A backlash is what happens after something occurs. That being the case, a “pre-lash” is a “reaction” to something before it occurs. Awkward, but accurate when describing what’s happening with consumer-directed health care.
Those of us who were in the managed care business fifteen years ago remember the “managed care backlash” – the time when consumers, deciding they did not want their choice of physicians restricted by HMOs, dropped out of HMOs and joined PPOs in droves. Many HMOs adapted, becoming “open-access” health plans, a much watered down version that gave members more choices, at somewhat higher cost.
If consumer-directed health plans are going to survive, they will have to adapt, and much more quickly than HMOs did. Because CDHPs have several key problems that are severely limiting their adoption.
These limitations include:
— a failure to demonstrate an appreciable cost difference compared to HMO plans
— a very low adoption rate (less than 20% of employees with a choice of plans chose a CDHP)
— for employees, monthly costs for CDHPs are pretty close to traditional plans, but their deductibles are much higher
— my bet is the individuals choosing CDHPs are younger and healthier than the folks who stick with traditional plans. If that is the case, then we’ve got an adverse selection problem brewing.
CDHP advocates are quick to point out that these plans have grown significantly over the last couple of years – neglecting to note that the plans started from a few thousand members, so any appreciable growth was going to represent a huge statistical increase. In fact, the increase in membership has been rather modest in terms of numbers, and a good bit of the increase in HSAs has been at the expense of HRAs. (In HSAs, the individual “owns” their health account balance; in HRAs the employer does)
According to a recent report from the Center for Studying Health System Change;
“To date, enrollment in employer-based CDHPs has grown more slowly than the early pace for PPO plans, where PPO market share grew from less than 1 percent in 1984 to 11 percent in 1987.”
What does this mean for you?
CDHPs as presently conceived are not going to work. But we have to bring some measure of price sensitivity to the health care market.
Joe:
Another great, and insightful post. I have to agree with you that CDHP’s are teetering on the brink of irrelevancy. I have been in the employee benefits business since before HMO’s and I think you have nailed the issues with this.
Gotta love the phrase “pre-lash”
TO’B
Joe,
I decided to try the HSA, even though I’m in my late 50’s, after doing research on it to write a newspaper article on it. The first year didn’t work well at all because I had a $900 expense right at the outset, when there was virtually nothing in the account. But this year it’s okay, except that I’ve stopped taking an expensive preventive med because I don’t want to spend $400 every 3 months for it. So I don’t know whether that’s an example of a CDHP working or not working. Here’s one thing I’ve noticed–when the employer offers a decent amount of money to start off the fund, there’s acceptance. When that doesn’t happen, no one wants to take the risk.
Thanks, CG
Joe, The basic notions behind HSAs are sound: (1) individuals must have a financial incentive to spend health care dollars wisely… the demand for medical care is practically infinite if it is free,and (2) the idividual should own their health insurance account, not their employer or their government, so that health isurance is portable with change in employment or residence and so the individual can buy healthcare with pretax money, eventually even funding retirement healthcare needs with wise purchases and personal behaviors and a little good luck.
Unfortunately there are also critically important details which are not addressed by current products and rules: (1) Rational healthcare puschase requires full access (no restrictive networks) to providers, and both cost (one price for all customers; no “volume discounts” for drugs, hospitals, or professional services) and quality information about all of them, derived mostly from aggregated data, that allow individuals to make value- based health care purchases (value = quality outcomes / dollar), (2) the positive insurance pool performance arising from favorable HSA selection and from improved health behaviors and wiser purchases must be largely returned to the policyholders in the form of lower premiums, not flow as windfall profits to the insurer, and (3) any responsible health benefits plan must have financial incentives for prevention, for healthy behaviors and for clinical preventive services and for good disease managment, but most HSAs have been perversely structured to create financial penalty for prevention e.g. selection of a higher cost blood pressure med that has proven effective for them. (I want to be in a pool that costs members MORE if they DON’T take the proper blood pressure meds, not if they do)
None of these are fatal flaws that a committed nation cannot fix; the magic of digital healthcare will make affordable many of the necessary measurements and communications, e.g. clinical outcome analysis and behavior monitoring, that are needed to operationalize the improved healthcare system.
However, as structured, HSAs are not working, and are not going to work without actions that addresses these shortcomings and abuses. Without reforms, this fundamentally wise path toward more rational healthcare system finance and operation is doomed.
All excellent points however no one has addressed the role of physicians, specifically PCPs, as it relates to consumers willingness to adopt HSAs. Quite simply, docs don’t cater to pts w/ HSAs and often treat them as cash pts and charge them the full amount “billed” to insurance. Until physicians answer the call of the market and start offering reduced cash prices (no profit loss b/c less paperwork/overhead), pts will be reluctant.