Editorial: What's behind the out-of-pocket cost problem

By Merrill Goozner
January 9, 2016 - Modern Healthcare

While millions of Americans are suffering financially from out-of-pocket medical bills, the data suggest the problem is getting better, not worse.

It was easy to lose sight of that fact while reading the extensive press coverage last week given the latest survey from the Kaiser Family Foundation, which found that 26% of Americans under age 65 reported they had problems paying their medical bills in 2015.

The survey of 2,575 people found that only a third of those reporting problems were uninsured, with the other two-thirds divided roughly equally among people with employer-based plans, those who bought their own plans and people on Medicaid.

The report's authors said they found no improvement over previous surveys. But that finding is at odds with the far more comprehensive survey conducted by the Centers for Disease Control and Prevention.

Its most recent survey of 35,000 households with 87,500 members that ended in June 2014 (halfway through the first year of the Affordable Care Act's insurance expansion) found a significant drop in the number of people who reported problems paying medical bills. Just 17.8% of CDC survey respondents made that claim in 2014, down from 19.4% in 2013 and 20.4% in 2012.

That overall picture is corroborated by the latest health expenditures report from the CMS (see this week's By the Numbers). Aggregate out-of-pocket expenses grew only 1.3% in 2014—a quarter of the rate of overall healthcare costs. Householders now pay for 11.5% of all personal healthcare consumption costs, down from 11.9% in 2013 and 13.1% in 2008.

So why the growing angst about out-of-pocket expenses? Simply put, the people getting hit with the big bills today are not the same as when the uninsured population was far larger.

The No. 1 driver of bill payment problems today is cost-sharing in high-deductible plans, which constitute about 25% of the privately insured, up from just 8% in 2009, according to another Kaiser survey. While their growth may taper off now that Congress has delayed the Cadillac tax, high-deductible plans have become a significant factor in the insurance marketplace.

The ACA's exchange plans are contributing to the anxiety. Most bronze and silver plans that people bought for their low monthly premiums included high deductibles. Many people discovered that only when they accessed healthcare for the first time as an insured patient.

Many of the newly insured still aren't aware that they may be eligible for cost-sharing subsidies in addition to their premium subsidies if they bought silver plans. How else can we explain the estimated 2 million people earning up to nearly $30,000 a year who purchased plans on the exchanges but didn't take advantage of those subsidies?

So, from a systemwide perspective, what it adds up to is far more people paying more out of pocket, but in aggregate paying relatively less, because of the shrinking number of the totally uninsured.

The politics of that situation aren't pretty. A decade ago, most middle-class Americans felt pretty good about their health insurance, and politically supported extending coverage to the uninsured. Now, more than a quarter of those folks are paying $1,000 or more before their coverage kicks in. They aren't likely to be politically supportive of calls to increase subsidies to people in exchange-based plans to cover their out-of-pocket costs.

High-deductible plans are not an effective means of promoting high-quality healthcare. When people have more skin in the game, they cut back on utilization.

But studies show they are just as likely to cut back on necessary care as on unnecessary or overly expensive drugs, tests and procedures. Price transparency still isn't a major factor in the marketplace.

High-deductible plans are a growing problem for providers, too. It causes financial problems when they cannot collect from people who don't have enough income to set aside sufficient funds in their health-savings accounts to cover their deductible.

Given employers' decision to make high-deductible plans a centerpiece of their strategy for avoiding rising healthcare costs, and the fact that they are affecting people across the income spectrum, policymakers need to come up with more creative solutions than making more subsidies available to more people, which will be politically resisted.

Making insurers and self-insured employers exclude an expanded set of high-value services from the deductible would be a good place to start.