A high-deductible health plan ($3,000 deductible) reduces premiums and discourages low-value utilization. However, research shows that HDHPs also reduce the use of preventive services and chronic disease medications among low-income enrollees. Why?
ALow-income enrollees do not understand the difference between preventive and non-preventive care
BThe deductible applies equally to all services, creating a financial barrier to both low-value and high-value care — low-income patients cannot afford to spend $3,000 before insurance kicks in, so they defer all care including necessary preventive care and chronic disease management
CHDHPs are designed to reduce all utilization equally
DPreventive services are not covered under HDHPs
This is the fundamental limitation of blunt cost-sharing: deductibles and copays do not distinguish between valuable and wasteful care. A patient who cannot afford the deductible will forgo a diabetes medication ($200/month) as readily as an unnecessary imaging study. The financial barrier falls hardest on low-income patients, who have the most to lose from deferred care. The ACA mitigated this by requiring first-dollar coverage of specified preventive services, but the general problem — cost-sharing reduces both appropriate and inappropriate utilization — remains.
Question 2 Short Answer
Value-based insurance design (VBID) reduces copays for high-value services (e.g., statins for heart disease patients) and increases copays for low-value services (e.g., brand-name drugs with generic equivalents). How does this differ from traditional insurance design?
Think about your answer, then reveal below.
Model answer: Traditional insurance design sets cost-sharing based on the cost of the service — more expensive services have higher copays. VBID sets cost-sharing based on the clinical value of the service for the specific patient — cost-sharing is low when evidence shows the service is highly beneficial (regardless of cost) and high when evidence shows limited benefit. This means a diabetic patient might pay nothing for their statin (high-value) while paying more for a marginal imaging study (low-value). Traditional design treats all services as if they have equal clinical value; VBID incorporates clinical evidence into the financial incentive structure.
The evidence on VBID is promising but still accumulating. Studies of reduced copays for chronic disease medications (statins, antihypertensives, diabetes drugs) show improved adherence with modest or neutral effects on total spending (medication costs rise but hospitalizations fall). The challenge is operationalizing 'clinical value' — it requires evidence review, clinical consensus, and IT infrastructure to implement condition-specific copay tiers.
Question 3 True / False
An out-of-pocket maximum caps total patient spending in a year. Once the maximum is reached, insurance covers 100%. This feature protects against catastrophic costs but increases moral hazard for patients who hit the cap early in the year.
TTrue
FFalse
Answer: True
Once a patient reaches the out-of-pocket maximum, their marginal cost for additional care drops to zero, eliminating any financial incentive to limit utilization. A patient who undergoes expensive surgery in January, hitting the $6,000 cap, faces zero cost for all subsequent care that year. This can increase utilization of discretionary services (elective procedures, specialist visits) in the remaining months. The tradeoff is intentional: the OOP max exists to prevent financial ruin from serious illness, accepting some moral hazard as the price of risk protection. The design challenge is setting the cap high enough to maintain cost-sharing for routine care but low enough to provide meaningful catastrophic protection.