The Incidental Economist

Cecille Joan Avila is a policy analyst with the Boston University School of Public Health (@cecilleavila). Paul Shafer, PhD, is an assistant professor of Health Law, Policy, and Management at the Boston University School of Public Health (@shaferpr). Megan B. Cole, PhD, MPH, is an assistant professor of Health Law, Policy, and Management at Boston University School of Public Health (@meganbcole). 

The Affordable Care Act (ACA) made historic strides in expanding access to health insurance coverage by covering an additional 20 million Americans. President Joe Biden ran on a platform of building upon the ACA and filling in its gaps. With Democratic majority in the Senate, aspects of his health care plan could move from idea into reality.

The administration’s main focus is on uninsurance, which President Biden proposes to tackle in three main ways: providing an accessible and affordable public option, increasing tax credits to help lower monthly premiums, and indexing marketplace tax credits to gold rather than silver plans.

However, underinsurance remains a problem. Besides the nearly 29 million remaining uninsured Americans, over 40% of working age adults are underinsured, meaning their out-of-pocket cost-sharing, excluding premiums, are 5-10% of household income or more, depending on income level.

High cost-sharing obligations—especially high deductibles—means insurance might provide little financial protection against medical costs beneath the deductible. Bills for several thousand dollars could financially devastate a family, with the insurer owing nothing at all. Recent trends in health insurance enrollment suggest that uninsurance should not be the only issue to address.

A high demand for low premiums

Enrollment in high deductible health plans (HDHP) has been on a meteoric rise over the past 15 years, from approximately 4% of people with employer-sponsored insurance in 2006 to nearly 30% in 2019, leading to growing concern about underinsurance. “Qualified” HDHPs, which come with additional tax benefits, generally have lower monthly premiums, but high minimum deductibles. As of 2020, the Internal Revenue Service defines HDHPs as plans with minimum deductibles of at least $1,400 for an individual ($2,800 for families), although average annual deductibles are $2,583 for an individual ($5,335 for families).

HDHPs are associated with delays in both unnecessary and necessary care, including cancer screenings and treatment, or skipped prescription fills. There is evidence that Black patients disproportionately experience these effects, which may further widen racial health inequities.

A common prescription has been to expand access to Health Savings Accounts (HSAs), with employer and individual contributions offsetting higher upfront cost-sharing. Employers often contribute on behalf of their employees to HSAs, but for individuals in lower wage jobs without such benefits or without extra income to contribute themselves, the account itself may sit empty, rendering it useless.

A recent article in Health Affairs found that HDHP enrollment increased from 2007 to 2018 across all racial, ethnic, and income groups, but also revealed that low-income, Black, and Hispanic enrollees were significantly less likely to have an HSA, with disparities growing over time. For instance, by 2018, they found that among HDHP enrollees under 200% of the federal poverty level (FPL), only 21% had an HSA, while 52% of those over 400% FPL had an HSA. In short, the people who could most likely benefit from an HSA were also least likely to have one.

If trends in HDHP enrollment and HSA access continue, it could result in even more Americans who are covered on paper, yet potentially unable to afford care.

Addressing uninsurance could also begin to address underinsurance

President Biden’s health care proposal primarily addresses uninsurance by making it more affordable and accessible. This can also tangentially tackle underinsurance.

To make individual market insurance more affordable, Biden proposes expanding the tax credits established under the ACA. His plan calls for removing the 400% FPL cap on financial assistance in the marketplaces and lowering the limit on health insurance premiums to 8.5% of income. Americans would now be able to opt out of their employer plan if there is a better deal on HealthCare.gov or their state Marketplace. Previously, most individuals who had an offer of employer coverage were ineligible for premium subsidies—important for individuals whose only option might have been an employer-sponsored HDHP.

Biden also proposes to index the tax credits that subsidize premiums to gold plans, rather than silver plans as currently done. This would increase the size of these tax credits, making it easier for Americans to afford more generous plans with lower deductibles and out-of-pocket costs, substantially reducing underinsurance.

The most ambitious of Biden’s proposed health policies is a public option, which would create a Medicare-esque offering on marketplaces, available to anyone. As conceived in Biden’s proposal, such a plan would eliminate premiums and having minimal-to-no cost-sharing for low-income enrollees; especially meaningful for under- and uninsured people in states yet to expand Medicaid.

