In January, the federal government released a research brief by Dr. Emily Mitchell that updated the thresholds for which people move between the different healthcare spending buckets. There is very little novel or new, but the facts are important as the trend continues — healthcare expenditures have a big right hand skew.
Lower Threshold | Upper Threshold | Lower Spending | Upper Spending |
99% | 100% | $72,212 | a lot |
95% | 99% | $26,355 | $72,212 |
90% | 95% | $14,651 | $26,355 |
70% | 90% | $3,776 | $14,651 |
0 | 50% | 0 | $1,317 |
There are a couple of big take-aways from this research. In any given year, half the non-institutionalized population is barely touching the medical system. From a health insurance policy point of view, these folks are likely to be benefit design indifferent as either they are not using any services so no theoretical cost sharing applies, the few services that they do use are already exempted from cost-sharing (flu shots) or the plans that they are offered have high enough cost-sharing that the difference between a $500 deductible and a $5000 deductible is completely theoretical retrospectively.
Another group is highly likely to be benefit design indifferent and that is folks with predictable high costs. Someone who knows that they have a $75,000 per year condition will not be influenced directly by cost sharing tweaks for one plan that is a little heavier on deductible while another plan is heavier on coinsurance. In either plan, they are extremely likely to hit out of pocket maximums and the difference in benefit design will only be on cash flow and cognitive complexity.
Cost-sharing is probably relevant retrospectively for individuals who are in the 50th to the 90%th percentile of spending. This group, retrospectively, has ~32% of all medical spending in the country (Figure 1 of the brief). If we think that optimal cost-sharing design can do something to healthcare expenditures, this is where the squeeze will be.
From an insurance policy perspective, we can look at this table and assume that people in the bottom 50% of the spending will more strongly benefit from a dollar in premium reducing subsidies than cost-sharing reductions. People at the very top of the spending distribution are indifferent as to the form of assistance as they will get a full pass-through one way or another. It is the people in between where a dollar spent in reducing maximum allowable deductibles instead of reducing premiums are in a complex situation. Someone who has $5,000 in deductible eligible claims will be better off if maximum deductible is reduced from $5,200 to $4,500. They are no better off if maximum allowed deductible is reduced from $8,850 to $7,500.
These spending distributions inform policy and they shape who wins and who loses from our choices.
Old School
Looking at the charts, the bottom 50% is largely younger people. (30.6% of that group is under 18. 43.2% is the 18-44 age group.) While that isn’t much of a surprise, wouldn’t a large portion of that group be covered under a family deductible?
David Anderson
@Old School: Maybe — a good chunk of the <18 population is Medicaid or CHIP insured. For kids on family coverage in the private market (ACA or employer group), yes, family deductibles are likely to apply but most family deductibles have individual sub-deductibles as well.
Another Scott
I was curious what “spending” was counted, so I clicked your link.
I guess the applicable words are “payments for medical care” no matter who is making the payments.
But if someone is spending $1k a month for health insurance, yet never goes to the doctor, are they really not spending anything for health care? They’re surely spending more than a 20-something invincible working 3 jobs who doesn’t go to the doctor and doesn’t have health insurance either. And they probably shouldn’t be lumped together.
Does a family budget care if the check is going out to Dr. Boatrider or to BCBS?
I’m sure the paper is very good at what it does. I just think it’s important when these things are talked about with the general public that reporters get the details right.
(To be clear, you do that very well and I thank you for it.)
Cheers,
Scott.