The other night, I had a long argument with some health care types* that hinged, partly, on whether individuals have seen sharp shifts towards out-of-pocket spending in the past few years. Whether, in other words, the Great Risk Shift was heaping out-of-pocket costs onto individuals in some new way. My recollection of the data was that it wasn't, that out-of-pocket spending was actually going down, and that ever more money was going into insulation and premiums. This was not a popular viewpoint. So I was glad to come across this CBO graph detailing the story I was trying, and failing, to tell:
That's a sharp drop, particularly considering how much health costs have risen over the same period. What you're seeing, to be sure, isn't less total spending on the part of consumers, but more going into premiums, and being taken out of wages. And this has some negative effects. As the CBO says, "Consumers facing lower out-of pocket costs tend to demand more health care services than consumers facing higher out-of pocket costs. At the same time, rising healthcare costs (as a share of income) have probably led individuals to seek more extensive insurance in order to keep the variability of their out-of-pocket expenses from increasing."
So it's a bit of a perverse cycle. Costs go up, unsettling consumers, who buy more protection, which encourages somewhat more use of health care, which then brings costs up...rinse and repeat. This critique is often used by libertarians to argue that we shouldn't have any insulation at all. That's foolish. But I could see a world in which first-dollar cost sharing is increased in a targeted way to both bring down costs and increase quality. Indeed, I've even written about such a world...
*Yes, I'm exciting.
