After writing about how health insurance invites waste, I came upon an article Ezra Klein wrote about the fact that even HSAs won’t help slow that waste. He makes a good point because the total exposures are usually the same. But once the out-of-pocket maximum is met, there is nothing to slow the wasteful spending after that. And the spending that comes after a deductible is met is much more significant than the ticky-tack test for strep throat or prescription for antibiotics – the stuff that is usually covered before the deductible on non-HSA plans.
Ezra’s point was that we need to do something to address the actual spending waste (unnecessary tests, unnecessary treatments, etc).
Instead, you’re going to need to attack these costs at the top. You may need to ration. You’ll definitely need to cut down on wasteful care. You’ll definitely need to erase the payment structure that encourages doctors to prescribe the most intensive treatments. You’ll probably need to give the government bargaining power so we begin paying less per unit of care, as all other countries do.
To give credit to the blogosphere that helped me find Ezra’s article: InsureBlog linked to a “quick and effective takedown” of Ezra’s article written by EconLog. If you read the rebuttal written by Bryan Caplan of EconLog, he equates unnecessary trips to China with healthcare spending. Here is what I wrote in the comments on his rebuttal titled “Ezra and Elasticity”…
You’ve written a good post here, but I think it misses the point of Ezra’s article. First of all, the $10K deductible is a bad example. We sell a lot of HSAs and a $5-$6K family deductible or $2-$4K individual deductible is more typical (and the best way to beat the actuaries). These deductibles leave about the same exposure as people normally have on non-HSA plans. The reason they got them though, was because they don’t need copays on doctors visits or Rx before the deductible, not because it has a higher deductible or overall exposure.
Ezra’s point was that once people reached their out of pocket maximum with a claim, which is typically the same as a non-HSA plan, there is nothing to reduce wasteful spending like unnecessary tests and treatments. So, he is correct in saying that healthcare spending will not slow because of HSAs.
… also, while the $2-$6K of healthcare spending that got the patient to their deductible may have been necessary, the expensive part comes after that. Part of the next $150 – $400K is where the waste comes in.
So in your Chinese travel example, it would be better to say that you pick people at random and require them to spend $4-$10K worth of travel to China, or they might die. But once they did that, they could travel to anywhere they wanted in the entire world and somebody else would pay, whether they needed to go there or not.
Kind-of a long comment, I know, but it was hard to equate healthcare expense with travel expense.