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Posted at 12:14 PM ET, 01/24/2011

High-deductible health care in the Affordable Care Act

By Ezra Klein

One of the problems many conservatives have, or think they have, with the Affordable Care Act is that it doesn't make enough space for high-deductible options. But I've not heard many explain exactly how much more space they'd like to make. As Jon Cohn explains, the plans permitted under the legislation can have pretty high deductibles already:

Look closely at the standards for coverage in the insurance exchanges: The minimal, or bronze, insurance option allows out-of-pocket spending of up to $12,500 for a family of four. The actuarial value is 60 percent, which means, very roughly, that the plan only covers about 60 percent of the average person's medical bills. Those are some pretty high deductibles! I haven't made the apples-to-apples comparison and I don't know anybody who has, but I'm pretty sure the overall exposure is comparable to what you get in a Health Savings Account, which is the model Douthat and conservatives generally say they want [...]

Now, the Affordable Care Act does mitigate the effect of high cost sharing in a few crucial ways. Under the law, even the bronze plans will include the benefits in the basic, government-defined package -- with no annual or lifetime limits on total claims paid. That's a vast improvement over the present individual market, in which policies can have huge, hidden gaps that leave unsuspecting consumers paying bills they'd assumed were covered.

More important, the exchanges will have subsidies to offset both the premiums and cost-sharing for people who make less money. So poorer people would never face anything like $12,000 in out-of-pocket expenses; that's the reason I can live with the high deductibles.

Maybe that's what Douthat doesn't like about the Affordable Care Act. But my impression was always that conservatives like him weren't looking to stick lower income people with cost-sharing they really couldn't afford. What they wanted was cost-sharing severe enough to impose some price discipline on the system, which the Affordable Care Act would seem to do.

It's worth noting that some of the most interesting thinking on high-deductible health-care plans has come from Jason Furman, who is deputy director of the National Economic Council and was heavily involved in the administration's discussions about the bill.

By Ezra Klein  | January 24, 2011; 12:14 PM ET
Categories:  Health Reform  
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Comments

A deductible is not a MOOP. Once you understand that you'll get it.

It comes down to what they allow as first dollar expenses (ie deductible) and what is cost-shared from there.

For example:

Actuarily (i'd expect) you'd get a lot lower premium with a $5000 deductible (not allowed) and then 80/20 coverage to $10k which is a $7000/$14000 MOOP than with a $2000 deductible (allowed) and a 50/50 to $10k which has the same $7000/$14000 MOOP but just gets there differently.


Posted by: visionbrkr | January 24, 2011 12:24 PM | Report abuse

Correct me if I'm wrong, but something like 85% of all health care costs are spent on catastrophic health care. So the high-deductible plans that the GOP wants -- which are basically catastrophic health care plans -- will do almost nothing to lower costs except on the margins, because people who need catastrophic coverage have no incentive to keep spending down since they know they're going to end up blowing through the deductible anyway.

One part of the debate of the past two years was Dems saying the GOP had no serious alternatives, and the GOP getting all indignant and insisting that they do. But two of the GOP's three biggest ideas to reduce costs -- medmal reform and high deductibles -- would do almost nothing to reduce costs (even if those ideas have other benefits). And that is why they are not serious -- if they haven't done their homework enough to understand why high-deductible plans would do little to affect costs, then they are not taking health care policy seriously. (Their other big idea -- selling insurance across state lines -- is only massive deregulation by another name. I suppose there's a more legitimate argument there about whether deregulation is worth the tradeoff of lower costs.)

Posted by: JamesCody | January 24, 2011 1:04 PM | Report abuse

High deductibles lead to higher medical costs long term. Low deductibles lead to lower medical costs long term. This has been shown over and over again. Conservatives have no theories to actually do anything positive with health care.

Posted by: DavidCEisen | January 24, 2011 1:12 PM | Report abuse

--*High deductibles lead to higher medical costs long term. Low deductibles lead to lower medical costs long term. This has been shown over and over again.*--

Cite?

Posted by: msoja | January 24, 2011 1:14 PM | Report abuse

--*But I've not heard many explain exactly how much more space they'd like to make.*--

Why is it even any of your business, Klein?

How about unshackling insurance companies from the government anchor? Let insurance companies write policies that people want to buy without moron policy wonks looking over their shoulder dictating every term. Let people decide whether or not to buy one policy or another based on their own wants, needs, and capabilities.

You know, like every other product in the universe (that government has stuck its nose up, yet.)

Posted by: msoja | January 24, 2011 1:23 PM | Report abuse

Make that, "has not".

Posted by: msoja | January 24, 2011 1:24 PM | Report abuse

@JamesCody,

the reason HSA plans work is that they in additon to having a deductible apply allow first dollar coverage for preventative care and the idea behind that (and behind PPACA requiring preventative care covered at 100%) is that if people take care of themselves prior to getting heart disease, diabetes (that many times are preventable and controllable with diet and exercise) then those figures you cite don't become an issue.

Why is it that liberals cite PPACA's preventative care benefit and forget that HSA's work the same way?

@DavidCEisen,

there is NO WAY you can argue that lower deductibles result in lower medical costs. 30 years of actual results proves you wrong.

Posted by: visionbrkr | January 24, 2011 1:49 PM | Report abuse

But, the ACA drastically cuts the level of pre-tax contributions you can make to Health Savings Accounts, which accompany high-deductible plans. This means that the average person will have higher out-of-pocket costs than prior to ACA. Anyone know why this was put in the ACA?

Posted by: AuthorEditor | January 24, 2011 3:15 PM | Report abuse

@AuthorEditor,

"But, the ACA drastically cuts the level of pre-tax contributions you can make to Health Savings Accounts, which accompany high-deductible plans"

no it didn't. I think you're thinking of FSA monies which will be capped starting in 2012 at $2500 (if i remember correctly). HSA's weren't affected as the 2011 election maxmium is $3050 for singles and $6150 for families with possible catchup contributions for those that are of eligible age for that.

Posted by: visionbrkr | January 24, 2011 3:42 PM | Report abuse

visionbrkr, I don't know what Mr. Cody's argument actually is, but I would guess that he was getting at the point you just made in response - cheaper preventative care leads to fewer catastrophic claims later. Perhaps he wasn't aware of ACA's "first dollar/no deductible" requirement for preventative care.

Posted by: KarenJG | January 24, 2011 4:04 PM | Report abuse

Karen,

Yes but there's a subtle difference between cheaper preventative care in HSA's and cheaper preventative care outside of HSA's. While they both have the effect of trying to keep us healthier outside of HSA's (in a low deductible world) there is no financial incentive to keep up with preventative care while in the HSA world there is (looming deductibles). that's why HSA's control costs more than non HSA plans, the dual incentives.

Posted by: visionbrkr | January 25, 2011 8:03 AM | Report abuse

So how does high deductible health insurance save you money?

Posted by: MartialArts808 | January 27, 2011 3:44 PM | Report abuse

Interesting Article Here high deductible versus low deductible health insurance.

http://best-health-insurance-quote.com/blog/2008/11/low-deductible-vs-high-deductible-health-plan.htm

Posted by: MartialArts808 | January 27, 2011 3:48 PM | Report abuse

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