High deductibles and the 'savvy' consumer: Why the plan to cultivate smarter healthcare shoppers has failed


High deductibles and co-payments were designed to make patients approach shopping for healthcare with the same scrupulousness as in other parts of the economy. But is this actually working?

Economists have theorized that when patients are forced to shoulder a greater proportion of their healthcare costs, over time, this will translate to a reduction in the amount of healthcare that is used and ultimately lower the price of services, according to The New York Times.

The theory behind high deductible health plans makes sense: If patients are not responsible for the price of healthcare services, they won't have any incentive to look for a bargain and healthcare providers won't have a reason to offer one. A RAND Corp. randomized experiment in the 1970s and 1980s helped demonstrate that at least part of this theory was true. One group in the experiment received health insurance with high cost-sharing, and the other received insurance with low cost-sharing. Over time, researchers observed that the people who were responsible for paying a greater proportion of their bills used less healthcare than the low cost-sharing group and were just as healthy, according to the report.

"If you make something free, people will spend a lot on it," Michael Chernew, PhD, the Leonard D. Schaeffer Professor of Health Care Policy at Boston-based Harvard Medical School's Department of Health Care Policy, told NYT. He argues the emergence of health plans that require higher out-of-pocket spending is most likely at least be partially responsible for a recent slowdown in healthcare expenditures.

However, the type of cost-sharing matters, and recent research suggests high deductibles may not produce their intended results. According to NYT, a team of researchers from the University of California, Berkeley, and Harvard published a paper on the outcomes when an unnamed company switched its employees from a more comprehensive health plan to one with a high deductible. The company provided the employees with a web tool to compare healthcare prices and a health savings account to cover the entire deductible. Researchers hypothesized that among the high-earning and educated employees of the company, the value of the high deductible plans would be evidenced by more diligent, comparative healthcare shopping.

But they were wrong. While the employees did spend a remarkable 12 percent less on healthcare, there was no evidence that they were comparing prices or cutting back on services as a result of having a greater financial responsibility. The workers visited the same physicians and hospitals as before, and reduced low-value medical services and medically important ones at about the same rate, according to the report.

Some health economists say a better solution could lie in types of insurance that provide patients with important healthcare services for free but charge them for treatments with fewer evidenced benefits. While he calls ordinary deductibles too "blunt," Dr. Chernew suggests more nuanced insurance plans could employ economic incentives to reduce wasteful spending without encouraging people to give up needed care because of cost, according to the report.

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