When it comes to health care, the word “affordability” carries more than one meaning. Coverage can be affordable to buy if the premium is low enough. It can be affordable to use if the deductible, coinsurance, network, and drug costs do not keep people from getting needed care. And it can be affordable over time if the health system is actually becoming more efficient, lowering prices, or preventing more expensive illnesses later.
Much of the current debate about affordability emphasizes the first definition: the appearance of affordability as exemplified in the cost of the monthly premium. It is undisputed that the end of the Affordable Care Act’s enhanced subsidies has made premiums less affordable, leading to millions of Americans losing coverage. But fixing the affordability of insurance premiums does less to address the underlying prices and care needs that make health coverage expensive in the first place.
Lowering the monthly insurance premium or public contribution while moving more financial risk to the person who gets sick is increasingly common in American health policy. It manifests as high-deductible plans, health savings accounts, Medicaid work requirements, and marketplace designs that may offer more choices but also expose people to higher out-of-pocket costs.
These policies are often described as improving affordability, expanding choice, or reducing public spending. And sometimes they do lower what a payer spends, at least in the short term. But that is not the same as making care affordable for those who need it.
From a regulator’s seat, the distinction matters. Premiums are visible, but risk is often buried in benefit design. A plan may look affordable because the monthly payment is lower, but become unaffordable at the moment of illness, injury, pregnancy, or diagnosis—the kinds of things we need health insurance for.
HIGH-DEDUCTIBLE PLANS ARE THE CLEAREST EXAMPLE. They are often sold as a form of consumer empowerment: Give people more “skin in the game,” connect them more directly to prices, and they will become more careful health care shoppers. In theory, that could promote efficiency and push providers to compete on price.
The evidence is less reassuring. Researchers studied a large employer’s forced move to high-deductible coverage and found that workers did reduce spending. The reduction, however, came from using less care, not from shopping for lower-priced care. The researchers found no evidence that consumers learned to price-shop after two years. Care fell across the spectrum, including services that may have been wasteful and services that may have been valuable.
That is the central problem. A low-premium, high-deductible plan may save money for an individual who is healthy and lucky. But while a deductible is a price signal, it is not a clinical judgment. It does not tell a patient which MRI is unnecessary, which medication matters, which symptom can wait, or which follow-up visit prevents a hospitalization. It simply tells the patient: This is your bill.
The cost of illness does not disappear when people drop insurance coverage or lose it due to administrative technicalities.
The evidence shows that healthy people don’t shop for health care. A 2023-2024 Gallup survey found that nearly three-quarters of Americans didn’t know they could look up hospital prices for common services, and only 11 percent of older adults—the group most likely to need care—had ever done so. Even for genuinely shoppable services like imaging or elective procedures, patients rarely compare costs, even when their employer or insurer actively encourages it. And most health care spending isn’t done by healthy people anyway. A large share goes to people with serious illness, multiple diagnoses, or care needs that are complex, urgent, and often both. For them, shopping isn’t just unlikely. It’s beside the point.
Some spending reductions can deliver real efficiency. A hip replacement that can be done safely in an outpatient setting may lower costs and improve convenience. Fewer unnecessary scans can mean less waste. Better medications that prevent heart attacks or hospitalizations are the kind of savings the system should want. But when spending falls because people skip medications, delay preventive care, or avoid follow-up visits, the meaning changes.
That is why recent work by David Cutler and Lev Klarnet is so useful. They found that U.S. medical spending in 2024 was nearly $1 trillion below earlier forecasts. That is a remarkable slowdown, and some of it appears to reflect genuine improvement: less unnecessary care, better treatment, and lower-cost settings. But in a recent interview, Cutler also pointed to high-deductible plans as part of the story, noting they cut spending but not always where the system should want.
The same mechanism shows up in the individual insurance market. When premiums rise or subsidies shrink, people often face a set of difficult choices: pay more each month, move to a lower-premium plan with higher out-of-pocket costs, or drop coverage. That is what has happened since the enhanced Affordable Care Act premium tax credits expired. Choosing among several bronze plans can be a rational choice for a household that cannot afford the higher monthly premiums of the silver, gold, or platinum plans. But while that may preserve affordability on paper, it does not necessarily preserve access to care. It is a trade-off: less money every month, more risk if care is needed.
