Showing posts with label Health Savings Accounts. Show all posts
Showing posts with label Health Savings Accounts. Show all posts

Wednesday, October 24, 2007

New Study Shows Lower Costs in Consumer-Driven Plans--But the Findings Won't Settle the Debate Over Just How Effective C-D Plans Are

HealthPartners, a highly regarded not-for-profit Minnesota health plan, has issued an important report on its consumer-driven care book of business. It includes Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs).

Their findings include:
  • After adjusting for "illness burden," HealthPartners found that heath care costs were 4.4% lower for members in a consumer-driven plan compared to its traditional co-pay-style plans.
  • "Researchers found the lower costs were driven by CDHP [consumer-driven health plan] members receiving care from lower cost providers and that providers used fewer resources such as diagnostic imaging and other procedures."
  • "The rate of preventive care services [at Partners] was nearly the same among members in CDHPs and traditional plans."
  • "Members with CDHPs were more likely to use Web-based tools that provide information on health care costs and quality."
  • "Members in CDHPs appear to be significantly healthier." They "were expected to use 28% fewer health care services compared to members enrolled in traditional plans."
  • "CDHP members are slightly younger."
  • Consumer-driven plans are more popular among mid-size companies. About 70% of the CDHP market at Partners is in the individual, 1-500, and 500-1000 employee market.
My sense is that this very well presented study doesn't provide any surprises. Consumer-driven care does save some money--only about 4% in this case--and is inhabited by people who think they can beat the system--the very healthy.

The good news is that at Partners the people who use these plans are making good use of preventive care and health information tools--there is no evidence that the quality of care is less.

I have always felt that consumer-driven care offers consumers incentives to use care more efficiently--especially for first dollar kinds of services and drugs. However, I have never seen CDHPs providing those financial incentives in any kind of effective way for those who incur the vast majority of health care costs--the very sick who blow past their deductibles and into the full pay areas. An overall 4% savings is what I would have expected in this context.

I have also repeatedly warned employer benefit managers who self-insure to be careful in how they design these plans because they have the potential to draw the healthiest people out of the employer pool leaving a disproportionately expensive remnant group and a higher overall program cost for the plan sponsor. The data on just how much healthier the consumer-driven group is only re-enforces that concern.

I was disappointed to see that the study, "excluded catastrophic claims above $100,000 to reduce random variation." That may make statistical sense but I would have hoped they could have found a way to investigate the contention that the bigger the claim the smaller the impact CDHPs has on cost management.

Thanks to HealthPartners for this valuable information.

You can download their PDF here.

Tuesday, July 3, 2007

The Market Has a Place in Health Care But It Also Has Its Limits

Every leading health care proposal today includes a place for the market. Some believe government should run it all and then there are those who believe the real solution lies in just letting an unfettered market get it all done.

Health care is not like buying a set of tires. We lose our market-driven objectivity pretty quickly when we are faced with scary medical decisions for ourselves or for someone in our family.

The notion that if you just let an insurance plan rate consumers for their risks, with no rules, is market simplicity taken to the ridiculous.

Two Cato authors recently proposed just letting the market take its course:

"If companies [insurers] can charge more to cover people who are likely to need more care — smokers, the elderly, etc. — then it won't make any difference who does or doesn't buy insurance."

Two of my good friends, Joe Paduda and Richard Eskow, both highly familiar with the advantages and disadvantages of the marketplace quickly pointed out the deficiencies in such a unilateral approach.

From Joe's recent post:

"One of the more puzzling arguments against universal coverage is that advanced by the worthies at the Cato Institute. They argue that if insurance companies could just charge people based on their risk profile, the market would solve the problem of coverage."

This from Richard's recent post:

"The Invisible Hand does many wonderful things, but the notion of the free market as a Universal Solution Machine is closer to theology than it is to economics. The United States has the most deregulated and privatized health system of any OECD country, and we also lag in virtually all major health measures. Don’t think there’s a correlation? Then you have an argument to prove. The Cato authors don’t succeed."

Joe's full post: 'Free markets' in health insurance just don't work

Richard's full post: Daydream Believers: Libertarians and Healthcare

If it's raining where you are this 4th of July, their posts are worth a read.

Have a safe and fun holiday.

My take on the right mix of government and private markets: There is a Health Care Reform Plan That Doesn't Duck the Big Issues--and More Than 100 Heavyweight Stakeholders Support It!

Friday, June 15, 2007

Wall Street Journal Sends Shockwaves Through the Health Insurance Markets With the Headline "Health Savings Plans Start to Falter"

It's the kind of headline I would have expected to see in the New York Times instead of the Wall Street Journal but there it was in Tuesday's edition.

Vanessa Fuhrmans' article seems to have unleashed some pent-up frustration in the health benefits market on the subject of health savings accounts (HSAs) specifically and consumer-driven care generally. It is as if it represents a turning point for how health savings accounts (HSAs) and consumer-driven care are going to be seen by the benefits market from this point forward.

