Let me outsource the following reconfirmation of the Rand Insurance Experiment central insight to Vox:
The idea was that higher deductibles would make patients become smarter shoppers: If they had to pay more of the cost, they’d likely choose something closer to the $1,529 appendectomy than the $186,955 appendectomy (yes, some hospitals really do charge that much). This would push the really expensive doctors to lower their prices so cheaper physicians didn’t steal their business.
This was, however, just a theory. And a massive new study suggests it might have been all wrong….
Economists Zarek Brot-Goldberg, Amitabh Chandra, Benjamin Handel, and Jonathan Kolstad studied a firm that, in 2013, shifted tens of thousands of workers into high-deductible insurance plans. This was a perfect moment to look at how their patterns of care changed — whether they did, in fact, use the new shopping tools their employer gave them to compare prices.
Turns out they didn’t. The new paper shows that when faced with a higher deductible, patients did not price shop for a better deal. Instead, both healthy and sick patients simply used way less health care.
People suck at deciding whether or not a procedure, process, prescription or surgery is high value care of meaningless care. Having to pay several thousand dollars to find is an excellent deterrent from getting any care as people will quickly be forced to make decisions between getting needed and high value care and paying the mortgage/rent. Unless I have a sucking chest wound, I am paying the mortgage until I absolutely can’t avoid or ignore a problem.
This was the central finding of the Rand Insurance Experiment — cost sharing does a great job of reducing utilization. It does a horrendous job of only getting rid of low value treatments and procedures. High deductibles and cost sharing are a utilization control system not an effectiveness optimization system.