Consumer-Driven Health Care: A National Overview Anthony T. Lo Sasso, Ph.D. Northwestern University

The (Very) Big Picture of CDHC While we are all very concerned about uninsurance and under-insurance, it’s worth stepping back and thinking about OVER-insurance for a moment Consumer-driven health care IS sugar-coated cost-sharing, but at least there’s some sugar!

The Sugar Coating: Notable Aspects of CDHC Key word in the name is “consumer”: changes patients from passive recipients to active consumers Managed care succeeded in restraining costs because a third-party was placed in the role of saying “no” to patients By contrast, consumer-driven health care is an effort to put patients in a position to say “no” to themselves It does so by creating a “budget constraint” which by definition creates incentives However, unlike simply raising copays, coinsurance, and deductibles, CDHC plans provide first-dollar coverage with spending accounts and create incentive to enrollees to use preventive services by exempting them from the spending account

What are Employers Thinking? The Henry J. Kaiser Family Foundation/ Health Research and Educational Trust 2003 Survey of Employer-Sponsored Health Benefits This supplement entailed fifteen questions about firms’ offerings, future plans, and views on consumer-driven health care

Yes, Cost-Sharing is For Real Small (3-199 Workers) Large (200+Workers) All Firms Deductibles, PPO Plans In-Network 2000 $210 $157 $175 2003 $419 $209 $275 Out-of-Network $383 $319 $340 $783 $459 $561 Employee Contribution, Family Coverage $162 $121 $135 $248 $179 $201

How Familiar are Firms with CDHC Relative to Other Initiatives, 2003?

Use of High Deductible Plans and High Deductible/HRA Plans, 2003

Employers Report Mixed Feelings About CDHC, 2003 Strongly Agree Somewhat agree Somewhat disagree Strongly disagree HRAs will result in lower health care use and expenditures 10% 59% 21% 5% HRAs will attract healthier employees 38% 42% 14% 4% HRAs will lead to more intelligent medical care purchases by employees 19% 45% 24% 8% HRAs will improve the quality of care 27% 44% HRAs will be popular with employees 2% 23% 36% 35%

Likelihood that Employers Will Offer an HRA, 2003 Very likely Somewhat likely Somewhat unlikely Very unlikely Likelihood of offering an HRA in the next two years 10% 21% 30% 39%

Company Case Study A 2500 employee manufacturing firm Implemented Definity HRA product in one of its two primary sites, 2002 Decision was motivated by company belief that the consumer must be engaged in the process to affect health care costs Company viewed the benefit change as a long-term commitment to “shrinking the pie”

Details of the Experience Plan featured $1000 account/$1500 deductible for single & $2000 account/$3000 deductible for family Enrollment in 2002 in CDHC was 12% (189 employees) 39% of enrollees spent through their spending accounts during the year Of them, ¾ also spent through their deductible

Further Details Biggest challenge to implementation: educating employees Administratively it appears to reduce the burden on staff Company continued to offer Definity in 2003 and penetration increased to 28% In 2003 company implemented Definity product as a total replacement in other site

Observations The Definity enrollees did tend to be healthier than average Health costs were significantly lower in the CDHC group, but haven’t controlled for selection The size of the network matters greatly However, when contracting expanded in 2003, enrollment increased People do not blow through their accounts

Concluding Remarks At their best, CDHC will provide a mechanism to inject incentives into non-life threatening medical care decisions If employees respond to these incentives and use the web tools to make decisions not just regarding their plan, but to select providers based on quality, make informed treatment decisions, and manage chronic conditions, quality of care should improve

Concluding Remarks At its worst, however, CDHC could destabilize risk pools and lead to a redistribution of health care services and income from the sick to the healthy The jury is still out on these issues and clearly more research is needed