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More People Choosing Consumer-Directed Health Plans---Pitfalls and All


Trudy LiebermanThe news last week from the respected Employee Benefit Research Institute, (EBRI), that more consumers are choosing consumer-driven health plans with their high deductibles came as no surprise.'  Many of us knew that eventually consumers would embrace them as insurance premiums zoomed up. ' EBRI says that more employers of all sizes are offering these arrangements to their workers which usually come with high deductibles--$2400 for families and $1200 for people who buy a type of consumer-driven plan known as a health savings account. ' Deductibles for other kinds of plans can be much higher.

In 2005, less than five percent of employers offered consumer-driven plans.'  Last year between 12 and 15 percent did.'  More large firms are in the game now---22 percent made them available in 2008; 28 percent did in 2009.'  Many employers have gone to a 'total replacement strategy.'  In insurance jargon that means workers don't have a choice of plans as they once did.'  It's now a take-it-or-leave-it deal.'  No more HMOs or PPOs.'  That's oh so ironic given all the flag-waving from politicos and advocacy groups about choice in health care.'  There's no choice after all.

'It shouldn't be a surprise we've seen enrollment growth as employers are desperate to do something about health care costs, and this is an alternative they are promoting,' says Paul Fronstin, a senior research associate at EBRI.'  Eleven percent of those with private insurance or about nineteen million people had consumer-driven plans in 2009.'  Some ten million have health savings accounts which allow them to set aside money tax-free to pay for the high deductibles and other medical expenses. Fronstin is right'it's the attraction of lower premiums. EBRI found that on average workers paid about 20 percent of the premium for a consumer-driven plan compared to 23 percent for an HMO and 24 percent for a PPO.'  (Typically employers and employees share the costs.)

These plans have a long history, growing out of ideas pushed by conservative think tanks over the last two decades as a way to make patients more responsible for the costs of their'  care.'  The theory was that if consumers had to think twice about spending their own money for medical services, they might not use as much of it.'  Voila! The national tab for medical expenditures would plummet because consumers wouldn't be going to the doctor as often.'  A gradual series of legislative changes made them a respectable if not a dubious proposition for many people, especially those who have chronic illnesses.

In some ways, consumer-driven plans are a pact with the devil. Yes, premiums may be lower up front, so they appeal to the young and the healthy.'  But you're taking a gamble.'  If you become seriously ill or have lots of medical expenses associated with a chronic illness, say, diabetes which means you go to the doctor often, you may quickly blow through any money in the savings account and must pay out-of-pocket until you've paid the deductible, and insurance actually kicks in.

And that brings me to another part of the story.'  Americans are cutting back on visits to the doctor.'  Does that mean consumer-driven plans doing what their supporters had hoped'discouraging consumers from seeking care they need it?'  'People just aren't using health care like they have,' said Wayne DeVeydt, WellPoint's chief financial officer.'  'Utilization is lower than we expected, and it's unusual.'

No one knows for sure whether it's because of the recession, loss of COBRA benefits , or lack of coverage under their consumer-driven health plan while patients satisfy their high deductibles. If it's the latter, there's another irony here. Health reform was supposed to ensure that people got the care they needed.'  Consumer-driven plans may result in just the opposite.

More Blog Posts by Trudy Lieberman

author bio

Trudy Lieberman, a journalist for more than 40 years, is an adjunct associate professor of public health at Hunter College in New York City. She had a long career at Consumer Reports specializing in insurance, health care, health care financing and long-term care. She is a longtime contributor to the Columbia Journalism Review and blogs for its website,, about media coverage of health care, Social Security and retirement. As a William Ziff Fellow at the Center for Advancing Health, she contributes regularly to the Prepared Patient Blog. Follow her on twitter @Trudy_Lieberman.

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Shoshanna Sofaer says
August 9, 2010 at 1:33 PM

Consumer driven health plans are an admission of our inability to control costs. We have tried for decades to reduce costs generated by physicians and hospitals, who actually control almost all the significant utilization of health care services in the country. The truth is that a major reason our costs are so much higher than those of other developed nations is that we pay our physicians, especially our specialists and sub-specialists, way more than their colleagues in other countries. So since we don't have the political will to try to reduce, even gradually, this major cost disparity (witness the Congress's rush to undo legislated reductions in physician payments under Medicare), we turn to the least powerful stakeholder in health care, consumers and patients, and ask them to do our work for us.

These plans have a fundamental flaw that even Trudi didn't catch! The vast majority of our health care expenditures are for people who are really really sick. CHDPs have little impact on costs like this because those folks blow through their "doughnut hole" really quickly and then keep on spending as their physicians order more and more diagnostic and treatment services for them.

There are specific arenas in which having a high deductible might work. First, they do appear to get people to spend less on prescriptions, primarily by buying generics. This is a pretty good thing. Second, a person with low back pain might well be less likely to demand CT scans and MRIs from their physician if they were paying for them; these diagnostic tests are not terribly useful, and much less expensive and intensive interventions, especially physical therapy, are the first thing to try.

Last point -- the famous RAND Health Insurance Experiment learned that when co-payments and deductibles are set high people do use fewer health serrvices. The catch? They use fewer unnecessary services, and fewer necessary services as well.

We need a better approach to reducing the number of times consumers/patients/family members ask for (and almost always get) services that won't do them much good. But we need, even more urgently, a way to reduce the number of times physicians order such services. This seems to be driven by the desire for more revenue, fear of malpractice suits, and probably, as well, the need to feel as if there is something MORE to offer a patient.