The New Consumerism in Health Care Why States Should Care Anne K. Gauthier Senior Consultant, State Coverage Initiatives AcademyHealth

Consumer-Driven Health Care Overview: High deductible insurance plan Personal account funded in various ways to pay for care Gap between the annual amount put into the account Internet-based decision support Potential Benefits: Consumer control over health care and financial decisions Personalized information to facilitate decisions Greater choice of providers Incentives for consumers to control health care costs Potential Drawbacks: Adverse risk selection Greater out-of-pocket costs for sicker and poorer consumers Information not yet sophisticated enough on quality

The Many Names of CDHC The labels, structure, and the corresponding incentives of CDHC may vary: Consumer driven or consumer-centric health plans Defined contribution health plans Medical savings accounts (MSAs) Health reimbursement accounts (HRAs) But, the direction of change is consistent! New Health Savings Accounts (HSA) allowances under the Medicare Modernization Act Greater employee cost sharing in all forms (premiums, deductibles, and coinsurance) across all plans States have had to contend with $200b in deficits over last 3 years ;collectively 40-50billion in next year – State’s had varying degrees of budget shortfalls – Most states budget gaps between 5-20% - 5 states had budget gap of more than 20%; 6 states less than 5%; 5 states 0

Today’s Session Consumer-Driven Health Care: A National Overview (Tony Lo Sasso) Challenges and benefits to implementation from the employer’s perspective Definity case study Reducing Health Insurance Costs for Small Business (Bill Lindsay) Benefit design issues in today’s health care environment An introduction to MSAs, FSAs, HRAs, HSAs Pressing Forward: Cuts, Coverage & Creativity (Mila Kaufman) Pros and cons of HSAs Policy issues and implementation for states States have had to contend with $200b in deficits over last 3 years ;collectively 40-50billion in next year – State’s had varying degrees of budget shortfalls – Most states budget gaps between 5-20% - 5 states had budget gap of more than 20%; 6 states less than 5%; 5 states 0

Questions to Consider Will consumer-driven health care address the current health care crisis? How will providers, employers and consumers react? How will the Medicare Modernization Act change HSAs? What is the trend for the future? What do states need to watch? States have had to contend with $200b in deficits over last 3 years ;collectively 40-50billion in next year – State’s had varying degrees of budget shortfalls – Most states budget gaps between 5-20% - 5 states had budget gap of more than 20%; 6 states less than 5%; 5 states 0