THE COMMONWEALTH FUND Karen Davis President, The Commonwealth Fund January 27, Health Savings Accounts

2 THE COMMONWEALTH FUND Few Insured People Are Currently Covered by High Deductible Health Plans (HDHP) or Consumer Directed Health Plans (CDHP) with a Savings Account Note: Comprehensive = plan w/ no deductible or <$1000 (ind), <$2000 (fam); HDHP = plan w/ deductible $1000+ (ind), $2000+ (fam), no account; CDHP = plan w/ deductible $1000+ (ind), $2000+ (fam), w/ account. Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer- Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December 2005.

3 THE COMMONWEALTH FUND Enrollees of HDHP/CDHPs Are Less Satisfied with Their Coverage Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer- Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December 2005.

4 THE COMMONWEALTH FUND Enrollees of HDHP/CDHPs Are Less Satisfied with Out-of-Pocket Costs Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer- Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December 2005.

5 THE COMMONWEALTH FUND Higher Deductibles Contribute to Failure to Receive Needed Care *Did not fill a prescription; did not see a specialist when needed; skipped recommended medical test, treatment, or follow-up; had a medical problem but did not visit doctor or clinic because of costs. Source: K. Davis, M.M. Doty, A. Ho, How High is Too High? Implications of High-Deductible Health Plans, The Commonwealth Fund, April Percent who had any of four access problems* in past year because of costs Deductible

6 THE COMMONWEALTH FUND Enrollees of HDHP/CDHPs Are More Likely to Delay or Avoid Getting Health Care Due to Cost Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer- Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December Percent of adults (n = 61) (n = 90)

7 THE COMMONWEALTH FUND Enrollees of HDHP/CDHPs Are More Likely to Not Fill a Prescription Due to Cost Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer- Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December Percent of adults (n = 61) (n = 90)

8 THE COMMONWEALTH FUND Cost-Sharing Reduces Use of Both Essential and Less Essential Drugs and Increases Risk of Adverse Events Source: R. Tamblyn et al., “Adverse Events Associated With Prescription Drug Cost-Sharing Among Poor and Elderly Person,” JAMA 285, no. 4 (2001): 421–429. Percent reduction in drugs per day Percent increase in incidence per 10,000

9 THE COMMONWEALTH FUND Higher Deductibles Associated with Medical Bill Problems Source: The Commonwealth Fund Biennial Health Insurance Survey, Percent of adults ages 19–64 with any medical bill problem or outstanding debt Deductible

10 THE COMMONWEALTH FUND Sicker Adults with Higher Deductibles More Likely to Report Medical Bill Problems Source: The Commonwealth Fund Biennial Health Insurance Survey, $500+<$500$500+<$500 SickerNot Sicker Percent of adults ages 19–64 with any medical bill problem or outstanding debt

11 THE COMMONWEALTH FUND Lower-Income with Higher Deductibles More Likely to Report Medical Bill Problems Source: The Commonwealth Fund Biennial Health Insurance Survey, $500+<$500$500+<$500 Income Less Than $35,000 Income $35,000 or More Percent of adults ages 19–64 with any medical bill problem or outstanding debt

12 THE COMMONWEALTH FUND Enrollees of HDHP/CDHPs Spend Higher Percent of Income on Out-of-Pocket Medical Expenses and Premiums Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer- Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December Percent of adults spending > 5% of income TotalHealth Problem <$50,000 Annual Income (n = 61) (n = 90)

13 THE COMMONWEALTH FUND Increased Health Care Costs Have Reduced Savings Has increased spending on health care expenses in the past year caused you to do any of the following? Among those with health insurance coverage who had increases in health care costs in the last year (n=731) (percentage saying yes) Decrease your contributions to a retirement plan, such as a 401(k), 403(b) or 457 plan, or an IRA Have difficulty paying for other bills Decrease your contributions to other savings Use up all or most of your savings Borrow money Have difficulty paying for basic necessities, like food, heat, and housing Source: EBRI Health Confidence Survey, 2005.

