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June 29, 2018

Are 'sky-high' deductibles breaking the US health system?

Daily Briefing

    Editor's note: This popular story from the Daily Briefing's archives was republished on March 22, 2019.

    The rise in employer-sponsored high-deductible health plans (HDHPs) has led many workers to avoid necessary care or fall into debt, but companies are beginning to take notice—and implement plans to lower employees' out-of-pocket costs, Bloomberg reports.

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    As Bloomberg reports in an article titled "Sky-High Deductibles Broke the U.S. Health Insurance System," employers in the early 2000s began to embrace HDHPs as a way to lower their rising health care costs. A survey from the National Business Group on Health showed that the share of large employers that only offer HDHPs to their employees increased from 7% in 2009 to 39% today, Bloomberg reports. Similarly, data from the Kaiser Family Foundation showed the share of U.S. workers enrolled in health plans with a deductible of at least $1,000 increased from 22% in 2009 to 50% in 2017.

    Employers hoped HDHPs would lead employees to reduce unnecessary medical spending, but over the years, research has suggested that HDHPs also lead people to skip routine medical care to save money, Bloomberg reports.

    Neeraj Sood, director of research at the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California, said HDHPs "do reduce health care costs, but they don't seem to be doing it in smart ways."

    Further, a result of skipping routine care, employees might be less likely to have their illnesses diagnosed early, which could lead to worsening conditions that are more costly to treat.

    The effects of HDHPs on out-of-pocket medical spending

    An additional problem is that many "people … simply can't afford to get sick" if they have an HDHP, Bloomberg reports. According to a report published this month by the Federal Reserve, about 41% of U.S. adults said they would not be able to pay a $400 emergency medical expense without either borrowing money or selling some of their possessions.

    For example, Bloomberg reports that Carla Jordan and her husband, John Jordan, faced a series of medical challenges in 2016. The couple was insured through a plan offered by Carla's employer, a public school in Stafford County, Virginia. However, they faced a deductible of $2,000—even after paying a $501 monthly premium.

    Carla had to undergo a gallbladder operation in 2016, and doctors that same year diagnosed her with diabetes. Also in 2016, John experienced a seizure and an unrelated campylobacter infection, which resulted in him visiting the emergency department.

    7 ways you can prepare for high-deductible health plan patients

    By the end of the year, the couple owed 18 different health care providers $8,000, and creditors were threatening to garnish John's wages, Bloomberg reports. The couple also faces monthly out-of-pocket prescription costs, including paying for John's blood pressure and acid reflux medication—which costs $36 a month—and other items, such as Carla's diabetes test strips and lancets, which cost $120 for a three-month supply.

    As of last year, the couple said they were living "paycheck-to-paycheck" with no savings for retirement or for their children to attend college.

    Atul Gawande, a surgeon at Brigham and Women's Hospital and a professor at Harvard University's medical and public health schools, said he has seen families struggle to cope with similar out-of-pocket costs. "I had one friend who was bankrupted with a health plan. He had a $3,000 deductible and couldn't meet it," he said.

    Companies aim to reduce employees' out-of-pocket medical costs

    Recently, a few companies—such as CVS Health and JPMorgan Chase—have announced proposals to either lower their employees' health plan deductibles or cover the costs of more health care services pre-deductible, Bloomberg reports.

    According to Bloomberg, CVS nearly five years ago had all of its 200,000 employees and their families enroll in HDHPs, which the company eventually noticed led to some people discontinuing their medications. CVS CMO Troy Brennan said, "Nobody in their right mind would think that it's a smart thing to basically be keeping people away from taking their medications."

    In response, CVS started to offer its employees a selection of generic drugs at no cost. The company later expanded the selection to include brand-name treatments and insulins, and CVS now is examining a plan that would allow its employees to access no-cost brand-name drugs in instances when CVS has negotiated steep discounts for the products. That plan could take effect as soon as 2019, Bloomberg reports.

    Elsewhere, JPMorgan has announced plans to effectively eliminate HDHPs for employees with annual salaries less than $60,000, Bloomberg reports. JPMorgan CEO Jamie Dimon earlier this month said, "We all thought high deductibles are going to drive people to get involved—'skin in the game.'" However, he said, "They didn't get the surgery they needed, when they needed it, because they can't afford the high deductible in one shot" (Tozzi/Tracer, Bloomberg, 6/26; Bakers, "Vitals," Axios, 6/27).

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