The High Price of Cost Sharing: Economic Ideas and U.S. Federal Health Policy

• In Event: 1555 - Section on Science, Knowledge, and Technology Refereed Roundtables (1 hour)
  In Refereed Roundtable 60min: 5. Scaling Up the Debate: SKAT Perspectives on Public Policies

Abstract

Why does the United States not have universal healthcare? Despite being largely privatized, the U.S. healthcare system is notoriously expensive: per capita healthcare expenditures are just shy of $10,000 annually, and in total the country spends almost 18% of GDP on healthcare. Sociological research on healthcare offers a variety of explanations for this predicament: the nation’s heavy reliance on employer-provided insurance, the large uninsured population, and the powerful influence of the American Medical Association. While these accounts stress the organizational complexity of U.S. healthcare, policy debates among experts are narrowly focused on how to best provide a sufficient variety of options to medical ‘consumers,’ even as healthcare costs have continued to rise. Why?

This paper argues that organizational explanations regarding complexity and historical bricolage in the creation of the U.S. healthcare system must also account for how experts have justified the system’s inability to provide universal coverage. Using a variety of archival sources and analysis of key debates over federal healthcare reform, it traces the institutionalization of economic research on medical cost sharing in the health policy field. Cost sharing, or the idea that individuals should shoulder some of the cost of their insurance, was theorized by economists in the 1960s as a ‘moral hazard’ problem. Subsequently, policy experts at the RAND Corporation conducted a massive social scientific experiment on cost sharing between 1974 and 1982, which demonstrated that people who share the costs of their insurance use all types of medical services less (with no adverse health effects). The RAND Health Insurance Experiment provided empirical confirmation of the economic benefits of cost sharing, and the difficulty of replicating these findings has prevented the health policy community from seriously considering a universal healthcare system in the United States.

Author

• Zachary Webster Griffen, University of California-Los Angeles