14 THE COMMONWEALTH FUND Deductibles are Unlikely to Affect Health Care Costs Since Most Costs Are Concentrated in the Very Sick 1% 5% 10% 55% 69% 27% Source: A.C. Monheit, “Persistence in Health Expenditures in the Short Run: Prevalence and Consequences,” Medical Care 41, supplement 7 (2003): III53–III64. Distribution of Health Expenditures for the U.S. Population, By Magnitude of Expenditure, % 97% $27,914 $7,995 $4,115 $351 Expenditure Threshold (1997 Dollars)

15 THE COMMONWEALTH FUND Most Insured Don’t Have Quality and Cost Information to Make Informed Choices ComprehensiveHDHP/CDHP Health plan provides information on quality of care provided by: Doctors 14%16% Hospitals 1415 Health plan provides information on cost of care provided by: Doctors 1612 Hospitals 1512 Of those whose plans provide info on quality, how many tried to use it for: Doctors 4254 Hospitals 2545 Of those whose plans provide info on cost, how many tried to use it for: Doctors 1536 ( n = 76) Hospitals 1432 ( n = 76) Source: P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer-Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December 2005.

16 THE COMMONWEALTH FUND Most Uninsured Unlikely to Benefit from Tax-Savings of HSAs 55% (0% tax bracket) 16% (10% tax bracket) 23% (15% tax bracket) 5% (27% tax bracket) 1% (30%-39% tax bracket) Source: S.A. Glied, The Effect of Health Savings Accounts on Health Insurance Coverage, The Commonwealth Fund, April 2005.

17 THE COMMONWEALTH FUND Health Care Opinion Leader Views on Solutions to Uninsured and Health Care Cost Problems Source: The Commonwealth Fund Health Care Opinion Leaders Surveys, April 2005, February 2005, and November-December 2004.

18 THE COMMONWEALTH FUND Promising Strategies for Improving Affordability and Achieving Savings Better information on provider quality and total costs of care Pay-for-performance provider payment Development of value networks of “high performing providers” under Medicare, Medicaid, and private insurance High cost care management and disease management Improved access to primary care and preventive services Limits on family premium and out-of-pocket costs as percent of income (e.g., 5% of income for low-income) Expanded group coverage and reinsurance

19 THE COMMONWEALTH FUND Modifications to HDHP/HSAs to Reduce Potentially Harmful Effects Permit employers to lower deductibles for lower-wage workers and qualify for HSAs Exempt primary care as well as preventive services from the deductible; exempt prescription drugs essential for management of chronic conditions Guarantee choice of a comprehensive health plan to workers covered under employer plans Permit greater flexibility in benefit design (e.g. actuarially equivalent benefits) Set an income ceiling on eligibility for HSAs to reduce the tax subsidy for high income individuals

20 THE COMMONWEALTH FUND Commonwealth Fund Resources Cathy Schoen, Senior Vice President, The Commonwealth Fund and lead author, “Insured but Not Protected – How Many Adults Are Underinsured,” Health Affairs, June 14, Sara R. Collins, Senior Program Officer, The Commonwealth Fund and lead author, The Affordability Crisis in U.S. Health Care: Findings from the Commonwealth Fund Biennial Health Insurance Survey, The Commonwealth Fund, March 2004; P. Fronstin, S.R. Collins, Early Experience with High-Deductible and Consumer-Driven Health Plans: Findings From the EBRI/Commonwealth Fund Consumerism in Health Care Survey, EBRI Issue Brief, December Research assistance – Jennifer L. Kriss, Program Assistant, Commonwealth Fund S.A. Glied, The Effect of Health Savings Accounts on Health Insurance Coverage, The Commonwealth Fund, April K. Davis, M.M. Doty, A. Ho, How High is Too High? Implications of High-Deductible Health Plans, The Commonwealth Fund, April Visit the Fund at: