There is an interesting paper put out by the National Bureau of Economic Research that looks into the sustainability of cost savings from high deductible health plans (HDHP) which are also known as consumer directed health plans (CDHP). Previous research had shown that a HDHP plan design was effective at controlling costs in the first year of utilization as people who were used to seeing $300 deductible were now seeing $2,000 deductibles before any insurance company payments kicked in. There is a question of whether or not this was a sustained savings or if this was a one time OH MY GOD cringe reaction.
This paper argues it is a sustained savings with a different cost trend being created:
we find that CDHP offer is associated with an approximately 5 percent reduction in total health care spending in each of the three years after CDHPs were introduced relative to cost growth observed for non-offering employers. The long term decreases in spending are focused in outpatient care and drugs and there is little impact on inpatient or emergency department spending…..the pattern of the point estimates suggests that the impact of CDHPs is greater when paired with HSAs (versus HRAs) and when employers make smaller account contributions…..
This is interesting but I think incomplete as it is a study on total cost and not the components of total cost which is the number of services used times the average price of those services. Two very different stories emerge depending on what is driving the cost trend reduction.
If utilization (the number of services) is going down, that tells a story of avoidance of visits. The avoided visits may or may not be the optimal visits to avoid. If the average costs of the visit is going down relative to the comparison group trend, then the story is different. It is a story of discerning shoppers bringing the atomistic power of the free market to bear on a chaotic medical market where low cost providers are rewarded.
We know from the Rand Health Insurance Experiment from the 70s that people reduced costs in the face of cost sharing by avoiding visits without finely discriminating between high value and very useful utilization and low value or wasteful services. This study is suggesting that the CDPS universe of employer sponsored covered lives is seeing utilization going down on mostly lower value services as there is no big cost blow up in Year 3 from mismanaged chronic conditions from Year 1 or Year 2. That is good news.
Yet, I am still somewhat skeptical as the study divided the medical cost world into four components in descending order of proportional spend: Pharmacy, Inpatient, Outpatient, Emergency Room. ER is usually the area of the greatest low lying fruit to minimize utilization as most ER visits aren’t needed, especially as urgent care centers have popped up to take care of urgent but not critical care niche. Yet they found no reduction there, nor in in-patient trend? I trust their data, but the results seem a little odd given my experience… but still, it is a very interesting study that adds evidence to the argument that for reasonably healthy people (remember people covered by employer sponsored coverage are on average, healthier than the general popuation) higher deductible plans are not harmful to health.
mrmcd
I switched to a HDHP with a deductible of about $2200 for 2014, and kept it for this year.
The main thing that pushed me over the edge was my employer changed their policies so that if you signed up for the HDHP, they kicked in $1000 to an employees HSA, and removed the employee share of a premium, which saved another $1200, meaning the deductible is essentially covered if I do need significant care, otherwise I can get the tax benefits of maxing out my HSA. They showed us how much they pay in premiums too, and $2200 is about half the savings for them versus someone on the high coverage plan, so it’s a good deal for both parties.
HOWEVER, I’m (relatively) young (early thirties), don’t have kids, have enough income where a sudden $2200 bill isn’t a crisis, and don’t have any chronic conditions. Without any of those things plus the change in employer policy I wouldn’t have done it. I think that’s the main thing that makes me uncomfortable about the HDHP situation is they are primarily used by people with no other choice, or as a tax benefit for the young and high income.
ThresherK
Spousal Unit is one of those patients for whom hitting the high deductible is not a matter of if, but how soon.
Seriously, every calendar year it’s like watching a good basketball team get fouled and spend most of the half shooting free throws. We celebrate the day and then it’s splurging on all those indulgent
lobsters we moochersdoctor-recommended screenings that middle-class, not-young folk get from the gummint.(Okay, it’s through her employer. But she’s not negotiating it individually with MegaHealthInsurer, and she’s not paying in little Galtian gold coins, so it’s soshulism, right?)
I'mNotSureWhoIWantToBeYet
Anecdata, but in my case, when I didn’t have any money while I was in school, I didn’t have a physician and I didn’t go to a dentist. That lasted for about 10 years (fortunately, I got strong teeth from my dad). My one visit to an emergency room was the day after I almost ripped off part of a finger drilling a hole in some sheet metal with a drill press…
Medical visits aren’t like deciding what to buy in a restaurant. One never knows whether a visit will cost $20 or $2000. The only sensible behavior in such circumstances is avoidance. You can’t shop around for the best price or most effective treatment because you need the diagnosis first and because prices aren’t published. And if it’s an emergency, what matters is time. One can rationalize that something “isn’t that bad” when one is broke and the choice is between seeing a doctor or dentist and having money to live and get to work. :-(
I suspect that 3 years is too short a horizon to determine real trends. Not getting regular preventive care, or fixing injuries when they’re fresh rather than letting them fester into something that causes chronic pain, may not blow up until many years later,
I suspect our medical bill will be substantially less when everyone finally has access to treatment and preventive care at little or no cost. Until then, the data is going to be pretty noisy and is going to depend on the details. Poor people aren’t going to be helped by HDHP and HSAs and the like – and too few people qualify for meaningful assistance. And, more than that, there are too many financial unknowns in visiting medical/dental professionals. Plus, they don’t have any money.
