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POLICY: Can Consumerism Save Healthcare? by Brian Klepper

THCB welcomes back old friend Brian Klepper from the Center for Practical Health Reform. He’s been asked to help various newspapers through the maze of consumer-driven health care, and here’s his take on the matter. You’ll note he gives it an easy ride, in that he doesn’t descend into the mire of risk pooling. Here’s Brian’s take:

In January’s State of the Union Address, President Bush called for expanding Health Savings Accounts (HSAs) as one sensible approach to curb rising healthcare costs. An HSA is a tax-favored healthcare-dedicated savings account that a patient controls. Combined with out-of-pocket requirements and a High Deductible (also called “Consumer Directed”) Health Plan (HDHP), these financing devices can provide comprehensive coverage. Federal 2006 HDHP family coverage guidelines call for deductibles of at least $2,100, with maximum out-of-pocket expenses of $10,500. To his credit, the President also proposed tax changes that would give individuals the same advantages employers already enjoy when they buy health insurance.                                                              The main logic and “sell” of these plans is that HSAs and HDHPs give patients more “skin in the game,” more awareness of healthcare costs, and more control over healthcare spending. The increased involvement in healthcare decision-making encourages healthier lifestyles and smarter healthcare purchasing decisions. In turn, the changes in patients’ buying behaviors will drive down healthcare costs.The reality may be somewhat different.First, there’s little question that HSAs and HDHPs will become major forces in the health insurance market the same way that managed care did in the 1990’s. They’re less costly for employers than conventional plans, so there’s every reason to believe that the market will grow quickly. A recent Kaiser Family Foundation study found that 20 percent of employers offering health insurance already make HDHPs available. Nearly every major health plan now offers an HDHP. And the health insurance industry association, AHIP, claims that HDHP enrollment tripled in the last 10 months, to 3 million lives.The deeper question is why. Are HDHPs becoming more popular because they urge patients to be more sensitive to cost? Or are they successful because, as the scale of healthcare cost has grown out-of-reach, skinnier benefits and higher out-of-pocket costs constitute a lower cost insurance alternative?Both. Employers clearly see HDHPs as a less expensive way to continue offering health coverage. It’s also apparent that, when care costs employees more, they’ll ask more questions.But studies also show that half of employers offering HDHPs do not help fund the HSAs. This may not be a problem for high-income or some middle-income workers. But if you’re low-income – one-quarter of workers make less than $18,800 per year and one-third of families make less than $35,000 – the increased out-of-pocket requirement can be onerous, especially if there’s a serious medical problem. Hospitals and many doctors are already experiencing rapidly increasing bad debt associated with these plans, because HDHPs without funded HSAs are, for many people, simply coverage that can’t be accessed. How about information that helps consumers become better purchasers? There are good Web sites that help patients learn more about their conditions and treatments. But so far, even though inexpensive evaluation tools exist, consumers still can’t get much information on the pricing and performance of hospitals, doctors and drugs. It’s hard to be an effective shopper if you don’t know what things cost or how the vendors stack up. Will consumerism significantly impact out-of-control health care costs? In truth, patients’ diagnostic and treatment choices represent a tiny portion of larger healthcare cost. The real money is associated with chronic disease and catastrophes. In those cases, healthcare professionals, not patients, guide the purchasing decisions. That’s exactly as it should be. But for consumerism to work, healthcare professionals must then be publicly accountable for their financial and clinical results.More to the point, unless consumers have access to robust information about pricing and performance, mechanisms like HSAs and HDHPs won’t really impact cost so much as finance it, merely guiding how the money flows. Even Regina Herzlinger, a renowned conservative Harvard-based healthcare economist, challenged Mr. Bush on this. “Health savings accounts are being touted as a way to control costs, and I very much doubt that claim.”The real roots of our healthcare crisis reside in the ways suppliers and clinicians are rewarded to deliver goods and services that are inappropriate, unnecessary and wasteful. Most healthcare experts agree that half or more of healthcare cost is due to these factors. Making healthcare affordable, stable and sustainable once again will require the infusion of skills and tools – compatible information technology platforms, clinical/administrative practice standards, pricing/performance transparency, payment that’s tied to outcomes – that other industries have long taken for granted. No matter how it’s pitched, consumerism just won’t get us there if these other components aren’t available to support the process.When it’s more mature, healthcare consumerism will likely include the mechanisms that help patients become better buyers and impact cost. Until then, HSAs and HDHPs are less expensive, slimmed down, short-term solutions that can work well if you’re healthy or financially secure. But they’ll do little to address our rapidly collapsing healthcare system. And as a national solution, they’re inadequate and oversold.

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DesmotivacionesEinschlafhilfealLibbi StovallBrian Huskey Recent comment authors
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Desmotivaciones
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Aw, this was a very nice post. In thought I would like to put in writing like this moreover – taking time and precise effort to make a very good article… but what can I say… I procrastinate alot and on no account seem to get something done.

