Out-of-pocket spending is a controversial topic in healthcare. On the one hand, the purpose of insurance is to reduce the financial impact of adverse events, like illness and injury, so higher out-of-pocket costs mean insurance is providing less protection. On the other hand, with little or no exposure to costs, a patient might over-consume healthcare, going to doctors for minor illnesses that could be self-treated, or getting screening tests – or even surgical procedures – that aren’t really necessary. In the latter case, the incentive effects of out-of-pocket payments might reduce wasteful healthcare spending and leave spending that is truly necessary mostly unaffected. The result would be a reduction in overall healthcare spending.
When exposure to out-of-pocket costs rises, which effect actually dominates? A recent study in JAMA Internal Medicine gives a hint of what happens, and it’s not looking good for incentive effects in the world of the Affordable Care Act (ACA).
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