The article points out that HSA growth may have stalled--the number of workers enrolled in HSAs through work grew only slightly, from 2.4 million in 2005 to 2.7 million in 2006. When employees had a choice of plan type, only 19% picked an HSA. The surveys also show low satisfaction rates for these plans. The managing director of Towers Perrin's health care practice: "If I were a product manager in any other industry and saw the scores this low in customer satisfaction and understanding, I'd be thinking of pulling that product from the shelves and retooling it."

Just to get my own bias on this issue out in the open, I have never believed that consumer-driven health care was any kind of silver bullet for solving America's health care problems. That said, I don't see much harm in making these plans available--particularly to consumers who can afford the extra financial risks they can create. These plans enjoy better consumer acceptance in the individual health market--particularly among higher paid consumers because they are a fantastic tax preference and a great way to fund the high deductible plans this higher-earning market tends to want anyway.

But HSAs as a health policy tool to fix the American health care system? Give me a break.

Consumer-driven care is a concept built on a free market foundation. And that foundation is turning out to be one that is pretty weak.
  • First, for people to act in an efficient way, they have to have information. They have to know their options and be able to assess the options. The medical directors of the leading health plans can hardly manage care optimally. How did we ever expect regular folks to figure it out. The information just doesn't exist--beyond some marketing brochures.
  • Second, the consumer-driven movement assumed that patients would want to take more control of their health care challenges if there was a financial incentive for them to do it. We are finding that the opposite is true. The health care delivery system is a hugely complex tangle and consumers are more interested in finding providers and/or insurers they can trust to guide them through it than thinking this needs to be their preoccupation. Ask anyone who has had a serious illness, or managed one for a close relative, and they will recount one nightmare after another about trying to get the best care and their frustration in trying to untangle bills and insurance documents. Who would actually want to do this?
  • Third, and you have all heard this a million times but we have to keep it on the list, 75% of all health care costs are incurred by the 15% sickest people. Look at all the consumer-driven financial incentives and you will find they are first-dollar oriented. Those people with all the high health care claims, and most of the costs, blow through those corridors very quickly and into full-pay areas where they no longer have financial incentives to better manage care--if they wanted to and could.
More information, price transparency, incentives to be better health care consumers, are all great ideas. Clearly, these concepts are responsible for the much better take-up rate for generic drugs and the huge savings there. The $5 co-pay and $100 deductible were around way too long. But the consumer's ability to be buy serious health care like he would buy a set of tires was a silly idea in the first place. This idea was pushed by the same "geniuses" who today write books about how we will save the U.S. health care system with new technology as the next "silver-bullet." All true to some extent but far more a sign of just how naive they are about the down-to-earth challenges we face.

We are at an interesting place in the national health policy debate.

One Democrat after another--so far Obama and Edwards--is proposing comprehensive health reform built around the Massachusetts health reform plan. That plan now has its challenges in getting off the ground and proving-out its proponents' ideas.

On the Republican side, we already have two candidates--Giuliani and McCain--who have said they want to work toward a more market-driven health care system with the consumer-driven concepts and HSAs at its core. But now even the Wall Street Journal is challenging the bottom line in that health care philosophy.

We have two big competing health reform ideas--one Democratic and one Republican--facing off in the upcoming national election just as real life results from both of these models are becoming available.

The candidates had better be careful to connect their rhetoric to the reality.

Monday, April 16, 2007

More Than 10 Million Are Now Using Consumer-Driven Health Care Accounts--We Will Soon Have Enough Data to Know How Well HSAs and HRAs Work

Consumer Driven Market Report (CDMR) has issued a report on the success of consumer-driven care in the marketplace.

CDMR reports that over 6 million people are participating in health plans that have a health savings account (HSA) as part of their plan—that is an increase of 2.85 million in the last year.

Similar health reimbursement accounts (HRAs) now total 4.1 million and are growing at a rate of 1.2 million per year according to CDMR.

Eleven insurers now have over 100,000 covered lives in HSAs and HRAs.

The top five include:
United Health Group 2,145,000
Wellpoint 821,000
Aetna 627,000
CIGNA 500,000
Assurant 400,000

Having ten million people in consumer-driven care today reflects huge growth for a market that is just a few years old.

It also reflects a consumer-driven market that is still only 5% of the U.S. private health care system.

At 5% of the private market, consumer-driven care, with its HSAs and HRAs, does not make up enough of the market to make a real difference in reducing our nation’s huge health care bill.

My own opinion about HSAs and HRAs has always been that they are no silver bullet solution. While HSAs and HRAs do little if any harm, I question just how much good they will do in improving either health care quality or cost.

The old rule is that 15% of the people incur 75% of all health care costs. Once these people blow through their HSA or HRA deductibles, they are in a full-pay area and their incentives haven't changed one bit.

That said, HSAs and HRAs can certainly have a positive impact on smaller dollar costs below that threshold. Consumer-driven plans have done a lot to move the country to use more cost effective generic drugs, for example. And, HSAs are one heck of a good tax preference especially for people who are going to have a high deductible health plan anyway. I have also told my insurer clients that they have to offer these plans if for no other reason than to stay current with market demands.

