This month’s Health Affairs has a great article written by Dr. Michelle Moniz and colleagues that looks at the out of pocket expenses for the year before a live birth to the three months post-partum for commercially insured individuals who had a live birth at a hospital from 2008-2015. The headline finding is scary.
Among women with out-of-pocket spending, mean total out-of-pocket spending for maternity care for all modes of delivery increased from $3,069 in 2008 to $4,569 in 2015
Having a baby is expensive if you have insurance through work. About half of all births in the United States are by women covered by employer insurance. Almost all of the rest are covered by Medicaid which has a completely different and far lower to non-existent cost-sharing profile.
However, there is something further in the article that piqued my interest from an insurance and value point of view.
mean total out-of-pocket spending for vaginal birth increased from $2,910 to $4,314, and for cesarean birth it increased from $3,364 to $5,161 (appendix exhibit A2). These trends were largely driven by a rise in deductible payments in the study period. Among women with deductible payments, the mean deductible for vaginal birth increased by 62.3 percent, from $1,617 in 2008 to $2,625 in 2015, and the mean deductible for cesarean birth increased by 72.3 percent, from $1,532 to $2,640.
Standardized costs for vaginal and cesarean births showed some variation but did not vary greatly over time (vaginal birth: $24,317 in 2008 [95% CI: $24,184, $24,451] versus $23,148 in 2015 [95% CI: $23,012, $23,283]; cesarean birth: $39,702 in 2008 [95% CI: $39,390, $40,015] versus $43,774 in 2015 [95% CI: $43,402, $44,145]).
We know that the US voluntary C-Section rate is high. The high rate does not deliver better outcomes. It is expensive in both direct reimbursed costs and recovery time for the mother and family. We have seen in California efforts to drive down low risk C-section rates. However, the implied insurance designs are not helping with this goal. Two things are happening here as I lay out in the chart I created from the data in the above paragraphs:
|Costs in 2015||Vaginal Delivery||C-Section|
|Total Cost Sharing||$4,314||$5,161|
|Non-Deductible Cost Share||$1,689||$2,521|
|Non Deductible Costs||$20,523||$41,134|
|Total Cost Share Percentage||19%||12%|
|Implied Coinsurance Rate||8%||6%|
|Data from: https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2019.00296|
First the cost of labor and delivery through either pathway is too damn high. The deductibles that are being paid in 2015 are roughly similar to each other for either pathway. In both cases, the deductibles are a tiny fraction of total costs. In either case, as soon as a woman walks into her ObGyn’s office with a positive pregnancy test, there is no difference in the incentives being generated by the deductible. A $2,600 deductible will influence decisions to go to urgent care or an ER, it will influence decisions to stick with a brand drug or a similar generic, it will influence low level decisions, but as soon as the cost bundle is big enough to actually drive a significant portion of national health care expenditures, the deductibles are irrelevant.
Secondly, the implied coinsurance rate (Non-deductible Cost Share/Non-Deductible Costs) is higher for the cheaper alternative. That is messed up. The total cost of non-deductible cost sharing is $800 less for vaginal delivery than a C-section but the implied coinsurance rate of each dollar of spending is 33% higher. This is a weird set of incentives.
If we believe that there are too many low-risk, elective C-sections that don’t offer improved value over vaginal births, and if we believe that cost sharing influences decision making at the margin, we should structure our cost sharing so that vaginal births are much cheaper than elective, low risk C-sections. Right now, the insurance structure that is being reported in this paper is removing strong incentives away from vaginal births over the marginal C-section.