Editorial Board

Out of Pocket, Out of Control

Photographer: Patrick T. Fallon/Bloomberg

Obamacare's goal to expand access to health care has been only half a success: More Americans have insurance, but a rise in cost sharing means fewer can use it. Copayments -- those predetermined charges you pay at the doctor's office -- are a big part of the problem. In recent years, they've risen to the point where they no longer work as they're meant to. 

In theory, charging moderate fees to see a doctor or get a procedure gives people an incentive to consider whether they really need it. Done carefully, copays can thus reduce unnecessary spending, benefiting everyone.

Obamacare, Assessed

That means the charges have to be just large enough to influence people's decisions, and not so big as to keep people from getting the care they need. Yet copays have been going up significantly. In the past five years, the average price to see a primary care doctor has risen 20 percent. For a specialist it's gone up 29 percent, and for outpatient surgery it's up 43 percent. And that's just for employer-sponsored insurance; on average, those covered through the Affordable Care Act's exchanges face even higher expenses.

No wonder 22 percent of people now say the cost of getting care has led them to delay treatment for a serious condition. That's the highest percentage since Gallup started asking in 2001. Another poll found that as many as 16 million adults with chronic conditions have avoided the doctor because of out-of-pocket costs.

The wisdom of copayments also relies on the notion that consumers understand the incentives the payments are supposed to impose. Yet almost two-thirds of Americans don't know what costs they face for using an emergency room or a walk-in clinic, a recent survey found.

When copayments grow too big and confusing to be effective cost controls, they merely shift an ever-greater share of insurance costs away from premiums. And this undermines the basic purpose of insurance, which is to spread the risk of unforeseen costs across populations and over time -- among not just the minority who need care, but also everyone covered by the plan. Unlike premiums, out-of-pocket payments concentrate spending on the few who get sick.

Obamacare has begun to solve the problem by banning copayments on preventive care, such as immunizations, annual wellness visits and screenings for various diseases. The law also imposes a cap on annual out-of-pocket payments (that includes both copays and deductibles, which are also rising and discouraging people from getting needed care), though at a level so high -- $6,600 this year for an individual, $13,200 for a family plan -- that few people benefit from it.

And the law subsidizes copayments and deductibles for people earning between 100 percent and 250 percent of the poverty line. For people who get their health insurance through work, however, no such protections exist.

There's precedent for going further still: Canada has disposed of almost all out-of-pocket costs for doctor and hospital services since 1984 -- and still spends half as much per person on health care as the U.S. does. While Canadians are more likely to see a doctor in any given year, they're less likely than Americans to wind up in the hospital.

Rather than ban copayments entirely, however, the U.S. could make better use of their ability to steer people away from high-cost, low-value care -- emergency rooms for routine treatments, for example, or brand-name drugs when generics are available. Imposing higher upfront costs for these makes sense, so long as services that provide better value are easier to afford.

The government should also look at extending copay subsidies to lower-income beneficiaries on employer plans and lowering the cap on out-of-pocket costs.

Simply charging people more and more for every episode of care doesn't automatically make the system more efficient. Copays can work well only if they're designed to provide clear incentives. 

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.