I also know that HSA and HRA programs are often priced lower than conventional plans. But that is generally explained away by the higher out-of-pocket expenses these plans incur and the likelihood of the healthier joining (positive risk selection). There is yet no definitive evidence just what an HSA or HRA does to control cost and improve quality.

Am I right in my pessimism that HSAs and HRAs are not going to have a fundamental impact on either health care cost or quality?


Well, at 5% of the market and 10 million people, we should be at a point where we will soon have enough data to know. We won't have to argue about it much longer.

Thursday, February 8, 2007

Don't Forget Consumer Choice in Reforming the Health Care System!

Bill Boyles is the publisher of Consumer Driven Market Report and Health Market Survey. He is one of the most effective spokesmen for the consumer driven movement and the effectiveness of the market in managing the cost and quality of care.

Today, he reminds us that those offering the new reform proposals shouldn't forget consumer choice:

The Uninsured Need Consumer Choice First

The only humane way to help the uninsured is to let them choose how much they can afford out-of-pocket and then enroll in that plan. Dozens of studies show why: the vast majority of people lacking insurance simply cannot afford it. Offering them unaffordable options is not only unworkable, it’s cruel.

Allowing people to choose high deductibles is never mentioned by all the Wal-Marts and coalitions and pious employer alliances. That’s too much detail. Once the cameras are packed up the job is over and the pious groups are delighted by headlines saying the issue is reaching new heights.

The worst example of this cruelty is the Massachusetts plan and its progeny in other states. They give the uninsured no choice at all under the guise of allowing them to choose their plan in brightly-colored brochures. The victim then finds out they cannot choose a low-premium plan which matches how much they can afford in out-of-pocket costs for their own family. It’s a false promise – hiding under the guise of “we know how much you need and we won’t offer you a cheaper plan because it’s not good enough.”

Surprise. You can’t force Americans to buy health insurance they can’t afford -- even if it is what they need. Even if it is what’s best for “the system.”

The irony here is that a better solution is endorsed by both Sen. Kennedy on the left and conservative health economists on the right. The new Kennedy plan offers all families a choice of plans via the federal employees program model, including varying deductibles, copays and premiums. The same distribution model is endorsed by the Heritage Foundation and others.

The state plans do not even have to go that far. They could offer the uninsured a choice of five plans with five levels of out-of-pocket costs and five levels of premium. These plans can easily be mandated to have low-cost prevention coverage too. No government-developed standardized benefits package can outguess the personal selection of a health plan when family income is so low that comprehensive coverage is out of the question.

For 30 years Americans have been told they cannot be offered things like high deductibles with low premiums because it’s bad for them and the system. It’s time for all of these companies and coalitions and Wal-Marts to stop the self-righteous talk and give the people a choice of what they can afford.

Wednesday, January 24, 2007

Health Savings Accounts (HSAs) and The Massachusetts Plan--Two Great Experiments

In the wake of the President Bush's new health plan, much has been said about whether we should move to reform the health care system by building upon the traditional employer-based system (preferred by most Dems) or move to a system more controlled by individuals (preferred by most Republicans and the President).

Democrats claim the President's plan would wreck the employer-based system--something that has worked fairly well for the majority of people who have health insurance there.

Republicans claim that the employer-based system simply insulates consumers from the true cost of health care with its rich benefits and that consumers need to be more in control of what is spent for them so that they are better consumers. HSAs are the answer many of these people look to.

The President might have had a chance of getting his plan through Congress in the Republican heyday three or four years ago but this Democratic Congress is not going to give him the time of day on his recent proposal. Nor will Democrats likely be able to move anything major with their slim majorities and a Republican presidential veto at hand.

But let's look at the bright side.

We have two great health care experiments underway:
  • Recent HSA legislation that enables us to assess these Republican ideas.
  • The Massachusetts universal health plan that mirrors much of what the Dems are talking about in terms of building a more universal system on existing public and employer-based programs.
Supporters of the Mass approach took a hit this week when the program administrator announced that the average premium for the basic health plan would cost an average of $380 per person per month (and many insurer bids were much higher)! The original estimate, when the bill was passed, called for an average cost per person of $200 per month--and there was a later estimate of $260 per month.

Clearly, the Mass program is a work in progress.

If Mass doesn't fix this problem this grand experiment is going to be dead before it even begins.

One can argue we even have a third experiment in the new Medicare Part D drug plan and Medicare Advantage program testing the notion that government can create and fund a benefit but let the private sector run it.

So, we won't see any great legislation in the last two "lame duck" years of the Bush administration.

But let's not miss the great opportunity we now have to test these competing ideas!

My sense is that once we elect a new President and Congress, with health care a major issue, in 2008 we will be as ripe for health care change in 2009 as we were in 1993.

All of this experimentation and debate is going to take us to a very promising and interesting place beyond the next presidential election!!!
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