The Illogic of Co-Pays and Deductibles

Last week, the NY Times ran story about how the Harvard University healthcare plan is raising various employee costs in an effort to lower costs–this is partly a response to various Obamacare/ACA policies (boldface mine):

The university is adopting standard features of most employer-sponsored health plans: Employees will now pay deductibles and a share of the costs, known as coinsurance, for hospitalization, surgery and certain advanced diagnostic tests. The plan has an annual deductible of $250 per individual and $750 for a family. For a doctor’s office visit, the charge is $20. For most other services, patients will pay 10 percent of the cost until they reach the out-of-pocket limit of $1,500 for an individual and $4,500 for a family.

Previously, Harvard employees paid a portion of insurance premiums and had low out-of-pocket costs when they received care.

Michael E. Chernew, a health economist and the chairman of the university benefits committee, which recommended the new approach, acknowledged that “with these changes, employees will often pay more for care at the point of service.” In part, he said, “that is intended because patient cost-sharing is proven to reduce overall spending.”

The Harvard faculty came out against which led to lots of brilliant commentary along the lines of ‘Harvard faculty supported Obamacare, now they pay more for healthcare. HUR HUR HUR!’ Leaving aside the reality non-faculty employees are now paying significantly more for healthcare, this shows the idiocy of co-pays and deductibles. The idea of having ‘skin in the game’ is that too many people are getting unnecessary treatment. That may be, but co-pays and deductibles really won’t do much to stop unnecessary treatment (note the italicized word).

Why? If you’re sick and able to pay, you will get the treatment in most cases. It’s worth the money–being able to afford medical treatment is one reason people like having money. Most people just aren’t that cheap when it comes to their health. But if you’re unable to pay, you won’t get treatment–even if you need it. The latter will lower healthcare costs–less fortunate people won’t get treatment–but so would shooting sick people in the head. And if you don’t believe me, those radicals at the Boston Federal Reserve seem to think so as well.

Will this put a crimp is the lifestyle of a tenured Harvard professor? Probably not, but it will screw over other non-faculty employees who don’t make that much money.

As always, it’s worth noting this was not only predictable, but predicted, not for egotistical reasons but to remember who got this right and wrong–and who gave a damn about people’s health, as opposed to their health insurance.

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4 Responses to The Illogic of Co-Pays and Deductibles

  1. JaniceInToronto says:

    Tell me again why you guys are so terrified of Canadian style health care. It works really well. I recently had an ambulance ride, an ER visit, 3 ECG’s, IV drug treatment and it cost me a whole $45.00 (for the ambulance).
    People who are telling you how horrible wait times are, are not telling you the whole truth.

  2. Robert L Bell says:

    Good work, but I would change the emphasis just a little bit. What we have here is yet another employer shifting costs onto the employee, who is helpless to resist, while dishonestly dumping the blame on some government regulation.

    Absolutely nothing in the ACA forces the Harvard administration to shift costs in this way, just the expectation of some paper shuffler in HR that they can squeeze a dime or two out of the peons.

    Good on the Faculty for making a stink and embarrassing the precious. brand.

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