“Skin in the Game” Fails As a Health Care Cost Control Idea
Health insurance premiums for a typical employer-provided family policy grew by an incredible 9 percent this year according to a new Kaiser Family Foundation study. Not only have premiums increased for employers, but the employee cost sharing has gone up as well.
Compared to only a few years ago, there has been a big increase in high deductible plans, co-pays and co-insurance. In 2006, 10 percent of workers with employer insurance had a deductible as high as $1,000 for single coverage; now 31 percent face such deductibles.
The first chart from the study shows how health insurance premium increases have far outpaced worker earnings. The second shows how more and more workers confront high deductibles. From KFF:
Charts like these should put to death the zombie myth that the way to control America’s incredible health care cost growth is to just give individuals more “skin in the game.” The idea that making Americans pay more out of pocket for their health care will reduce overall health care spending is false, and pursing it will be a complete failure. The idea is based on a childish, simplistic belief that a “free market” functions well in health care and health insurance; it has no basis is reality. But sadly this notion is still championed by free market economists, including prominent advisers to President Obama.
As the study and its graphs show, we have been dramatically increasing the amount of “skin” individuals have in the game for years, yet our health care costs continue to grow rapidly. Our health care costs also rise faster than those in the rest of the first world even though we tend to pay far more out of pocket. There is no reason to believe further cost shifting to consumers/patients in the future will end up controlling our out of control health care costs.
This is why I don’t have much faith that the Affordable Care Act will control costs. Many of the so called “cost saving” ideas, from the exchanges to the excise tax, are supposed to magically reduce health care costs by farther increasing skin in the game and relying on “free markets.” The evidence shows that doesn’t work.