Moving forward: A need to directly address underinsurance

More extensive efforts are necessary to meaningfully address underinsurance and related inequities. For instance, the majority of persons with HDHPs receive coverage through an employer, where the employer shares in paying premiums, yet cost-sharing does not adjust with income as it can in the marketplace. Possible solutions range from employer incentives to expanding the scope of deductible-exempt services, which could also address some of the underlying disparities that affect access to and use of health care.

The burden of high cost-sharing often falls on those who cannot afford it, while benefitting employers, healthy employees, or those who can afford large deductibles. Instead of encouraging HSAs, offering greater pre-tax incentives that encourage employers to reabsorb some of the costs that they have shifted on their lower-income employees could prevent the income inequity gap from widening further.

Under the ACA, most health insurance plans are required to cover certain preventative services without patient cost-sharing. Many health plans also exempt other types of services from the deductible – from generic drugs to certain types of specialist visits – although these exemptions vary widely across plans. Expanding deductible-exempt services to include follow-up care or other high-value services could improve access to important services or even medication adherence without high patient cost burden. Better educating employees about what services are exempt would make sure that patients aren’t forgoing care that should be fully covered.

Health insurance is complicated. Choosing a plan is only the start. More affordable choices are helpful only if these choices are fully understood, e.g., the tradeoff between an HDHP’s lower monthly premium and the large upfront out-of-pocket cost when using care. Investing in well-trained, diverse navigators to help people understand how their options work with their budget and health care needs can make a big difference, given that low health insurance literacy is related to higher avoidance of care.

The ACA helped expand coverage, but now it’s time to make sure the coverage provided is more than an unused insurance card. The Biden administration has the opportunity and responsibility to make progress not only on reducing the uninsured rate, but also in reducing disparities in access and patient affordability.

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The following originally appeared on The Upshot (copyright 2020, The New York Times Company). 

American opponents of proposed government-run health systems have long used the word “choice” as a weapon.

One reason “Medicare for all” met its end this year has been the decades-long priming of the public that a health system should preserve choice — of plans and doctors and hospitals. To have choice is to be free, according to many.

So how many Americans actually have choices, and what type of freedom do choices provide?

Making mistakes with Medicare

Current Medicare enrollees have more choices than any other Americans — to some, in fact, an overwhelmingly large number of them.

In 2019, 90 percent of Medicare enrollees had access to at least 10 Medicare Advantage plans, which are government-subsidized, private-plan alternatives to the traditional public program.

But this is just the beginning. If Medicare beneficiaries who elect to enroll in the traditional public program want drug coverage, they must choose from large numbers of private prescription drug plans. In 2014, beneficiaries could choose from an average of 28 drug plans. They can also select private plans that wrap around traditional Medicare, filling in some of its gaps, and this doesn’t even count plan options that may be available through former employers as retiree benefits.

Choosing among all these options would be a challenge for anyone, or, as a Kaiser Family Foundation report put it, “a daunting task.”

“Medicare beneficiaries are so confused, overwhelmed and frustrated with the number of choices and the process of choosing among them, they end up taking shortcuts,” said Gretchen Jacobson, now with the Commonwealth Fund and an author of the report. “Those shortcuts can lead them to select plans that aren’t as beneficial to them as other options.”

In other words, freedom to choose is also freedom to make mistakes.

For instance, in the first year that drug plans were available to Medicare beneficiaries, economists have shown that 88 percent of them chose a more costly plan than they could have. This cost them 30 percent more, on average, and the tendency to select needlessly costly plans persisted in subsequent years. This is the kind of error, as other studies have found, that is easy to make when inundated by choices.

More generally, without some assistance, many people don’t understand the health insurance choices and features. Even common terms can be confusing. In one study, all the subjects said they understood what a “co-pay” was, but 28 percent could not answer a question testing their knowledge of the term; 41 percent couldn’t define what “maximum out-of-pocket” meant.

Of course, just because people make mistakes when faced with choices doesn’t imply that a single plan for all would be a better fit for more people. It all depends on the details.

Medicaid also offers the vast majority of enrollees private-plan choices. States, on average, offered seven plans for enrollees to choose from in 2017. Some types of enrollees — particularly those with more complex health problems — are not able to choose plans and are put into one that specializes in their needs.