Einschlafhilfe
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al
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trurutyiyuiyuiyuioyo

Libbi Stovall
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Libbi Stovall

Is there any precedence for a US insurance company paying for a procedure performed by a foreign doctor in a foreign country? Is there any legislative discussions about having insurance companies allow this in situations where the only alternatives in the US are much more expensive and offer a less favorable outcome (have a much greater chance of causing disability, and may lead to further surgeries)?

Brian Huskey
Guest
Brian Huskey

You folks are Great! I have no views at this time, as I am a student for Health Administration. WOW! Great talks and reviews—I have gotten great insights! I am here to ask you folks about consumerism/innovations in healthcare in regards to CatScans for a thesis. Everyone gets them and every doc orders them. I would like to have some relevant data that supports WHY CT is so popular (as if I didn’t know!) and how this is affecting consumerism. We now have “pay out of pocket” institutions for the ordering of CT’s and other imaging modalitie, just because you… Read more »

natalie Hodge
Guest

You’ve left out the best innovative medical model of all, Personal Pediatrics administrative support system for pediatricians. The aforementioned companies ( miute clinic and take care health systems ) are one direction that medicine is headed, for those that like a nurse to be on the front lines of their care and get a pap smear on their way out of Walmart. For those that value their time and the time and comfort of their children, consider a high deductible combined with an MSA credit card to pay for Personal Pediatrics care coming to a neighborhood near you. We are… Read more »

Sally
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Sally

And then there is the issue of Medicaid…Did anyone see Newt Gingrich’s latest blog this week on the subject? He takes on the issue of consumerism but specifically what’s going to happen to Medicaid or vice versa. I think I found it at http://consumerhealthworld.com. Interesting food for thought.

Steven Geanopulos
Guest
Steven Geanopulos

There is another issue here that should be addressed. A single payer system eliminates choice. The fact is HSA’s are dependent on the purchaser being educated and understanding what they are buying and how it can be used as a retirement/investment vehicle. Small business owners can now offer both health care benefits and a retirement plan in one affordable package thus allowing small businesses to compete for talent in the workforce, instead of everyone looking for the corporate job. With HSA’s you can have enough put away that you can finance your premiums while looking for another job. People will… Read more »

JoAnne Allen
Guest
JoAnne Allen

Science recognizes the beauty of simplicity. When competing theories claim to explain the same phenomenon, scientists break the tie based on which offers the simpler, more elegant explanation. Those in government and industry who are trying to unravel the Gordian knot of hospital pricing would do well to adopt a similar guiding principle. An array of experts have testified on Capitol Hill that the prices some hospitals charge are at best illogical and at worst illegal, immoral or some combination of the three. How this came to be is no longer important—the reasons are many and re-hashing them accomplishes nothing.… Read more »

Jim
Guest
Jim

The only way to finally come to grips with this insane system is for every American to drop having insurance which would almost immediately force the healthcare system to its knees where it needs to go. Insurance keeps people feeling less responsible for their own healthcare and forces people like me who have spent less than $1,000 in my 48 years on all of my medical care and drugs combined paying way too much for insurance should I opt to buy it which I choose not to do. There are too many completely unnecessary tests being done, unnecessary procedures and… Read more »

Steve Beller, Ph.D.
Guest

Why do you say that single Payer is the only solution that will provide universal healthcare and lower the overall costs of h/c in the USA? I’m not saying you’re wrong, I just wonder why you think there are no other possibilties.

Kahuna
Guest

The president’s pushing HSA’s is a diversion of the addressing of the real healthcare crisis. Some form of universal healthcare is the only solution in the USA. Further, Single Payer is the only solution that will provide universal healthcare and lower the overall costs of h/c in the USA. The fact that there is no political will to propose this, and that the pharmaceutical and insurance industries have two highly paid lobbyists in WDC for every one of our elected senators and congressmen, does not in any way change this reality. When leadership bubbles up thru grass roots, corporate sensibility,… Read more »

Steve Beller, Ph.D.
Guest

In response to the post above, I don’t know who’s representing consumers in HIT & RHIOs, but I suggest it requires folks with determination, confidence, respect, talent, honesty and integrity, wisdom, compassion, an open mind, a clear view of the big picture, and a vision of what is possible; along with interests and motivations sharply focused in one direction: Realizing substantial and sustainable benefits to consumers, society, and the world.
I believe enabling people like these to guide the transformation of the healthcare system would do wonders.

Trapier K. Michael
Guest

Very true and duly noted Spike. I’m banking heavily on
his credentials as a Duke University professor but that could very well be a mistake.
~TKM

spike
Guest
spike

Trap, I don’t know if that article is anything to take to the bank. It’s filled with so many qualifications, misdirections, etc., that it’s virtually impossible to tell where he gets his final number from. The section on Tort Reform really cracked me up. He puts this completely arbitrary number on the value of the deterrance of having a Tort System saying that the lives saved + the payouts to the injured = $33 Billion. What? How do you just arbitrarily put a dollar value on saving the lives of several thousand people. In addition he discusses at length how… Read more »