[nkurz]

  > In 2006, about one in 10 employees had a health insurance 
  > deductible over $1,000. Today? About half do.
  > To health economists, this sounded like good news; they've 
  > long theorized that higher deductibles would force down 
  > health-care costs. The idea was that higher deductibles 
  > would make patients become smarter shoppers: If they had  to 
  > pay more of the cost, they'd likely choose something closer 
  > to the $1,529 appendectomy than the $186,955 appendectomy 
  > (yes, some doctors really do charge that much). This would 
  > push the really expensive doctors to lower their prices so 
  > cheaper physicians didn't steal their business.

This seems so illogical that I think I must be missing something. Presumably, the patient pays the deductible out of pocket, and the remainder is covered by the insurance.

  Case A:  $1,529 appendectomy.  
  Patient pays $1000, receives "cheap" appendectomy. 
  
  Case B:  $186,955 appendectomy.  
  Patient pays $1000, receives "luxury" appendectomy.

Why would the "health economists" think that a patient be incentivized to choose the less expensive option? Rightly or wrongly, the frequent presumption is that more expensive services are higher quality. Why would a patient go out of their way to choose the lower priced option if they are paying a flat rate?

  > But when the researchers looked at why spending dropped, 
  > they found it had nothing to do with smarter shopping. The 
  > average price of a doctor visit wasn't dropping.
  > 
  > Instead, under the high-deductible plan, workers just went 
  > to the doctor way less. The paper finds that "spending 
  > reductions are entirely due to outright reductions in 
  > quantity." Workers did use less "potentially wasteful 
  > care," like imaging services, but they also cut back on 
  > "potentially valuable care," like preventive visits.

Clearly the incentive is for the patient to avoid costs that are less than the deductible. Lo and behold, the patients chose to avoid costs that are less than the deductible (doctors visits and preventative care), and to ignore cost in cases that are higher than the deductible (surgeries and emergencies). How can this be construed as a surprise?

[dragonwriter]

Plans with a deductible "over $1,000" usually have deductibles well over $1,000, e.g. $3,000 to $6,000+, and only cover something like 20% costs after the deductible.

So, neglecting the annual limit, the $1,529 vs. $186,955 appendectomy situation wouldn't be $1,000 vs. $1,000, it would be more like (with $3,000 of unused deductible at the time of the procedure) $1,529 vs. $39,791.

[nkurz]

I was concentrating on the lousy logic expressed in the article rather than specific numbers in the study. I think my point stands, since the total cost for any appendectomy is almost certain to exceed any deductible.

As you point out, the real difference in costs (and the factors that actually might influence patient behavior) are the percentage of coverage after the deductible and the levels for out-of-pocket max. As you probably noticed, these weren't mentioned in the article.

I'd hope the actual paper has a better discussion of this, but it doesn't seem to be publicly available: http://www.nber.org/papers/w21632

One of the authors do have some summary slides available: http://eml.berkeley.edu/~bhandel/wp/BCHK.pdf

From Slide 8, it looks like the studied group had a 10% in-network copay, with a $6,250 out-of-pocket cap.

[cjy]

The annual deductible in this study is $3,750. So, as long as a patient hasn't spent over $3,750, they have the incentive to reduce costs. You are correct, after a patient hits their deductible they have no incentive to reduce costs.