Healthcare & Cost-Shifting

Health care in America is a mess, quite frankly, and I am not going to sit here and pretend I have any sort of solution for cleaning it up. Change makes a lot of us uneasy, I think, and so it is tempting to blame everything on the biggest recent change in health care that comes to mind: The Affordable Care Act (ACA). Some folks like to call it “ObamaCare” but I prefer using the official title of the law. I’d like to direct your attention to The Great Cost Shift, an article that blames our increased out-of-pocket spending on health care not on the ACA but on cost-shifting by employers.

From the article:

The actual reason why employee and employer costs are increasing at different rates is because employers have, over time, shifted greater responsibility for health care expenses to their employees through higher deductibles, higher copayments, and higher coinsurance—a practice that began long before the passage of the ACA. Other employers pay smaller shares of their employees’ health care premiums.

To some degree, this long-term cost shifting has contributed to the overall health care slowdown. Increased cost sharing discourages the use of health care—individuals tend to spend less on their health care when they are subjected to higher fees or deductibles—which has lowered overall health care spending. Employees with higher cost sharing are more likely to avoid or delay even beneficial and cost-effective care. Employers, insurers, and public health care programs benefit from these savings, while individual employees with significant health care needs face greater out-of-pocket costs. Employees have increasingly reported that their health care costs are unaffordable. In other words, almost everyone in the health care system is realizing savings, but employees’ costs are rising.

The authors, Topher Spiro, Maura Calsyn, and Meghan O’Toole are advocating for reforms that allow employees to share in the cost-savings realized by employers. I am not optimistic with regard to such reforms, but passing along some of these savings to employees would surely incentivize a more thoughtful use of health services, and that would be a benefit to all of us.


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