The Impact of High Deductible Health Insurance Plans on Spending and Enrollee Response

I assess the extent to which high deductible health plans (HDHPs) reduce ex post moral hazard. Recently, HDHPs have become commonplace in the employer insurance market; however, the effect of adding an HDHP option into an individual’s offer set remains understudied. This paper answers three questions regarding HDHPs. First, do HDHPs lower total medical spending, and is there a behavioral response or simply a shifting of costs to the individual? I find HDHPs lower spending by 16 percent and reduce utilization as predicted by demand theory. Second, I find reductions in hospital-based medical care spending account for 60 percent of the savings. Finally, contrary to recently published papers, I find evidence of discriminatory cutbacks in service utilization and no evidence that these cutbacks impact health outcomes.