Fun (Facts & Fiction) With Numbers: Health Care Edition

The graph below, courtesy of the Kaiser Family Foundation, is featured in a VOX post purporting to explain why your health bills are gettng larger (all in one chart!).

kff deductiblesThe article focuses on the fact that deductibles have risen so dramatically as a major explanation for why it seems like we’re spending so much more on health care, even as health care expenses have been growing more slowly. There is some truth in the claim, and especially to the argument that people are more careful spending on health care when they have to pay for more of it up front, but there are some serious problems with this chart that can lead one to some pretty wrong conclusions.

First, what the graph doesn’t reflect is that the increase in premiums and the increase in deductibles are not, as the picture would appear, necessarily moving together for the people paying them. These are averages, and averages hide lots of information. Moreover, the graph makes it look like the two are increasing are independent of one another; i.e., that people are paying both 24% more in premiums and 67% more in deductibles since 2010. But that’s not the case. Since the ACA, many employers have moved to high-deductible plans that have lower premiums than the low-deductible plans that were popular pre-2010 (see below). What the graph hides is that people with low-deductible plans have seen higher than 24% increases in premiums while people with high-deductible plans have seen much lower increases in premiums–if not actual reductions in their premiums. What has changed is not necessarily how much people are paying for healthcare, but how they are paying it: in premiums or in deductibles. The graph above fails to show that.

Second, looking more closely at the news release on the Kaiser website, the 67% increase in deductibles is an increase in total deductibles paid–not the increase in the average deductible per employee. It reflects not only any increase in deductibles, but the increase in the number of people who have (higher) deductibles. That’s a pretty sneaky way to inflate the numbers on the graph to make it look like the average person is actually paying that much more. Consider the following two graphs, also from the Kaiser Family Foundation 2015 survey. kff-mkt-share-type kff-premiums The table on the left shows that premiums for high deductible plans (HDHP/SOs) are significantly lower than premiums for other types of policies. The table on the right shows that the market share of HDHP/SO plans has increased tremendously since gaining ground in 2006. In fact, to relate this to the first graph above, participation in HDHP/SO plans almost doubled from 2010 to 2015, meaning that 50 points of the 67% increase in deductibles could be attributable solely to more people choosing high deductible plans, specifically because the premiums are so much lower. And what the Kaiser report doesn’t say is how much employers contribute to the HSA plans that often accompany HDHP/SO plans. For some individuals, switching to the HDHP/SO plan may actually reduce their total out-of-pocket expense for health care. So while the original graph makes it look like everyone is paying more, that is likely not true for many people–and certainly not at the rate the original graph might suggest.

Finally, because the first graph is in percentages, it hides even more information that changes the story. Suppose deductibles had been $500 and increased to $1,000 or even $2,000. That’s would be a 100-300% increase! 300%! But that’s only $1,500. Not that $1,500 is chump change, but compared to the average annual premium of $6,251 (see the left-hand table above), that’s just 24%–ironically, about the total increase in premiums over the past five years. Even if that $500 deductible grew at the 67% shown in the first graph (which we know from #2 that it didn’t), the increase in actual out-of-pocket health care costs would have been $335–not quite the cost of two lattes a week.

Mark Twain is famously quoted as saying (and actually quoting Disraeli), “There are three kinds of lies: lies, damned lies and statistics..”  I’m not saying VOX (or Kaiser) are lying. But be careful when you see things like VOX’s report about some “fantastic new chart.” It’s far too easy to be misled if you don’t think carefully about the numbers being thrown about.

Bonus: If you’re interested in what the research says about the effects of high deductible plans, RAND has a nice summary site with links to additional resources.

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