My $0.02.
Thanks.
Cheers,
Scott.
Richard Mayhew
@mrmcd: You’re pretty miuch the ideal person for a HDHP — you have the ability to take a financial hit but you are extremely unlikely to actually take that hit in any given year, so you should be able to accumulate assets in the HSA for several years to fully cover a deductible for one or two years if needed.
Soprano2
Urgent care centers may be a good idea, but I’ve had some bad experiences with them in my hometown, especially after regular doctor’s hours. A doctor at one misdiagnosed my mother’s bowel obstruction as that digestive problem where people can’t eat anything with seeds in it. Luckily she got to the ER the next day and it got taken care of, but still that was a scary experience. OTOH there is one near my workplace that has been good, both times I’ve seen an older physician assistant who knew right away what my problem was and how to take care of it.
mrmcd
@Richard Mayhew: Yeah exactly. It’s a good deal for me but as a policy tool the HDHP/HSA combo almost entirely benefit those who are already healthy and well off. Probably why Republicans like them so much.
satby
@I’mNotSureWhoIWantToBeYet: I think you’re right. A lot of things that can blow up into serious chronic illness is asymptomatic and can stay that way for much more than 3 years, things like HBP or type 2 diabetes. My sister neglected to get an accurate diagnosis of her MS for almost 7 years, by then it was too late to slow down the wreckage.
I think that after 5 years or so some of the potential negative effects of the avoidance of care may be more obvious.
Xantar
Richard, what this says to me is that cost-sharing should be narrowly tailored instead of applied indiscriminately to all medical services.
For example, if we want people to use lots of contraception and mental health screenings, then make sure those are covered with no co-pay, deductible, or co-insurance (just like under the current Obamacare regime). On the other hand, something like bariatric surgery should be subject to a deductible and coinsurance if we believe there are generally cheaper and also effective remedies like diet, exercise, and therapy.
Violet
I started skipping visits last year or putting more space between them because I couldn’t afford the giant deductible at the first part of the year. It meant that I missed some treatments that I needed or should have had. I’m not as stretched financially as many people so if I did it I can only imagine what happens to people whose budgets are quite tight.
The high deductible plans lead to this and aren’t going to end up being as cost effective as they could. Perhaps deductibles could be monthly or something.
Mnemosyne (tablet)
I have a couple of prescriptions I take every day for asthma and ADHD. My company offers a high-deductible plan, but it would be a freakin’ disaster for me because I would have to pay out of pocket for all of my prescriptions until I finally hit the deductible. Instead of paying $4 for a 3-month supply of generic Concerta, I would pay $400. And, yes, it would be extremely tempting to just do without even though I make a decent living and even though it would put me back at risk of losing my job.
Just out of curiosity, do they ever look at the effects of these kinds of plans on people with chronic conditions? Are they even included?
rreay
I’m near ThresherK’s situation. The Spouse is expensive medically and we’re always close to the deductible. So when I changed jobs last month there were differences in the available plans that could have made a difference.
What we would end up paying for a single specific prescription during the deductible period would determine whether not hit the deductible in a typical year. But I simply could get anybody to give me a straight answer what the negotiated rate was for that single medicine. With out being enrolled no one would say; they’d tell me the co-pay price or list price but not negotiated price. I eventually threw a dart and picked one.
So yeah, it’s not possible to be an informed consumer if no one will inform you.
richard mayhew
@Mnemosyne (tablet): This particular study as far as I can tell did not look at individual level health indicators, but other studies have. And yes, the HDHP model sucks for people with known medium to high cost maitenance amicable conditions.
azlib
I have been on high deductible health plans for quite a while now. When I was self-employeed I had an HSA. Now with employment I have an HRA. With the HRA, it looked to be about a wash with a standard PPO plan, since my employer kicks in $1,000 a year into the HRA.
The key factor is I can afford a potential $10K cost per year (my yearly family deductible), since I have a steady relatively high paying job and I have sufficient savings. Most folks are not in my situation. So I have always seen HDHPs with an HSA as a SOP to the upper middle class.