Employer-sponsored coverage comes out of one’s paycheck. It is a regular expense that one gets used to and doesn’t even notice. But because of the increases in cost-sharing that have been occurring, people may start to have unexpected expenses. This is true even for people with private insurance. Maybe they have a high deductible; maybe the expense is not covered by their plan. And that is when their decisions are affected by other spending in the household.
Cathy Schoen (Commonwealth Fund) raised the question of whether the work going forward on tracking reform progress should focus on prospective risk or look at what people did spend.
She asked what people want to do with this index. Tracking would show whether the reforms put on the books have converted more of the risk, moving it from risk into a premium, and making it more predictable.
In her view, a measure is needed to indicate whether policy is moving in the right direction, staying about the same, or getting worse over time. The current SPM just subtracts medical care spending and says who is poor now—that is already on the books. Did they become poor just because of medical care?
Claxton responded that depending on some of the health reform decisions and what packages people get—particularly in the nongroup insurance market, in which the risk is the largest because the policies are the shabbiest—one might be able to say something prospectively about the insurance if the essential benefit package does not have a lot of limits.
If the package has a lot of limits, then one wants to track what people actually spend in order to figure out where they are spending their money and why. There is supposed to be an out-of-pocket limit of $5,000, $6,000, or whatever is decided upon.
For people who do not get a lot of cost-sharing subsidies, the deductibles are going to be in the several-thousand-dollar range at least, the out-of-pocket maximums will be nontrivial, and there may be other limits. So people with chronic conditions are still going to spend out-of-pocket. One hope is that fewer people will be spending very large amounts because they are hospitalized.
Those out-of-pocket limits apply to in-network care, he continued. And for people who are hospitalized, finding their way to an in-network provider all the way through their hospitalization is very difficult. The hospital doesn’t always wake you up from surgery to ask you about your network, for example.
Pamela Short mentioned two different takes on what represents a high burden of out-of-pocket expenses. One is an absolute standard of, say, 10 percent or 7.5 percent of income, which implies that, even at 400 or 500 percent of the poverty line, it is a bad thing, trying to avoid losing 10 percent of your consumption, basically on a much higher base. She said that