A recent post for the Los Angeles Times blog, Economy Hub, discussed a government report that found the number of Americans having trouble paying medical bills fell since Obamacare was passed. LA Times business writer, Michael Hiltzik, reported how 44.5 million Americans had trouble paying bills in early 2015, compared to 56.5 million in 2011.
How do we know 44.5 million Americans had trouble paying bills in 2015 — or that 56.5 million had trouble in 2011? A sample of Americans were surveyed (basically interviewed) and the results extrapolated to the entire country. Is this really accurate? And what does it even mean? Economists don’t generally put much faith in polls and surveys where people tell their opinions. The poll is referred to as a survey instrument (that’s a fancy name for a carefully-worded questionnaire). The way a poll is worded can easily bias the responses — sometimes intentionally. Economist prefer ex post facto data where subjects reveal their preferences through data that tracks their actions.
As an aside, I especially don’t trust polls that ask people if they’ve had trouble paying for something they don’t necessarily want to pay for in the first place. For example, there are people out there who would probably say they have trouble paying for cigarettes. Yet, these same people will continue to buy them. Their revealed preference is to buy cigarettes despite the cost. They may say they have trouble affording cigarettes because they can remember a time when a carton cost $17 and now that only buys two or three packs depending on where you live. Smokers undoubtedly resent that fact that cigarettes are expensive due to taxes and would likely report the financial strain if surveyed. By contrast, there are also people who will spend an exorbitant amount of their income on alcohol, but may never say they have trouble affording beer. Rather they may have trouble paying for beer, cigarettes and unexpected medical bills on the same budget. If you ask them, they would probably report having trouble paying for the least popular items in their budgets rather than the luxuries they choose to afford.
Hiltzik assumes the ACA is working because 12 million fewer people indicate they have trouble paying medical bills. Yet medical bills can be a problem not just for the uninsured; and not just because medical care is expensive. Paying for health care when uninsured (and costs below the deductible) is a problem because our convoluted health care system does not compete on price. Because it doesn’t compete on price, it also doesn’t post prices or try to earn the patronage of price-sensitive shoppers.
There is one trend that is likely to cause many more people to have problems paying medical bills in the future; the growing prevalence of high-deductible plans. Health insurance deductibles are rising both under Obamacare and in the workplace. As premiums and deductibles rise, enrollees become increasingly apt to drop coverage if they can. Who wouldn’t question the value of paying, say, $6,000 per year for a plan with a $6,750 deductible you will never exceed. As healthy enrollees drop their insurance, enrollees who stay are likely to be sicker and more costly — resulting in premium hikes the following year. This will prompt yet another cycle of healthy enrollees dropping out.
If there is one silver lining in the dark cloud that is the Affordable Care Act, it is that the costly — and largely worthless — Obamacare exchange plans will encourage millions more people to ask about prices when receiving medical care. Millions of enrollees are essentially paying for all of their health care out of pocket because their deductibles are far higher than their annual medical needs. Hopefully that will boost the number of patients comparison shopping for medical services. People who pay all their medical bills out of pocket have an incentive to ask questions like “doc, do I really need an MRI right now?” “Can’t we wait to see if my knee gets better on its own?” “What’s that going to cost?” “Is there somewhere I can get it done cheaper?” You get the picture; when asking about prices become more common, maybe we can move beyond Omamacare and establish a consumer-directed health care system that serves more peoples’ needs.