The point is not that people are wrong to make that trade. Many have no better option. The point is that policy discussions often describe choosing among the lower-tiered options as “competition” and the resulting coverage as “more affordable,” without saying what has been made affordable and what has been made riskier.
Medicaid work requirements illustrate the same distinction from the public side of the ledger. Work requirements are often upheld as a way to make public coverage more fiscally sustainable. But the fiscal savings do not come from making care less expensive. KFF has reported that Medicaid work requirements account for more than one-third of the spending cuts in the 2025 reconciliation law, or about $326 billion, with savings driven by reduced enrollment and coverage losses.
That is a different kind of “affordability.” The federal government may spend less because fewer people remain enrolled. But the cost of illness does not disappear when people drop insurance coverage or lose it due to administrative technicalities. Accidents still happen. Unexpected illnesses still occur. And then those costs are transferred to the uninsured person, the safety-net provider, or the hospital that provides needed care but goes uncompensated.
In policy debates, these shifts often are concealed through more appealing language. Reduced federal spending is described as “affordability.” Lower-premium options are described as “enhanced choice.”
HEALTH CARE CONSUMES PUBLIC BUDGETS, HOUSEHOLD INCOME, employer compensation, and state fiscal capacity. Some cost reductions are exactly what the system needs. But not all cost reductions are created equal. The problem is treating every reduction in payer liability as if it were the same thing as lower-cost care.
Real affordability would look different. It would not depend mainly on making people think twice before seeking care. It would focus on reducing what makes care expensive in the first place: the prices providers and insurers command, the billing structures that inflate those prices, and the intermediaries who extract revenue without adding value.
One example is reference-based pricing. Oregon capped what its state employee and teacher health plans would pay hospitals as a percentage of Medicare rates, while Montana used a similar Medicare-based approach for its state employee plan. California’s public employee system has used reference pricing for selected procedures. These approaches differ, but they share the same basic move: They set a disciplined payment benchmark rather than leaving prices entirely to hospital market leverage.
Another example is site-neutral payment. The same service can cost substantially more when delivered in a hospital outpatient department than in a physician office or ambulatory setting. That difference does not reflect the service itself. It reflects market power, facility fees, and billing classifications. Reducing those payment differences addresses a real source of cost growth without asking patients to sort out which bill will arrive after the visit.
Drug spending follows the same logic. In Ohio and Kentucky, audits revealed that pharmacy benefit managers (PBMs), the intermediaries that sit between insurers and pharmacies, were charging Medicaid programs substantially more than they paid pharmacies and keeping the difference. In Ohio alone, that spread pricing exceeded $224 million in a single year. Both states moved to require pass-through pricing and consolidate PBM contracts under public oversight. Ohio saved $140 million in the first two years. Kentucky saved nearly $283 million in the first two years, despite industry predictions that the reforms would cost the state money.
These approaches share a common aim: reduce exorbitant prices, limit administrative spread, and curb middleman extraction while preserving access to needed care. That is different from saving money because people avoid care or skip their prescriptions.
Global budgets and all-payer models offer a broader structural version of the same idea. Maryland’s hospital payment system constrains volume-driven incentives that can inflate costs without improving care. Hospitals operate under prospective budgets intended to limit revenue growth while encouraging prevention, coordination, and reductions in avoidable use. These models are imperfect, but they aim to capture the underlying economics rather than transfer exposure to patients.
The deeper problem is that lower prices hold only when hospitals, drug companies, PBMs, and insurers, the entities collecting them, face real pressure, either through competition or regulation, to reduce what they take in, not simply to shift who pays. Without that pressure, every part of the system finds new ways to pass the bill along. Policies targeting affordability must interrupt extraction without contribution: revenue gained from market leverage or collected by intermediaries that does not improve care, reduce complications, or lower the cost of delivering services.
Risk transfer asks patients, families, or states to absorb the problem. Cost reduction tries to solve it. Making insurance cheaper to buy does not necessarily make health care affordable to use. That distinction should matter in the politics of affordability. A health plan that is affordable only if you stay healthy is not affordable in the way most people understand the word. Real affordability shows up when care is needed. It protects people not only when they buy coverage, but also when they use it.