According to a systematic review by Michael Sparer, a professor at Columbia University’s Mailman School of Public Health, studies do not find much cost savings to Medicaid programs stemming from all this choice. But some studies indicate that private Medicaid plans do provide better access to some types of care, including primary care.

A caution, however: “Since Medicaid is a state-based program, broad averages don’t tell you much about what is happening in specific states,” he said. “Some states have been able to save money through the managed care options enrollees can select, and some have not.”

It’s much less clear how many choices people with employer-sponsored plans have, because that data isn’t public. Generally speaking, employers serve as a filter, selecting or working with insurers to devise a small number of plans offered to employees.

What we do know is that three in four employers offer just a single plan. These are mostly small businesses, so only a minority of workers are employed by them. Most workers (64 percent) are employed by firms that offer some choice among plans. But most of these workers are at firms that offer just two options. Does this imply workers at these firms have less freedom?

About 4 percent of firms with more than 50 employees offer coverage in private exchanges, akin to what the Affordable Care Act established for individuals. “Private exchanges generated a lot of hype five years ago,” said Paul Fronstin, director of health research at the Employee Benefit Research Institute. “For some reason, they just never became popular.”

He gets his coverage from an exchange that offers a whopping 60 plans. “Choosing among them is no small task, particularly because information about them is so confusing,” he said.

One employer that stands out in offering choices is the federal government. Federal employees can typically choose from about two dozen plans (the number and details vary by state). There are 28 plans in Washington and 21 in Rhode Island, for example.

This year, all A.C.A. marketplace enrollees have choices among plans, on average about 19 of them. Some have over 100.

All told, a rough calculation suggests that about 80 percent of insured Americans have a choice of health plan.

What is ‘freedom’ in health care?

It’s worth considering what accompanies health insurance choice for some Americans. If you work at a company, you could lose access to affordable coverage if you lose your job or if the company decides to stop offering it.

Other people choose coverage plans that can be too skimpy to pay for a major treatment.

Yet others may have options, but they may not be affordable. None of this is necessarily a condemnation of choice per se, just the nature of health insurance choice in America today.

Medicare for all was supposed to address problems like these. As the Finnish author Anu Partanen wrote of a single-payer system: “The point of having the government manage this complicated service is not to take freedom away from the individual. The point is the opposite: to give people more freedom.”

The Medicare for All Act would have offered no choice, enrolling everyone in the same, comprehensive plan with no out-of-pocket cost. Proponents of this approach trust the government to devise a program suitable for all. Detractors of it favor choices precisely because they have less faith that government will do a better job than plans that are in competition. For them, freedom to choose is freedom from tyranny. But too much choice without enough guidance can be overwhelming.

@afrakt

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When colleges nationwide canceled in-person classes and closed dorms for the semester, thousands of college students like me moved away from our campuses. Like most full-time students with university-sponsored coverage, my health insurance is primarily intended to let me access care from on-campus providers during the academic year. So how will moving away from campus affect college students’ access to needed medical care during this pandemic?

In the context of a growing pandemic that affects people of all ages, the costs associated with limited health insurance coverage could discourage displaced students from accessing needed care, especially those from low-income and middle-income families. Many university-sponsored health insurance plans impose high out-of-network costs, meaning that accessing even vitally-necessary care could pose a serious financial burden for low-income students.

I’m no longer living in university housing, so my former primary care doctor is not in my insurance network. This means that I would pay 30% of the cost out of pocket for a visit to my primary care physician or an out-of-network hospital. That could easily cost thousands of dollars. Financial disincentives to access care like this, especially now, are a public health concern, but I can’t seem to find a single article discussing this potential disaster.

I’m not overly worried about paying for my own care. I come from a middle-class family (my parents are teachers), I’m young, and I’m fairly healthy. For lower-income students that don’t qualify for Medicaid, though, paying 30% of a hospital bill would likely prove impossible. It could lead to bankruptcy. Needing hospital care is not much of a choice, but low-income students in need of care could soon be forced to choose between receiving life-saving treatment or paying rent. Even as someone from a middle-class family, paying up to my yearly out-of-pocket maximum of $6,350 for a prolonged hospital stay could put my family into dire financial straits.

