Consumerism in health care – no panacea, a little promise

Austin Frakt’s piece discussing the latest research findings tells us what we’ve long suspected – high deductible plans don’t seem to reduce cost trends.
Frakt highlights an analysis by Katherine Swartz of the Robert Wood Johnson Foundation, an analysis that reads in part:

the CDHP [consumer directed health plan, which uses a very high deductible] was not able to controlmedical expenditures over time and it appears that the enrollees in the CDHP spent more on hospital care than enrollees in the traditional plans…The findings from these three studies are consistent with expectations about deductibles — once the deductible has been met, there are no longer strong incentives for an enrollee to be concerned about further health care expenditures. […]
Health plans with high deductibles and uniformly applied co-payments or coinsurance rates are oftenreferred to as “blunt instruments” for reducing unnecessary health care expenditures because evidenceis mounting that people reduce both essential and nonessential care…uniformly applied cost-sharing particularly causes people to reduce their use of prescription drugs, which in turn seems to lead to use of more expensive types of care that are indicative of adverse events and poor health outcomes. [emphasis added]

Those who’ve been watching the evolution of CDHPs for some time are not surprised. In fact, we knew as long as five years ago that CDHPs = lower drug costs = more hospitalization
. There are several other problems w CDHPs – chief among them the fact that the people who spend the most dollars on health care will not alter their spending habits on iota due to a CDHP.
Here’s a discussion from a previous post.
The underpinnings of CDHPs lie in the economic theory of “Moral Hazard.” Journalist-author Malcolm Gladwell describes this as the belief that “insurance can change the behavior of the person being insured” and notes that it is popular among many economists and think-tank types and, consequently, has been influential in shaping health care delivery systems. The idea is that if insurance covers the bills, people are more likely to seek care and run up unnecessary costs.
The Moral Hazard theory falls short when confronted by the rather uncomfortable reality of actually having health care services rendered to one’s own person. Why would anyone want to subject themselves to surgery or hospitalization if there were an option to avoid it and just go fishing instead?
But on the surface, the concept makes some sense. Most people would be careful about getting an MRI if they knew they had to foot the bill, but perhaps too careful. People will not simply avoid discretionary care; they will avoid necessary care, as several studies indicate. One Rand Corporation study concludes that when individuals are required to pay more for prescription drugs, they don’t take them as they should. This leads to nasty physical and financial problems, such as more strokes, which cause lots of pain and cost lots of money to fix when a few blood-pressure pills might have sufficed. As far as drug copays go, increasing consumers’ costs actually drives up total medical expenses. It’s not a great leap to think individuals with high deductibles will likely wait before scheduling an appointment with their physician to see if a problem just goes away on its own. In a time when the Centers for Disease Control describe diabetes as “a runaway train,” is it economically wise to foster measures that discourage preventive care?
The coup de gras for CDHP is its old nemesis, the real world. CDHP’s fatal flaw is that the “consumer” part is directed at the wrong people. Half of U.S. health care costs are spent on five percent of the population. A deductible has little impact on the purchasing behavior of these folks; they’ll blow through a few thousand bucks in a couple of months
Conversely, over two-thirds of Americans spend less than a thousand dollars a year on health care. The only effect a high deductible will have on these folks is to discourage the use of preventive care.
Consumerism is not all bad – health care shouldn’t be “free” for anyone. Requiring people to share in the cost of their care should be a part of any serious reform effort. The fix for CDHP is relatively simple – get rid of high deductibles, which are unaffordable for many and may well discourage preventive care, and replace them with coinsurance per service to ensure patients have some financial skin in the game. Insurance companies should keep an income-indexed out-of pocket-maximum, while covering preventive services and maintenance medications at very low copays to encourage their use.
I”d add that employers really interested in reducing costs over the long term do have another alternative – buy a CDHP plan, and then fund the deductibles. One company has saved their clients significant dollars with this hybrid approach.