Myth vs. Fact: Consumer-Driven Health Plans

Theoretically, consumer-driven health plans should give people more control over their care and provide them with what they want. In reality, it doesn't work that way.

Consumer-driven health care plans are touted for giving people the best care that suits their needs, but an evaluation of these plans shows low satisfaction levels and cost-shifting to the sick. (iStockphoto)
Consumer-driven health care plans are touted for giving people the best care that suits their needs, but an evaluation of these plans shows low satisfaction levels and cost-shifting to the sick. (iStockphoto)

“Consumer-driven health care” is the euphemism for high-deductible health plans with savings accounts. It is based on the theory that increased financial exposure will encourage patients to act like consumers, comparing quality and costs and negotiating lower prices. It also, according to the rhetoric, gives people greater control over their health care.

Yet many experts paint a different picture. Rep. Pete Stark (D-CA), Chairman of the House Ways and Means Subcommittee on Health, called a hearing last week to take an honest look at whether consumer-driven health care plans contain, or merely shift, costs. Announcing the hearing, he said, “HSAs and high deductible plans … make things worse, not better. Instead of using the tax code to encourage people to purchase coverage that may be woefully inadequate, we should focus on providing comprehensive health care coverage to those most in need in the most cost-efficient way possible.”

This fact check below shows exactly why consumer-driven health plans and health savings accounts have it wrong:

Myth: Consumer-driven health care plans give consumers what they want.

Fact: Satisfaction is actually lower in consumer-driven health plans.

Only 33 to 42 percent of people in consumer-driven health plans are extremely or very satisfied with their health plans, compared to 63 percent of those with traditional plans. And two-thirds of people prefer an employer-selected set of plans to an employer-funded account or choosing insurance on their own.

Myth: Consumer-driven health plans encourage high quality and appropriate use of care.

Fact: High deductibles and cost sharing discourage consumers from seeking any care, even when it is high quality or critical.

The idea that consumer-driven health plans lead consumers to choose cost-effective providers is based on faulty assumptions that consumers can obtain adequate and reliable information on cost and quality and that they can differentiate necessary from unnecessary care. What’s more, consumer-driven health plans’ high-deductibles and cost sharing cause a reduction in use of care whether it is needed or not.

Even plans with small co-pays can discourage people from using preventive services in particular. Consumer-driven health plans are permitted, but not required, to cover preventive services outside of the deductible. In a number of these plans, recommended preventive services must be financed through the accounts, sometimes at a considerable cost to the consumer.

Because about 70 percent of health care costs in the United States come from 10 percent of Americans whose costs are well above the deductible, there’s little reason that a high deductible will change their behavior and encourage them to seek more preventative or cost-effective care.

Myth: Consumer-driven health plans will reduce costs by giving people more control over their health care choices.

Fact: Doctors still retain primary control over health care, and patients are unlikely to “shop around” for services.

The truth is that doctors have a larger role in determining health care use than patients. Most tests, drugs, and services result from the recommendations of health professionals, not the desires of consumers. In fact, we encourage patients to follow doctors’ advice. This means that high deductibles will likely not curb higher use of many health care “commodities.”

And the stakes of “shopping around” for services can be very high for patients and their families. Health care is ultimately about preserving life and delaying death, which makes people think differently about it than other services. For example, most parents of sick children do not shop for or negotiate prices; people with cancer are unlikely to decline a new and expensive test or treatment.

Myth: Consumer-driven health plans will encourage people to get the care that best suits their needs.

Fact: High deductibles and cost sharing shift benefits to the healthy but shift costs to the sick.

A survey from the Employee Benefit Research Institute found that, while people in such plans were more cost conscious, they were twice as likely to report delaying or avoiding care and about three times as likely to report paying a large fraction of their income on health costs as those in comprehensive insurance.

Although employers are allowed to make contributions to health savings accounts, a 2007 survey shows that employers contribute less to HSA-qualified plans compared with other types of plans, shifting higher out-of-pocket expenses to workers which could further deter workers from seeking care.

What’s more, enrollees in consumer-driven health plans appear to be significantly healthier than others. As sicker workers stay in traditional plans, the cost of such plans will go up, causing such plans to become unaffordable for workers and employers. This erodes group purchasing power, leading to even higher prices, and possibly more uninsured Americans. It could also undermine Medicare as it expands there.

For more information on consumer-driven health care and prevention, see:

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