Do Some Pay Too Little for Health
October 26, 2003
By DAVID E. ROSENBAUM
WASHINGTON - Consider what would
happen if employers paid
for their workers' car insurance and if that
covered routine maintenance. No doubt, the cars would
a good deal more time in the shop, and the price of
and the cost of auto insurance would skyrocket.
By the same token, some health policy
Americans see doctors more often, have more
take more medicine than they need because most, if
of the cost is covered by insurance.
"When consumers don't have to pay any
regard to price, they
overconsume," said Kate Sullivan, director of health
at the United States Chamber of Commerce. "You get
value for what you buy when you have a stake in it."
But there would be another
consequence if people's cars
received more service: they would run a lot better
a lot longer. This analogy may also apply to health
"People who have affordable and good health insurance
good preventive care and treatment when they need
Christine Owens, a health policy specialist at the
A.F.L.-C.I.O. "People who don't have good, affordable
health care delay treatment and are in poorer
The question of whether Americans
should have to pay more
of their health care expenses out of pocket has
central one in labor negotiations and in the
debates here and in state capitals. More than 80,000
supermarket workers are now on strike in California
four other states over proposed cuts in their medical
benefits. Transit workers in Los Angeles and garbage
workers in Chicago also walked out this month over
in their health insurance.
Workers at Verizon and the Big Three
automakers agreed to
much smaller pay raises than they might have expected
year so that their contracts would retain health
allowing them to pay little or nothing for
In Congress, negotiators are
struggling over what the
elderly should pay if prescription drugs are covered
Medicare. They are considering charging people who
Medicare for part of the cost of home visits by
Faced with spiraling costs for
Medicaid, the federal-state
health insurance program for the poor, many states
begun requiring low-income adults and the parents of
children covered by the State Children's Health
Program to make co-payments when they receive medical
"The public is more worried about
their rising health care
costs than they are about anything else - even about
mortgage payments or whether they will lose their
in the stock market," said Drew Altman, president of
Kaiser Family Foundation, which conducts opinion
about health matters.
But many economists, liberals and
conservatives alike, have
concluded that health costs will continue to rise out
control unless patients are required to pay more out
pocket for the services they use.
"As we've moved away from managed
care as a cost-control
device, we have no choice but to move to higher
and co-pays," said John F. Holahan, director of the
Policy Center at the Urban Institute, a research
The latest Kaiser study shows that
workers are dipping into
their wallets more often these days to meet medical
expenses. Since 2000, the average annual cost of
premiums has risen to $9,068 from $6,230 for family
coverage, and the worker's average share is now
from $1,619, an increase of nearly 50 percent.
(what patients pay out of pocket for each service)
deductibles (the annual amount people must pay before
insurance kicks in) have also risen.
What insured workers actually pay for
health care varies
widely. The average deductible is $275 for people in
preferred-provider organizations, the most common
health plan, but for workers in small companies, it
almost $500. Co-payments for doctor visits range from
more than $25, depending on the plan.
But in almost all cases, the expense
is not so great that
workers change their behavior - not enough, say, for
patients to ask doctors in advance what they charge.
Jonathan Gruber, an economist at the Massachusetts
Institute of Technology who was a deputy treasury
in the Clinton administration, argues that to limit
of health care, people should have to pay enough of
cost out of pocket that it pinches. Perhaps poor
should be exempt from cost sharing, he said, but
with union contracts are affluent enough that they
afford some co-pays."
Some economists disagree with Mr.
Gruber. Market principles
do not apply to health care, they say, because most
believe good health is priceless.
"If you make people pay more for
their health care," said
Uwe Reinhardt, a health economist at Princeton, "all
are doing is rationing health care according to
People like you and me would continue to get all we
and those without means would have to do without."
Some economists who are comfortable
with the principle of
making people pay more are not sure how much it would
to keep overall costs down, because all insurance
would still cover catastrophic expenses. A large
of total costs are attributable to a relatively small
number of people who are very sick, and their bills
generally exceed the ceiling on catastrophic
There is no conclusive evidence that
people's health would
deteriorate if they were charged more for care. Mr.
said he was convinced that "the health gains" from
health insurance "are not large enough to justify the
additional costs in aggregate."
But Mr. Reinhardt was skeptical and
fell back on the auto
insurance analogy. "When I was young and could not
regular maintenance, my cars constantly broke down,"
said. "Now my cars run forever."