While COVID-19 disproportionately impacts older people, college students are not immune to the virus. According to the CDC’s most recent data, 20% of those hospitalized for COVID-19 were between 20 and 44 years old. College students can still be at high risk for severe complications from the virus if they have diabetes, severe asthma, or are otherwise immunocompromised. Even otherwise young and healthy people can become severely ill or die from COVID-19.

Under the newly-passed Families First Coronavirus Response Act, private health insurance plans are required to cover COVID-19 testing free of charge, which includes university-sponsored coverage. Although shortages of virus diagnostics in the United States severely limit the effects of this provision, making testing more affordable for some patients was certainly a step in the right direction.

Despite the current policymaking frenzy in Congress, federal legislators have not yet implemented any requirements for private insurance plans to waive out-of-pocket payments for COVID-19 treatment. Representatives from a health insurance industry group refuted President Trump’s statement that insurers would “waive all copayments for coronavirus treatments,” stating that major plans would cover copays for testing but not for treatment. Absent further legislation action, patients could be on the hook for a range of costly items like hospitalization or admission to an intensive care unit.

New Mexico and Massachusetts recently became the first states to waive out-of-pocket costs for COVID-19 treatment for some privately insured patients, filling the gap left by federal inaction. But the federal government’s deep pockets and heavy influence over health insurance regulation mean that states can only do so much without the help of Congress and the White House.

Displaced college students will need to access health care for a variety of other reasons during this crisis. Medical emergencies like anaphylaxis, car accidents, and life-threatening injuries haven’t magically stopped while we wait for the spread of the virus to subside. Out-of-network cost-sharing like copays and deductibles still apply. Displaced low-income students’ medical bills can threaten the livelihoods of their families, especially as unemployment surges. Surprise billing remains unaddressed, despite President Trump’s claim that insurance companies would prevent such charges.

High out-of-pocket costs lead patients to forgo necessary and unnecessary care indiscriminately. We can’t afford to let the prohibitive costs of out-of-network charges stop students from receiving the care they need.

Even as a student of health policy, I had trouble parsing what providers and benefits my health insurance covers while I’m not on campus. That information tends to be tucked away into a morass of lengthy and obscure documents on a poorly-designed insurance company website, full of hard-to-parse technical language. If you’re a college student with university-sponsored coverage inadvertently living away from campus, or a parent of one, it’s worth getting in the weeds of benefits, deductibles, provider networks, and copayments. (If you’re pressed for time, prioritize finding out which hospitals near you are in your insurance network.) You’ll thank yourself later.

Here are a few resources to help get started:

• Understanding insurance terminology (here’s a glossary with more terms)
• Understanding your coverage
• Emergency care FAQs

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This piece originally appeared in Public Health Post and is coauthored by Elsa Pearson (@epearsonbusph) and Austin Frakt (@afrakt). Research for this work was funded by the Laura and John Arnold Foundation.

Health insurance is supposed to help us pay for expensive medical care, but what if the insurance itself becomes too expensive? What happens to our health?

Private health insurance premiums are ever increasing. Premiums for a family plan grew 25% nationwide between 2012 and 2018, increasing much faster than wages.

Higher premiums mean more people forgo insurance altogether. When individuals are uninsured, they use less health care—including preventative care—and even have higher chances of dying.

It is possible to make progress on taming health care cost growth, which often makes its way into insurance premiums. In Massachusetts, employer-sponsored insurance premiums are the highest in the country, and they keep growing. Yet, compared to the rest of the nation, the state has done a good job improving access to care and addressing spending growth. Two major laws are responsible.

Chapter 58—sometimes called RomneyCare—was passed in 2006 to expand access to affordable health insurance through state and federal subsidies. To address health care costs, Chapter 224 was passed six years later. Among other things, it established the Massachusetts Health Policy Commission, which sets health care cost growth goals and monitors the state’s progress.

Both laws were successful; the state boasts the lowest uninsured rate in the country and an annual health care spending growth rate below the national average for most of this decade. Still, health insurance costs—especially for private plans—are persistently high.

Premiums are only part of it. Out-of-pocket spending for private plans—deductibles, coinsurance, and copays—has also increased considerably nationwide.

The individuals hit hardest by this cost growth are those stuck in a coverage gap, with incomes too high to qualify for Medicaid but too low to comfortably afford a private plan. Massachusetts residents below 300% of the federal poverty level and enrolled in employer sponsored insurance spend nearly a third of their entire income on health care.

