a lot of the risk on the left hand side of the spending distribution for an insurance company.
High deductible health plans are effective at reducing service utilization. They are currently ineffective at making people good shoppers. However the incentive effect goes away once the deductible is reached. Here there are two scenarios. If someone is in reasonably good health and has a one time spike claim that maxes out the deductible, then there is a short term incentive for that individual to pull medical utilization forward from the future to the current low cost sharing time period. Someone may know that they need a knee replacement at some point in the future. They had been deferring it because of the cost sharing. If they had an unrelated two night hospital stay for the flu in January, they may decide to get their knee done in April because the marginal cost is much lower than it otherwise would have been.
Again, that is the more common scenario as most people most of the time are reasonably healthy.
However the incentive function of a deductible falls apart for people like Savannah.
No matter what the family does, they will blow through the deductible every policy year. They may control whether they exceed the deductible in the first half of January or the second half of January. The deductible has no incentive on their behavior because the expected medical costs for a non-crisis year are still huge and the costs for a crisis year is massive.
Instead, a deductible for a family that has someone with expensive, persistent high cost conditions is merely a tax. It is saying that being sick means an annual levy of $6,000 that is collected every January for the rest of their lives.
Policy that works for 95% of the population because they don’t have persistent conditions that require a lot of expensive care fails miserably in the outliers. Large deductibles may be an appropriate tool to hold down utilization and potentially prices for the cohort of people who are primarily worried about one-off events and have years of reserves to draw-down and then years to rebuild those reserves after the single bad year. It fails miserably for people who never can accumulate or rebuild those reserves.