The bitter reality of what it means to have skin in America’s health care game

Jacob Margolis, a science writer for KPCC, Southern California Public Radio, got an unwelcome surprise two days before New Year’s Day that brought his family some unexpected medical bills. His wife Rachel, four weeks from delivering a full-term baby, suffered a life-threatening complication: her placenta began to detach, threatening the health of both mother and baby. An ambulance rushed her to a nearby hospital for surgery, and after some dicey moments both mother and baby came through their unexpected medical trauma. Margolis’ wife spent five days in the hospital, and the baby just came home from the neonatal intensive care unit, 10 days after delivery.

The hospital was in their insurance network, but became an out-of-network facility at the beginning of the new year. So far, the insurance company says it will continue to pay for the baby’s care at in-network rates because the admission was an emergency. That doesn’t mean the family isn’t facing a financial hit. Their $8,000 out-of-pocket maximum for the family and $4,000 maximum for each family member reset on January 1. That means they’re on the hook for some portion of the bills for the 10 days in the NICU for baby Zoe and five for Rachel. They must come up with a substantial sum of money to satisfy their insurance policy’s cost-sharing requirements.    

“We were feeling pretty prepared to pay the $8,000 last year,” Margolis told me. But now, he says, the family is facing bills that could total as much as $16,000, a figure that includes some charges left over from monitoring Rachel’s pregnancy. Not surprisingly, he is having trouble getting straight answers from the hospital and his insurer. He told me that Minnesota-based insurer HealthPartners essentially said, “‘Sorry dude, you’re free to appeal.’” “It’s a bad feeling when something happens that is out of your hands that puts you in a financially stressful situation,” Margolis told me. “What we are going through doesn’t make us feel like we are recovering as a family.”  

As the country heads into a new year with the issue of high health care costs still unresolved and little prospect for relief from Congress, medical bills continue to heap financial distress on millions of American families. Last year the Federal Reserve Board released a troubling study that showed 40% of American adults would have to borrow or sell something in order to pay a $400 emergency expense. Twenty percent of adults had major unexpected medical bills. Among those with such expenses, 37% had unpaid debt.

However, what’s happening to Margolis and his family financially may be just what some members of Congress and health care special interest groups had in mind a few decades ago when they decided Americans had it too good when it came to health insurance coverage. They needed to pay more for their care. Hence the rise of the “skin-in-the-game” approach as the solution for America’s rising health care costs.

That idea went something like this: If people had to shoulder more of the cost of their care through higher deductibles, hefty coinsurance, and high out–of-pocket spending limits before their insurance paid a dime, they’d become smart consumers and use fewer health care services. They wouldn’t run to the doctor for every little sniffle, health care executives were fond of saying in public meetings.

That line of reasoning sounded logical, and policymakers bought into it as if it were some magic elixir. Premiums would come down. Employers would pay less for coverage and pass the savings on to their workers. Best of all, national spending on health care would come down. So would the amount of GDP spent on medical care. Market mechanisms would solve our health system’s woes. “We are clearly seeing a march to a more consumerist system,” said Helen Darling who headed the National Business Group on Health from 2001 to 2014. “Shifting from copays to coinsurance was a more subtle way to increase what the consumer pays.”

What’s happening to Margolis and his family financially may be just what some members of Congress and health care special interest groups had in mind when they decided families needed to pay more for their care. Hence the rise of the “skin-in-the-game” approach as the solution for America’s rising health care costs.

Employers slowly began shifting the responsibility for paying for medical care to those who actually became ill. By the time the Affordable Care Act came along in 2010, that principle was enshrined in American health insurance arrangements. Since the law passed, insurance deductibles have more than tripled. This year people buying an Obamacare policy can pay as much as $8,150 before their insurance kicks in. A family with such a policy can pay as much as $16,300. The caps increase each year. No wonder many families shun those policies because few have the cash reserves to pay such huge out-of-pocket amounts. Given that people with severe health problems are able to buy Obamacare policies without an insurer scrutinizing their health, it’s fair to assume that many of those policyholders who do buy policies are spending considerable amounts on medical care. It’s now alarmingly easy to have way too much skin in the game.

Meanwhile, national health care spending has continued to increase. More skin in the game and ever-higher cost sharing limits have not slowed rising medical costs. In 1995, when the skin-in-the-game approach first surfaced, health care accounted for 13.4% of GDP. In 2018, health care consumed 17.7%.  

Given the consolidation among health care providers and hospitals in the health care industry, it’s hard to see how big health systems wielding monopolistic or near-monopolistic power will bring prices down. Just consider how hard hospitals and doctors are lobbying Congress to make sure any fix for surprise billing doesn’t affect their incomes and revenues — the issue at the heart of the seemingly intractable stalemate.

That brings us back to the skin-in-the-game theory of controlling health care costs. The seemingly obvious problem with this solution is that too often people have no choice but to seek medical care. We’re not shopping for vacuum cleaners here. Certainly the Margolis family did not have the luxury of shopping their care. Had they done so, family members would have died. Certainly I did not have the capacity two years ago when an infection caused three life-threatening conditions that put me in a coma and pushed me to the brink of death. It’s absurd to think families are going to turn down life-saving treatment no matter how costly because they’re obligated to be ideal rational consumers and have more skin in the game. They will just do what they have to survive, assume serious financial debt and wait for the bill collectors to salt their wounds.

And those collectors keep coming. Journalists are doing a good job of covering the consequences of some of the medical community’s debt collection practices with stories like Lizzie Presser’s piece on Coffeyville, Kansas, published by ProPublica last year. But much more attention needs to focus on the underlying reason stories like this are making headlines. The stories alone aren’t changing the structural reasons that keep producing these outrageous outcomes.  

This skin-in-the-game method along with surprise bills, which are a relatively new twist, must go if Americans are ever to have medical security. Most Americans could do with far less skin in the health care game. The market-solves-all approach to health costs is not controlling costs, but is harming American families, both medically and financially.

Veteran health care journalist Trudy Lieberman is a contributing editor at the Center for Health Journalism Digital and a regular contributor to the Remaking Health Care column.