“Skin in the game” is a phrase that has come to be associated with the healthcare market. It implies that if a person has a personal financial stake in a decision, he or she will act more responsibly. Insurance executives and some conservatives say that if someone has “skin in the game,” they’ll be a better consumer of healthcare and keeps costs down for everyone.

Others have compared healthcare to car upkeep. “Would you use automobile insurance to buy gasoline?” former Secretary of State George P. Shultz and two of his Hoover Institution colleagues, Scott W. Atlas and John F. Cogan, asked last year in an op-ed for the Los Angeles Times. The thrust of the article was that health insurance should be used only for catastrophic sickness or injury.

Attitudes such as this have spurred the popularity of high-deductible health plans, both on the individual and employer-sponsored markets. Under these plans, annual physicals are covered and visits to the doctor have a specified co-payment, but all other expenses are subject to a deductible, rarely less than $1,000 and often many times more. The Affordable Care Act offers some help, capping 2015 deductibles at $6,450 in out-of-pocket costs for an individual and $12,900 for a family.

High-deductible plans are becoming increasingly common. According to a survey by the Kaiser Family Foundation, in 2006 10% of workers were enrolled in a plan with a deductible of $1,000 or more. By 2014, that number had increased to 41% of workers. Smaller firms had an even larger percentage of workers covered by high-deductible policies. In companies employing fewer than 200 people, the numbers went from 16% in 2006 to 61% last year.

The expenses borne by people in those plans can make almost any condition “catastrophic” if you’re living near the edge financially. I saw a specialist late last year for a medical condition that required lab tests. The physician was in the medical group I had used for years and they accepted my insurance. The sample was sent to the lab and a diagnosis was returned. But a couple weeks ago, I received a bill from the lab for more than $600.

Fortunately, I’m able to pay the bill, but there was a time not long ago, when I was unemployed, that I would have had to hope I had room on a credit card for that expense. And I’m better off than most. For someone making as much as $20 an hour, that bill would have cost about a week’s take-home pay.

Of course, when you’re the former president of engineering giant Bechtel and had a long career at the highest levels of government like Shultz did, it might not occur to you that there are those to whom a $600 bill is a catastrophe.

A report from The Commonwealth Fund showed that the percentage of costs not covered by insurance is steadily rising. In 2011, 19.2% of Americans under age 65 spent more than 10% of their family income on out-of-pocket medical expenses. That number was up from 18.2% in 2007-2009.

In a 2008 survey reported in Health Affairs, 40% of those with chronic conditions covered by high-deductible plans had trouble paying their medical bills, compared to only 16% of those on traditional plans. And 25% of those covered by high-deductible plans had trouble paying other bills because of medical costs. For families with incomes less than 400% of the poverty level, the numbers are even worse. Fifty-nine percent of those people had trouble paying their medical bills. The median out-of-pocket costs reported by those patients were $2,210, more than double the costs paid by those insured under a traditional plan.

The survey went on to report that 34% of those with a family member with a chronic condition were likely to experience financial hardship when covered by a high-deductible plan. That number increases to 60% for those making less than 400% of the poverty level. The poverty level for a family of three in 2008 was set at $17,600, so even those with a family income of $70,000 were likely to have financial hardship brought on by medical costs not covered by insurance. 

According to the study’s authors, “although high-deductible plans may provide health insurance coverage with affordable premiums and limit exposure to catastrophic costs, some families in these plans may remain effectively underinsured, limiting the plans’ effectiveness in reducing financial barriers to health care access.”

It doesn’t take a big out-of-pocket expense for people to forego needed care, either. A study published in the New England Journal of Medicine showed that even a small co-payment pushed biennial breast cancer screening rates down 8.3%. As might be expected, the effects were greatest among women in areas of lower income or education and particularly among black women.

Other studies have shown similar results. According to another Commonwealth Fund study, “46% of people earning less than $22,980 a year cited at least one example of skipping needed health care because of their plan’s copayments or coinsurance: 28% did not fill a prescription; 28% skipped a medical test or follow-up treatment; 30% had a medical problem but did not go to the doctor; and 24% did not see a specialist when they or their doctor thought they needed one.

There are ways to save money on healthcare, the supposed reason for the “skin in the game” argument. I suppose I could have found out what lab my clinic uses, called the lab, gotten a price check on the test that was to be performed, then called a bunch of other labs, gotten their prices, then called doctors who contracted with them to see if they’d take my insurance for the procedure. Because, to return to Shultz’s comparison, healthcare is NOT like gasoline. Aside from the fact that one controls whether you can drive to Target and the other controls whether you’ll live long enough to get there, it’s easy to see how much a gallon of gas is—it’s advertised on the front of the station. Even if doctors posted prices, it’s unlikely they’d be able to tell you how much a lab would charge to run a test.

And doctors don’t post prices. Nor is it easy to find out how much a procedure will cost. A study published in JAMA Internal Medicine in 2013 documented that even with a relatively straightforward procedure it’s difficult to get pricing information. Investigators called hospitals in each state to price a complete hip replacement including hospital and physician costs for a patient paying cash. Out of 122 hospitals contacted, 19 were unable to provide any pricing information and another 27 could provide only partial information.

There’s no question that comparison shopping can provide cost savings. The total costs ranged from about $11,000 to about $125,000. But these figures were based on extensive knowledge on the part of the researchers of whom to ask and what to ask for. The odds are against the average 60-something patient having the knowledge and wherewithal to conduct such a survey, even on a local level.

Even with pricing information, the costs can vary. Insurance companies encourage their customers to use “in-network” doctors and facilities. Those doctors have agreed with the insurance companies to accept a given fee for a service. But in the case of our patient needing a hip replacement, suppose an out-of-network anesthesiologist is substituted at the last minute. It’s not likely a patient would know who their anesthesiologist is and it’s not likely to occur to someone about to go under the knife to ask if the doctor behind the table is in the right network.

In a case such as this, an out-of-network provider will attempt to collect more money from the patient in a practice known as “balance billing.” Sometimes patients, even those in emergency rooms, will be asked to sign a form permitting this practice. Then, a few weeks or months later, a bill for what can be thousands of dollars comes in the mail. Some states, such as California, prohibit this practice for emergency room treatment, but many others do not. Hopefully those states allow patients to use their cellphones while driving for treatment to find out which ER is the cheapest.

So do high-deductible plans do what they’re supposed to? If you’re an employer or insurer, the answer’s yes. They provide the illusion of coverage at the lowest possible cost. If you’re the person stuck with one of those plans, the answer probably depends on whether your savings account looks like George Shultz’s.

-Steve Straehley

To Learn More:

The Share of People with High Medical Costs Increased Prior to Implementation of the Affordable Care Act (Commonwealth Fund)

Skin in the Game: How Consumer-Directed Plans Affect the Cost and Use of Health Care (RAND Corporation)

Study: Consumers With ‘Skin In The Game’ May Have Lower Health Costs But Risks Remain (by Rachel Zimmerman, WBUR)

Those Protesting Harvard Professors Have a Point (by Helaine Olen, Slate)

It’s Time to Rethink Health Insurance (by George P. Shultz, Scott W. Atlas and John F. Cogan, Los Angeles Times)

2014 Employer Health Benefits Survey (Kaiser Foundation)