Republicans don’t spend too much time talking about alternatives to the Affordable Care Act, but if they do, they often argue that rather than having the government define a standard package of health care benefits that all insurers must provide, Americans should have the option of purchasing catastrophic coverage (high-deductible “consumer-driven” health care plans) and tax-advantaged health savings accounts. Such plans require consumers to pay $1,000 or more per person for health care before their coverage kicks in, but charge lower monthly premiums and allow policyholders to stow away dollars for medical emergencies.
Here is Sen. John Barrasso (R-WY) advancing the proposal to Obama during the White House health care summit, who in turn argues that catastrophic plans wouldn’t make sense for the vast majority of Americans:
BARRASSO: And, Mr. President, when you say, with catastrophic plans, they don’t go for care until later, I say sometimes the people with catastrophic plans are the people that are best consumers of health care, in using — the way they use their health care dollars. [..]
OBAMA: Would you be satisfied if every member of Congress just had catastrophic care? Do you think we’d be better health care purchasers?
I mean, do you think — is that a change that we should make?
BARRASSO: Yes, I think — I think, actually, we would. We’d really focus on it. You’d have more, as you’d say, skin in the game… [...]
OBAMA: Would you feel the same way if you were making $40,000 or you had — that was your income? [...] [M]embers of Congress are in the top income brackets of the country, and health savings accounts I think can be a useful tool, but every study has shown that the people who use them are folks who’ve got a lot of disposable income. And the people that we’re talking about don’t.
The other problem is that catastrophic-only plans generally appeal to a younger and healthier population and may even discourage those individuals from seeking preventive services, even, as it turns out, when that care is free. A new study of 36,000 families enrolled in high-deductible plans finds that health spending was 14 percent less in the first year than for families with lower deductibles, but — and this is a big one — these families were much less likely to invest in preventive care that could stave off more expensive chronic conditions. This may be because they have more “skin” in the game as Barrasso put it, or because they simply don’t understand the coverage benefits. Applicant were also “typically younger and healthier and lived in areas with higher percentages of college graduates”:
But the percentage of young children receiving vaccinations dropped as much as 8.5 percent in the first year their families were covered by the high-deductible plans, while vaccination rates for children in standard plans rose slightly. And use of cancer screenings was two to three percentage points lower among families with high deductibles.
It’s worth noting that the existing legislation already gives younger individuals the option of enrolling in high deductible plans that cover less services at cheaper rates. Insurers will also be able to price their policies based on age and charge young people rates that are three-times lower than what older (and presumably sicker) applicants will be paying.
But some conservatives have proposed going even further, suggesting that insurers should be allowed to design catastrophic plans outside of the requirements of the law (which mandates policies to provide a set of essential benefits) and the exchanges. You can see how this wouldn’t work. If younger people have an incentive to enroll in cheaper high-deductible coverage, the exchanges will be left with sicker individuals who need comprehensive coverage and use it frequently. Without healthy individuals to offset the costs of this care, premiums will have to increase, pushing out everyone but the sickest and neediest applicants. As a result, the exchanges will become cost prohibitive for most Americans.
Meanwhile, the younger people who are enrolled in the cheaper high deductible policies will find their coverage inadequate once they — as we all inevitably are — fall ill and may be even more likely to do so if they forgo preventive care.