They are underinsured—they have insurance, but also deal with unaffordable out-of-pocket costs. In 2018, nearly 30% of insured adults in the United States were underinsured. Of that 30%, four in 10 admitted to delaying care because of cost.

Just like being uninsured, being underinsured has consequences. People who have to pay more out-of-pocket tend to delay or skip care because of the added cost. A study in JAMA Pediatrics found that some parents of children with asthma rationed their children’s medications and even delayed appointments when out-of-pocket costs were high.

Without change, health insurance will become even less affordable for more people over time, increasing the number who forgo coverage or care altogether. What could we do to fix this?

For one, Massachusetts has set the state’s health care cost growth benchmark at the national rate of 3.1%. If the state can stay below this, it could help prevent health care costs from getting worse. Other states could follow suit and establish or maintain annual growth benchmarks of their own.

But insurance is expensive now; what else could be done in Massachusetts and elsewhere?

For those who purchase insurance on the exchange, many states have good and modestly priced options. In Massachusetts, individuals with exchange plans spend the least amount of their income on health care spending compared to those with any other type of insurance.

For those with employer sponsored insurance, states could push employers to offer affordable insurance options. For example, Massachusetts could make permanent a law that penalizes employers who should offer affordable insurance but don’t. It’s set to sunset at the end of 2019, but allowing it to do so would be a step backwards, removing an incentive for employers to use their negotiating influence to reduce health care costs.

High health insurance costs are built into our system by years of uncontrolled spending growth. States have made progress in addressing the issue, but, for many Americans, insurance is still unaffordable. With unaffordable insurance comes skipped coverage, delayed care, and worsening health. Future reform must close the insurance coverage gap in which so many Americans are still stuck.

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We’ve been hearing a lot of pretty general plans to implement Medicare for all Americans. How would that work? Medicare as it exists today has some coverage gaps. How would that be addressed in Medicare for All?

This video was adapted from a column Austin Frakt and Elsa Pearson wrote for the Upshot. Links to sources can be found there.

@DrTiff_

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Often, private coverage is assumed to be better than public coverage. More and more often, that’s just not what families are finding. Those that work, even those earning a decent living, just can’t afford the private care they’re offered. They have to turn to public insurance.

@DrTiff_

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Erika Cheng, who is a health services researcher and faculty member at IUSM with me, is a star. We’ll all be working for her someday. She and I wrote a commentary that discusses a study published in JAMA that examined whether the dependent coverage provision of the Affordable Care Act was associated with changes in payment for birth, prenatal care, and birth outcomes among married and unmarried women.

You should go read both the original study and our thoughts on it.

@aaronecarroll

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I have a piece on The Upshot today about the CVS-Aetna merger. With my concurrence, the editors cut a rhetorically unnecessary paragraph. Not wanting anything to go to waste, here it is:

Traditional Medicare enrollees in that program can sign up for stand-alone prescription drug plans, which are not liable for non-drug spending. A study by economists Amanda Starc, of Northwestern’s Kellogg School of Management, and Robert Town of the University of Texas, found that Medicare’s stand-alone drug plans cover drugs less generously that they otherwise would if they accounted for non-drug health care spending. In doing so, they end up costing traditional Medicare over $400 million per year. Another study by Ms. Starc and Kellogg School colleagues David Dranove and Christopher Ody, found that when states shift provision of Medicaid drug benefits to private organizations responsible for managing non-drug benefits too, program spending goes down.

@afrakt

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Whether through an employer, Medicare, or an Affordable Care Act marketplace, many Americans have choices of health care plans — sometimes from among dozens of possibilities. I’ve written a lot on the AcademyHealth blog and The Upshot about how hard it is for people to make good plan choices from such a bounty of options. They often end up paying more than they should, either because they actively choose a suboptimal product or because they passively remain in a product that drifts away from optimality over time.

Some studies indicate that with reminders and assistance — provision of calculating tools, better ways of comparing and viewing options, and other guidance — people can be encouraged to make active choices and, moreover, make better ones. Availability of such things is not widespread, but it is growing.

