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May 8, 2015

Health Care Costs Are Declining Because You Are Paying More

  Rare

The growth in health care spending has slowed down and President Obama wants you to know his health care law gets the credit. Or maybe the blame, because one reason for that slowdown is that you are spending more out of your own pocket.

Health care actuaries will tell you that when people have to spend more out of pocket for health care, they tend to spend less. And when a third party—employers, health insurers or the government—insulates consumers from the cost of care they tend to spend more.

Just imagine how much more people would spend on cars if they could have any car they wanted for a $20 copay.

Well, out-of-pocket spending on health care has declined for decades—until the Affordable Care Act kicked in.

In 1961, Americans forked over 43 cents out of their own pocket for every dollar spent on health care. That out-of-pocket spending steadily declined over the years so that by 2010 consumers were only spending about 12 cents out of pocket. Conversely, third-party payers went from spending 57 cents out of every dollar in 1961 to 88 cents.

Enter Obamacare in 2010. By 2012 out-of-pocket spending had risen to 14.8 percent of total health care spending, and by 2013 it was up to 15.2 percent, according to the Health Care Cost Institute. With people spending more out of pocket, they will naturally curb their spending.

And expect to be spending more out of pocket in the future. That’s in part because so many Americans have had to shift to very high deductible policies in order to afford Obamacare’s very expensive coverage. Thank you, President Obama!

HealthPocket examined deductibles for 2015 Obamacare policies. The average deductible for a single person choosing a Bronze plan (the least expensive) was $5,181; the more popular, and more expensive, Silver plan average deductible was $2,297. Deductibles for a family policy were about double the single deductible, in the $12,000 range for a Bronze plan.

My wife had a comprehensive policy with a $2,500 deductible we were very happy with. Last fall that policy was cancelled because of Obamacare—you may have heard about the millions of policy cancellations—and so she had to get a new policy. She decided on one that was essentially identical with the one she had with the same health insurer—except the deductible is now $6,000, not $2,500. And we get to pay 50 percent more for it. Thank you, again, President Obama!

Deductibles for employer-provided plans tend to be lower, but they are also rising. Indeed, USA Today says the rising deductibles are “crippling the middle class.”

Think about that for a minute. Obama takes every opportunity to talk about how he wants to help the middle class, yet USA Today suggests the rise in deductibles, a result of his health care law, is crippling the middle class.

The upshot of these higher deductibles is that people will spend less on health care, and that is helping to slow the growth in health care spending—giving Obama his boasting point. Rising deductibles aren’t the only factor, but they are an important one.

But here’s the irony: Obama never intended any of this. He thought Obamacare would reduce out-of-pocket spending. And he and most Democrats have railed against high-deductible policies for years, claiming that greedy health insurers were taking people’s money but didn’t have to pay any claims (because of the high deductibles). And yet under Obamacare deductibles have never been so high.

The fact is that moving to higher deductibles, especially when accompanied by a tax-free health care spending account for smaller and routine expenditures, is good policy. But the high deductible advocates usually recommended something in the range of $3,000, not the $5,000 to $6,000 deductibles so many are facing under Obamacare. And a $12,000 family deductible provides very little health insurance help for most middle-income families.

So Americans are increasingly spending more out of their own pockets for health care, which Obama never intended, helping to slow the growth in health care spending. The president wants the credit, but it’s costing you more.


 

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