The truth about out-of-pocket medical costs

'Dad, I got a bill for $1,113." One of our daughters was incensed. "I went to my doctor with a simple question. She sent me downstairs where they drew a few tubes of blood for tests. It took two minutes. How do I owe over $1,000?"

She's not the only one outraged by out-of-pocket health costs in the U.S. Many of us feel we are paying more for less and less insurance coverage. We blame high-deductible plans, rising copays and other policies that seem to shift more costs onto patients. Headlines such as "Out-of-pocket health spending in 2016 increased at the fastest rate in a decade" amplify the unhappiness.

But the perception of ever higher out-of-pocket health care costs obscures important facts.

It's true that, in 2016, those costs rose 3.9 percent. But health care costs overall increased 4.3 percent, so as a percentage of total health care spending, out-of-pocket costs actually fell. And this has been the case for several years. In 2010, total out-of-pocket costs amounted to almost $300 billion, 11.5 percent of national health expenditures. By 2016, they rose to slightly more than $350 billion, but fell to 10.6 percent of total spending.

What's going on? Well, a lot of people point to businesses shifting more workers into high-deductible health plans. Such plans save an employer, on average, more than $1,500 per insured family. In 2017, more than half of all insured American workers had health insurance with a deductible exceeding $1,000 — that's almost twice as many as had such policies when Obamacare passed. But that's not all that's changed.

The Affordable Care Act has also limited many Americans' exposure to extremely high out-of-pocket spending. By expanding insurance coverage, it has lowered the number of Americans who pay the full bill for all of their health care. And it placed a legal limit on out-of-pocket costs for people who have insurance. (Disclosure: We both helped design the Affordable Care Act.)

Before Obamacare, Americans who contracted cancer or had a serious accident or gave birth to a premature baby could be forced into bankruptcy. Today, even high-deductible plans must limit out-of-pocket expenses to $14,300 for a family or $7,150 for an individual. This seems like a lot of money — and it is — but these limits have significantly reduced bankruptcies caused by catastrophic health care costs. And they're a big reason that, despite higher deductibles, out-of-pocket spending has fallen as a share of overall health spending.

What's more, people tend to deal with deductibles irrationally. Even patients with chronic illnesses who go to the doctor a lot, get a lot of tests and are maybe even hospitalized — and therefore are sure to reach their deductible limit in the year — hold off getting medical tests and treatments at the start of the year, research has shown. Yet delaying medical care because of the deductible can undermine a person's health.

This is why the Affordable Care Act requires insurers to cover, without deductibles, preventive services and three primary care visits. This, too, has enabled Americans to save on health care costs.

Of course, it's very unpleasant to receive a bill for $1,113 — but it is dramatically more so to face bills amounting to $20,000 or $30,000 when you get seriously ill. We believe health insurance should involve more protection against very high costs, even as it provides more exposure to small ones. That's effectively what is happening.