Consumer-driven health care: Bush, GOP back HSA expansion

Insurers and employers are increasingly moving toward plans that put patients in the driver's seat.

By Joel B. Finkelstein — Posted March 8, 2004

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Washington -- Eager to curb rapidly rising health spending, some lawmakers have embraced a trend already catching on in the private sector -- consumer-driven health plans.

Businesses large and small are looking for ways to preserve employee health benefits without breaking the bank. Many have latched onto the concept of consumer-driven health care, which shifts more of the responsibility for health-spending choices onto the patient.

"We see a 15% reduction in drug spending right out of the chute within five to six months and a 6% reduction in physician visits," said Mike Parkinson, MD, chief medical officer for Lumenos, an Alexandria, Va.-based health insurance company offering consumer-driven plans across the country.

"You know that 20% to 25% of doctor visits are unneeded; 30% to 35% of all health care is ineffective or inefficient. How better to get at [that waste] than front-loading the consumer who says I want to get the care I want when I want it and from whom I want it," he said.

Consumer awareness of price and quality information will drive competition among physicians seeking to offer the highest value services, Dr. Parkinson said. Many physicians like consumer-driven plans because they emphasize preventive and behavioral services that support doctor-prescribed treatments and make for healthier patients, he said.

While yearly reports suggest that consumer-driven health care may lower health costs, that research also suggests that savings are achieved through reductions in using necessary as well as unnecessary services.

"What these plans are asking [patients] to do is to ration their own care," said Dwight McNeill, an expert in quality measurement and improvement at the Agency for Healthcare Research and Quality.

"The question now is, do consumers, as rationers or deciders of their own health care, have better or more useful information to make these decisions than doctors did" in managed care, he said. "The answer has to be, no, ... consumers just aren't ready for it, and they don't have appropriate information."

Gathering information on the efficiency, quality and value of health care services and procedures will take more time and money, McNeill said.

Republican lawmakers remain unconvinced by arguments that patients cannot make their own health decisions. Many want to move forward with legislation designed to encourage the trend.

Tax-deductible sweetener

The Bush administration already has proposed building on the passage of the health savings account provision in the Medicare reform bill by making the health insurance purchased in conjunction with the accounts fully tax-deductible.

While consumer-driven health care has been mainly driven by employers, the trend has started to draw more attention from the public, said Sen. Larry Craig (R, Idaho), chair of the Senate Special Committee on Aging. He described health savings accounts as "one of the most important accomplishments of Congress."

HSAs can be used by workers to pay for routine medical expenses, which count toward the deductible of accompanying catastrophic health insurance. Some experts hope that as the accounts become more readily available, they will fuel the growth of consumer-driven health care.

"Health savings accounts, which empower patients to have greater control over their health care decision-making, will become a more attractive option for covering health care needs," AMA President Donald J. Palmisano, MD, said when the legislation passed.

But questions remain about HSAs and other proposed incentives, which have the potential to put another pinch on federal tax revenue. For example, the HSAs alone are estimated to cost $16 billion over 10 years. Making catastrophic health insurance tax-deductible would cost the government another $25 billion over 10 years.

"We have to ask the question if [these approaches] will save taxpayer money," Craig said.

Build it, and they will come

Congressional encouragement is likely to boost the fledgling field of insurance plans already offering products based on health reimbursement accounts, a predecessor of HSAs. Proponents say these consumer-driven health plans have been inappropriately maligned as an attempt by insurers to cherry-pick the young, healthy and wealthy.

Michael Showalter, vice president of market solutions for Definity Health in St. Louis Park, Minn., said its health plans, which have been based on health reimbursement accounts, attract plenty of older workers. The plans also get their share of low-wage workers. "Salary does not appear to be a big driver of selection of these plans," he said.

AHRQ's McNeill said a simulation he conducted based on Definity's health plans shows that these products offer a cost savings to sick and healthy workers. But those in the middle -- individuals he describes as the slightly and moderately sick -- would end up paying more than they would with traditional insurance.

"Medical savings accounts or HSAs have this curious feature of having a deductible that is paid for through your account and then [you are] exposed up to a certain amount. And the people in the middle are the ones who really get hit," he said.

"I'm a big proponent for consumer-driven health care, but not the particular approximation to it that we have now," he said.

McNeill also objected to the idea that focusing on one approach will save the day. "Getting rid of managed care and thinking there's a new cure through consumers is foolhardy," he said. "You need a full-court press on these issues if we want to control inappropriate spending. Providers have to be involved with it, consumers have to be involved with it, government, business, etc."

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Savings at the extremes

Consumer-driven health plans might be a boon for people who are either very sick or healthy, but a financial drain for the rest of the population. A simulation shows the impact consumer-directed options would have on yearly out-of-pocket spending, compared with costs of PPOs or HMOs.

Portion of
Affected how
The healthy 63% $584 savings
The slightly sick 22% $250 loss
The moderately sick 10% $581 loss
The very sick 5% $300 savings

Source: Health Affairs, January/February

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