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The Myth of Consumer-Directed Health Care

The theory behind “consumer-driven health care” is that when the health care user has more financial ‘skin in the game,’ they’ll become more informed and effective purchasers of health care for themselves and their families. That theory hasn’t translated into practice, based on data from the Employee Benefits Research Institute’s (EBRI) latest Consumer Engagement in Health Care Survey.

Health Reimbursement Accounts (HRAs) began appearing in employer benefit packages around 2001, with Health Savings Accounts emerging in 2004. 20% of large employers (with >500 employees) offered either an HRA or HSA plan in 2010, covering 21 million people or 12% of privately insured people in the U.S. Among these, there were 5.7 million accounts in 2010 containing $7.7 billion (including a couple thousand dollars from my own household).

Employees with HRAs and HSAs who exercised, didn’t smoke, and weren’t obese had higher account balances and higher rollovers than those who had less healthy behaviors.

EBRI asked employees with HRAs and HSAs questions concerning cost-conscious health behaviors to see if there was a link between those behaviors — representing cost- conscious processes for health decisions – and account balances. EBRI’s hypothesis was that the higher the account balance, the more likely the individual engaged in the behavior. All of the questions are arrayed in the chart; these include checking whether the employee’s health plan covered a medication; checking the price of a doctor’s visit; checking a quality rating of a hospital; talking with a doctor about the cost of treatments and prescriptions; and asking for generic drugs.

No relationship was found between either HRA/HSA account balances or rollover amounts (shown in the chart) with respect to cost-conscious behaviors.

Jane’s Hot Points: Over the past decade, employee benefits consultants and certain health policy theorists have pointed to consumer-driven health care (CDH) delivered through healthcare reimbursement accounts as an effective vehicle for bending the cost curve of health in the U.S. EBRI’s data should give CDH proponents pause. Consumers don’t behave in straight-line, lock-step fashion when it comes to health care consumption: the general rules of Economics 101 don’t apply for a whole range of reasons I and many other economists have discussed. Here’s a post I wrote in February on Anthem’s price hikes that highlights some aspects of market failure in health care.

Don’t assume that consumers having more financial skin in the health care game will make them smarter health consumers. Many health citizens make what seem to be smart fiscal decisions for health care consumption in the short run — like postponing visits to doctors when they feel ill, or skipping doses of medication. These often lead to longer-term dismal physical outcomes.

Jane Sarasohn-Kahn is a health economist and management consultant that serves clients at the intersection of health and technology. Her clients include all stakeholders in health, including providers, payors and plans; companies in biopharma, medical devices, financial services, technology and consumer goods; non-profits and NGOs. Jane’s lens on health is best-defined by the World Health Organization: health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity. She blogs at HEALTHPopuli.

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hangdsxqrz
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DanielR
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DanielR

Do you guys know where can I watch the health lottery draw, like the one here
http://www.lottotube.tv/results/latest-health-lottery-draw.asp

Bob
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Bob

Looks good!

mop456
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no to ny more welfre for sttes such s cliforni. the techers nd other civil workers, their unions never stop demnding more. the welfre stte of clif. is n open pit nd the more bilouts we obtin the more the unions sk for. the politicins in this stte live off the minority vote nd lot of our legisltures re minorities. they refuse to enforce the emigrtion lw nd they shelter the illegl popultion. this becoming mong the mjor problems clif. is broke,

Tujay
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Tujay

During the boom years, employers courted health insurance companies to provide benefits as part of an attractive employment package. Doctors made the decisions about treatment and health care insurance and employers made the financing decisions. Where was the consumer in any of this? In my opinion this caused a recipe for the disaster we are experiencing today. This allowed for a burgeoning growth of the health care industry alongside the increase of health care costs far above what the average American can afford. The free market moans and groans about government intervention and regulation but yet when bubbles burst and… Read more »

Richard Quinn
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It’s quite simple, health care is not like buying anything else and the average person is unable to make objective decisions (for good reason). In addition, we have forgotten what insurance is all about. Health insurance i snot insurance at all, people expect 100% coverage for everything.
Auto insurance does not cover oil changes, new tires or other routine maintenance, but health “insurance” does. That is the essence of the problem, people do not see spending $100 on health care in the same way they spend $100 on anything else. It is still $100, why the difference?
http://www.quinnscommentary.com/category/healthcare