But is encouraging annual plan shopping, providing selection aids, and improving choice architecture just treating the symptom of the real problem? Maybe more choices isn’t better? What if helping consumers navigate them is merely second best to reducing the number of choices in the first place?

It sounds a bit crazy, because a premise of an ideal market is that there are so many choices, everybody can find a product to perfectly match his or her preferences. No market achieves that ideal, but clearly fewer choices moves in the wrong directly, theoretically.

Theory is useless if it is wrong. It must be tested.

In a study published as an NBER working paper, Jason Abaluck, Jonathan Gruber did so. They compared people’s choices of health plans under various interventions: (1) promotion of active choices, (2) assistance with choice support software, and (3) reduction in plan choices. According to their analysis, across these intervention types, consumers achieved the best outcomes when choices were restricted. Less is more!

These interventions were implemented across school districts in Oregon between 2008 and 2013 where, according to the analysis, only 36% of covered employees had made the cost-minimizing choice. On average, employees spent about $1,000 more on coverage per year than they could have. The number of plan choices varied across district and time. Through 2011, the vast majority of employees had four choices. After 2011, some had as many as ten. Choices ranged in plan style — closed panel HMOs (e.g., Kaiser) and broader network PPOs — as did employer contributions to premiums and cost sharing, all of which was controlled for in analysis.

The authors analyzed nearly 400,000 employee-year observations in several ways. One analysis exploited the fact that 12% of employee-year observations were forced to switch plans when their current plan was dropped in their district. Did forcing people to switch cause them to choose better plans, compared to people who did not switch? Nope. Forced switchers actually spent even more than they could have, compared to non-switchers.

Another analysis exploited the randomization of enrollees to access to a tool that used each individual’s claims history to provided the total cost of each available plan. Based on this information, it also displayed plans in order of total cost and stared the lowest cost plan. In other words, it relieved consumers of most of the cognitive effort of comparing plan costs — just look for the star and done!

The authors estimated that users that received the tool’s recommendations were only 8% more likely to choose the best plan, relative to those that did not have access to the tool. Unfortunately, the tool’s recommendations were not always in alignment with true plan costs, because the tool had to make some assumptions and also due to user input error. The authors estimated that a perfect tool fed perfect information — which is essentially impossible to achieve — would induce 17% of users to choose the lowest cost plan, reducing foregone savings, coincidentally, by only 17% as well.

Finally, the authors examined forgone savings as a function of choice sets. Foregone savings are almost twice as large when employees face a choice of eight plans versus only four plans. Now, this result could occur if what’s going on is that as additional choices include better ones, but that enrollees don’t pick better ones. That is, they could do better with more choices, but they don’t know how to make the right ones.

That’s not what’s going on. The authors wrote,

[S]maller choice sets lead to beneficiaries being enrolled in lower cost plans because larger choice sets have more plans which are higher cost on average – and individual choices do little to offset this “more dangerous” choice environment.

In other words, when choice sets are small, plan administrators have made relatively good selections already. But as administrators expand the choice set, they add worse (more expensive) plans. Because consumers have a hard time picking the best plan, they are more likely to end up in a more expensive one as choices grow.

The conclusion is that consumers may save far more if they are presented with fewer choices than they save by either being induced to shop or by provision of output from a plan cost estimator. Yes, we can help some people make modestly better choices with cost calculators and better choice architecture — and we should provide such things. However, according to this study, people are so bad at choosing plans that they are even better served by simplifying their choices.

@afrakt

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The following originally appeared on The Upshot (copyright 2016, The New York Times Company). It is jointly authored by Nicholas Bagley and Austin Frakt and appeared on page A3 of the December 6, 2016 New York Times print edition.

A co-worker struggling to make ends meet comes to you with a problem. The price of admission to a dear colleague’s retirement party at an upscale establishment is beyond her means, though not yours.

You both feel obliged to attend. She’d rather bring some refreshments to a conference room than spend what she cannot afford on a lavish event. You like the idea of a grand send-off for your retiring colleague. There can be only one party.

A similar, underrecognized conundrum arises in health insurance. Both you and your less fortunate co-worker are obliged under the law to obtain coverage (which you both want anyway).

But you differ in what you’d prefer to pay for. A high-level manager who makes, say, $200,000 per year is probably willing and able to pay more for health care than someone who makes $50,000.

