I’ve had two NBER papers that I am struggling to make sense with. These papers are critical health policy papers as they relate to high deductible health plans (HDHP). We’re going in that direction for a lot of health policy. My prior assumption is that high deductible health plans paired with a health savings account is appropriate for people with the means to save significant money and a reasonable expectation that they are insuring and saving against one time risk. As soon as those conditions are not met due to either low ability to save due to low income or known chronic conditions that would routinely incur costs at or above annual cost sharing limitations, high deductible health plans are massively inadequate. That is my prior.
So I just want to flag two papers that I’m struggling to make sense with together. They each make perfect sense on their own. I am struggling to put them together.
Relative to control firms and the pre-offer years, firms offering a CDHP had an estimated 6.6, 4.3, 3.4 percent lower annual spending in the first three years respectively (p < 0.05 for each difference) (Table 3, column 1). In addition, the CDHP second pre-year trend coefficient is insignificant, supporting the assumption of a parallel trend in the absence of CDHP offer. In section 6.4 below, we discuss whether the post CDHP offer impact is changing over time controlling for differential composition of treatment firms over time.
Her team does a nifty piece of machine learning to balance covariates to address the possibility that the savings are merely an illusion of the covered population effect. I don’t have the statistical chops to say if their treatment makes sense but I’m glad that they are attempting to look at the case mixture. One of my big worries as we generalize HDHP learning from employer sponsored coverage is that ESI is a unique pool compared to public pools. ESI is younger than Medicare, wealthier than Medicaid and healthier than both. More importantly, ESI offers people with known high disease burden a lot of outs if the richness of their benefit package declines. They can get a new job. They can go on their spouse/domestic partner’s coverage. They can apply for Medicare and disability if sick enough. There are outs in ESI that are not present in other systems. This is my big worry about generalizing research.
And then the other paper:
Employees at the firm are relatively high income (median income $125,000-$150,000), an important fact to keep in mind when interpreting our analysis. In addition, post-switch there is no meaningful change in the relatively small rates of employee entry or exit from the firm. The required firm-wide change from free health care to high-deductible insurance constituted both a substantial increase in average employee cost-sharing and a meaningful change in the structure and complexity of that cost-sharing. We use this natural experiment, together with the detailed data described to assess several aspects of how consumers respond to this increased cost-sharing. First, we develop a causal framework to understand how spending changed, in aggregate and for heterogeneous groups and services. In doing so, we account for both medical spending trends and consumer spending in anticipation of the required plan switch.5 We find that the required switch to high-deductible care caused a spending reduction of between 11.09-15.42% for t0, with the bounds reflecting a range of assumptions on how much anticipatory spending at the end of t−1 would have been spent under higher marginal prices in t0. Spending was causally reduced by 12.48% for t1 relative to t−1, implying that this reduction persists in the second year post-switch….
We find no evidence of price shopping in the first year post switch. The effect is near zero and looks similar for the t−1 − t0 year pair (moving from pre- to post-change) as it does for earlier year pairs from t−4 to t−1. Second, we find no evidence of an increase in price shopping in the second year post-switch; consumers are not learning to shop based on price. Third, we find that essentially all spending reductions between t−1 and t0 are achieved through outright quantity reductions whereby consumer receive less medical care. From t−1 to t0 consumers reduce service quantities by 17.9%. Fourth, there is limited evidence that consumers substitute across types of procedures (substitution leads to a 2.2% spending reduction from t−1 − t0). Finally, fifth, we find that these quantity reductions persist in the second-year post switch, as the increase in quantities between t0 and t1 is only 0.7%, much lower than the pre-period trend in quantity growth. These results occur in the context of consistent (and low) provider price changes over the whole sample period.
The decline in expenditure is directly related to decline in utilization and not shopping. This applies to the sickest group of people who routinely would go over their deductible.
My brain crash on these two papers is the first paper is not seeing any catastrophic care costs bounce back in the out years while the second paper finds extremely inefficient and irrational consumption behaviors.
These are two papers I need to chew on.