Peter
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Peter

“How do you provide a long term study for something that hasn‚Äôt been around a long time? It has only been a few years that CDHPs have had enough participation to do much meaningful analysis.” “I made it as an administrator of benefit plans working with thousands of groups and tens of thousands of members.” So you think now you are able to provide “meaningful analysis” without data for long term study. “those under 65 are both healthy and unhealthy and your point makes no sense nor is it even close to accurate.” So tell me why an unhealthy person… Read more »

John R. Graham
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The variables in question are confounded by the fact that neither EBRI, the employer, the insurer, nor the HSA bank know how the patient is paying his bills. People who know how to use their HSAs know that one should not pay out of the HSA for medical costs if one has after-tax cash flow available. Better to let the HSA balance compound. So, looking at the HSA balance in isolation tells us nothing about health spending on a current-year basis. BTW, the criticism often hurled at HSAs – that they are merely another tax-deferal tool for high earners, is… Read more »

Davis Liu, MD
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This is not surprising. The public isn’t good at financial skin in the game whether in healthcare or retirement planning. This is exactly why I wrote my book to provide those who are interested the skills and knowledge on when to spend money from HSAs and when to safely skip. Americans frankly don’t want to be empowered patients, the latest thinking in fixing the healthcare system. They want a system that allows access to care that is simple, convenient, and personal. http://davisliumd.blogspot.com/2010/09/empowered-patient-is-this-what.html Organizations that can do that will win and redefine on how Americans can and should get care. —… Read more »

Bill
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Bill

For your health care blog I’d like to address a national health care plan…it could be relatively simple: ALL U.S. citizens should be eligible for the same level coverage as every member of Congress has access to……afterall, taxpayers pay for their insurance coverage…..

nate
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nate

Did you read these Peter?
“Research does show that CDHP enrollees clearly demonstrate cost-conscious behavior, according to the Employee Benefit Research Institute (EBRI).”
How does Peter link to this right after you say;
“HD/CD/HSA plans are designed to control spending not designed to control costs”
I guess if you cover all sides of an argument your always right

nate
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nate

Few points for you Peter, How do you provide a long term study for something that hasn‚Äôt been around a long time? It has only been a few years that CDHPs have had enough participation to do much meaningful analysis. Can you show me a long term study suggesting worse outcomes? Seems your very biased and vocal opposition doesn‚Äôt even have anecdotal evidence to support it yet you feel free to spew it. Your use of anecdotal biased opinion to dismiss or disagree with my comment relies on misusing anecdotal. It‚Äôs an undisputable fact that someone asking to switch to… Read more »

Peter
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Peter

Nate, can you show me a long term study, not your own anecdotal biased opinion, that there are as good or better long term outcomes, financial and medical, for HDHP/HSA? You’d also have to account for income and initial health status in the study. If insurance companies did their own medical analysis before offering high deductibles I’d be very surprised, but I know they would have done their own corporate financial analysis. I would also assume that working age group employed are a healthy population to begin with, and of course you can’t loose with a HDHP if you are(stay)… Read more »

nate
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nate

“HSA in my view is just a means to maximize profits” Gary can you please link to any study or analysis showing HSAs are more profitable than traditional PPO plans? Being that traditional plans are considerably more expensive I would expect them to provide a higher profit. For example it is much easier to make $10 on a $300 premium then it is on a $100 premium. Just curious where this view came from as it seems counter logic. “Besides you can’t spend it on anything but sick care.” All those federal laws allowing them to pay, actually requiring they… Read more »

Peter
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Peter

HD/CD/HSA plans are designed to control spending not designed to control costs or give better outcomes. I guess you’d have to track long term outcomes and eventual account balances to determine if these plans really are financially better. They attempt to make the patient the medical expert who knows better than the doctor. But surely higher income plan holders do better than low income in the, getting seriously ill lottery. “I do ask my doctor what things cost” I agree that doctors should be held to some sort of treatment cost control accountability, but having them know the patient cost… Read more »