Unfortunately, neither person really has a choice because the plans all cover “medically necessary” care, meaning any care that offers a clinical benefit. That includes lots of expensive and technologically sophisticated care that is no better, or only slightly better, than cheaper alternatives. You may be just fine paying for high-tech care of marginal value. For your colleague of more modest means, it’s a stretch.

Consider, for example, treating prostate cancer with proton-beam therapy. It’s more expensive than alternatives like intensity-modulated radiation therapy, but isn’t proven to be any better. If given the choice, many people — especially those with lower incomes — might rather buy health insurance plans that exclude high-cost, low-value treatments.

The trouble is that insurers rarely sell those sorts of plans. Even insurers that try to exclude a particularly expensive and unproven technology from coverage are often rebuffed by legislatures and the courts.

This one-size-fits-all approach to insurance coverage disproportionately hurts low-income people, many of whom might reasonably prefer to devote their scarce dollars to housing or their children’s education. To some extent, subsidies and other monetary adjustments can mitigate this problem. Medicare and Medicaid, for example, are financed in large part out of federal income taxes. And within the Affordable Care Act marketplaces, lower-income people receive subsidies that cover some of their costs.

People who receive coverage through their employers, however, don’t get that kind of help. Perversely, employer-sponsored health insurance is more highly subsidized for the rich than the poor. The subsidy comes in the form of an exclusion of health-insurance premiums from taxation. Since income tax rates are progressive — that is, the rich pay a higher rate of income tax than the poor — lower-income families get less of a benefit.

But both high-wage and low-wage workers at the same company are effectively forced into the same plans. To qualify for the tax exclusion, federal law requires that companies offer the same plans to all or most of their employees, with no consideration for the variable demand for health care. Employees then pay for their fringe benefits by taking home lower wages — and a flat, across-the-board cut in wages burdens low-wage workers disproportionately.

In theory, the labor market could adjust in ways that might lessen the problem: Low-income workers, for example, could demand higher wages for being forced into plans that are more expensive than they’d prefer. These would have to be made up by reducing the wages of high-income workers, something it’s not clear they would accept. There’s no evidence that labor markets actually work this way.

“The notion that labor markets perfectly offset the varying preferences for health insurance among workers by giving higher wages to those who value health insurance less is a comforting but crazy idea,” said Amitabh Chandra, a Harvard economist.

The problems with one-size-fits-all insurance run deeper. In some insurance markets, like those for small businesses in Massachusetts, employees across companies are pooled together and pay the same premium. A recent report from the Massachusetts attorney general showed that workers in companies that receive health care at less expensive hospitals effectively subsidize those at comparable companies who receive care at more expensive ones.

The uniformity of insurance plans also affects the pace and composition of technological innovation. To extend our party metaphor, if everyone — even those who preferred simpler events — were effectively forced to pay for any retirement party, regardless of how lavish, we’d see, and pay for, retirement parties of ever-escalating extravagance.

In much the same way, medical innovators respond to the size of the market for new technologies. The fact that health plans routinely cover all medically necessary care sends an “if you build it, we will pay for it” signal. Innovators are not getting the right signals, the right incentives, to develop high-value or cost-saving treatments. It’s more lucrative, instead, to develop pricey new therapies, even if they offer only marginal clinical benefits. The result is lots of new treatments that don’t provide much bang for the buck.

Those new treatments pose a continuing challenge to efforts to bend the cost curve. Economists have long known that technology is the primary driver of escalating health expenditures. Indeed, in 2012 medical technologies that were not offered a decade earlier accounted for almost a third of Medicare spending delivered by physicians and outpatient hospital departments.

What’s to be done? Managing technological innovation would require us to consider policy changes that would have been unthinkable a generation ago. “The tax code could be restructured to make extravagant health insurance less appealing,” Mr. Chandra suggested. Employers might then offer health plans that appealed more to low-income workers.

The Cadillac tax on expensive health plans, which is scheduled to go into effect in 2020, is a step in that direction, but according to Mr. Chandra doesn’t go far enough. And it is unpopular across the political spectrum. Other ideas — like incorporating cost-effectiveness criteria into Medicare and private plan coverage criteria — are sure to prompt disagreement.

Contentious solutions they may be. But as the cost of health care and health insurance rises, it won’t be a party for politicians feeling more pressure from consumers.

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