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Health Affairs, 23, no. 6 (2004): 129-135
doi: 10.1377/hlthaff.23.6.129
© 2004 by Project HOPE
 
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Health Tracking

MARKETWATCH

Doughnut-Hole Economics

Meredith B. Rosenthal

Both the recently enacted Medicare prescription drug benefit and a new cohort of consumer-directed health benefit models offer doughnut-shaped insurance coverage with large deductibles that begin around the mean annual spending for enrollees. These policies leave enrollees to bear more risk than policies with equal expected payouts that rely on first-dollar deductibles. This risk to enrollees is substantial, given the skewed distribution of health care spending and the placement of the typical deductible. I consider alternative explanations for this new benefit design trend and conclude that the desire to distribute tangible benefits to the largest number of constituents is most plausible.


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