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Shift more of the financial burden of health care onto employees, goes the logic, and our consumerist impulses will take over to reign in costs by eliminating unnecessary doctor visits, tests and medicines. Unfortunately, several studies suggest that consumer-directed health care could have the opposite effect — or at least have a hard time living up to its promises. Consumer-directed health plans, or CDHPs, put employees in control of health-care decisions by combining a high-deductible health insurance plan with a health-reimbursement account and Web-enabled information to produce better health-care choices. According to Forrester Research, only 500,000 employees are enrolled today in such consumer-directed plans. But given the pressure of health-care costs, the firm expects the plans’ market share to grow from 2 percent to 24 percent by 2010 and premiums collected by the plans to grow from $16 billion this year to $88 billion in 2007. That a much larger share still will remain in more traditional approaches is due in part to employer doubts about CDHP savings. In the 1970s, the landmark RAND Health Insurance Experiment confirmed that increased cost-sharing by consumers reduces the use of medical services but also increases the likelihood that the sick will get sicker by not getting needed treatment. A 2003 study published in the New England Journal of Medicine found the same results from prescription drug-sharing in Canada. Tiered prescription costs and increased cost sharing by one employer even led some employees to discontinue taking ACE inhibitors and other heart attack-fighting drugs! Further complicating the cost-sharing logic of consumer-directed care is health insurance’s longtime conundrum: the small percentage of the very sick who account for most health-care costs and who are much less likely than younger, healthier workers to select CDHP plans with out-of-pocket costs they can’t afford. A study by the Center for Studying Health Benefit Change reported that 10% of health-care consumers account for 69% of spending. Not surprising, then, that Harris Interactive and the California HealthCare Foundation found Californians with low incomes and chronic conditions were three times more likely than other insured Californians under cost-sharing to postpone or skip a doctor appointment or not fill a prescription. This has prompted some insurers to decrease the cost of medicines and treatments for the sickest to head off hospitalization and even more expensive care later. In exchange for completing online health risk assessments and pledging to maintain healthy lifestyles, other plans offer employees a higher level of benefits and lower co-pays. Along with concerns about the effects of CDHPs on the risk structure and costs of HMOs and other plans favored by sicker and lower-wage employees, others wonder about physician liability if patients make inappropriate choices. “If patients have the choice between an X-ray, MRI and CAT scan to resolve a problem, will they be able to know that the CAT scan, though more expensive initially, is the better diagnostic tool?” wonders Robert Booz, vice president for health and managed care at Conning Research and Consulting. The Agency for Healthcare Research and Quality recently compared the out-of-pocket costs of CDHPs vs. HMOs and PPOs. At today’s prices, it could take little more than a colonoscopy to exceed the $1,000 health reimbursement account and put an employee in the gap between their HRA balance and deductible. That's why Karen Davis, president of The Commonwealth Fund, argues for a comprehensive and common-sense approach to controlling health-care costs — one that focuses not only on cost but quality of care, prevention and other factors. In the article, "Will Consumer-Directed Health Care Improve System Performance?" she suggests the following steps for achieving a high-performance health system:
Sources: U.S. Department of Health and Human Services, May 2004; Managed Care, September 2003
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Consumer-directed Care Tame Health-care Costs
