Study: Consumers With 'Skin In The Game' May Have Lower Health Costs But Risks Remain

A new study by the RAND Corporation bears this out. It concludes that when consumers have the kind of health insurance that requires more out-of pocket payments, they do, indeed, become more mindful of their care. And this more conscious approach to picking and choosing medicines, tests, specialists and treatment could save billions annually, the report, published in the May edition of the journal Health Affairs notes. But these so-called "consumer-directed" health plans, notably high-deductible plans and personal health accounts, do have risks because people may forego important prevention and treatment measures in order to cut costs.

"The study found that among families enrolled in consumer-directed health plans, about two-thirds of the savings were the result of fewer encounters with health care providers. The remaining third was caused by lower spending per encounter, suggesting patients were making different choices about tests and treatments. Families in consumer-directed plans used fewer brand-name drugs, had fewer visits to specialists and had fewer elective hospital admissions than families in traditional plans," the news release says.

Here's the abstract:

Enrollment is increasing in consumer-directed health insurance plans, which feature high deductibles and a personal health care savings account. We project that an increase in market share of these plans—from the current level of 13 percent of employer-sponsored insurance to 50 percent—could reduce annual health care spending by about $57 billion. That decrease would be the equivalent of a 4 percent decline in total health care spending for the nonelderly. However, such growth in consumer-directed plan enrollment also has the potential to reduce the use of recommended health care services, as well as to increase premiums for traditional health insurance plans, as healthier individuals drop traditional coverage and enroll in consumer-directed plans. In this article we explore options that policy makers and employers facing these challenges should consider, including more refined plan designs and decision support systems to promote recommended services.

And from the news release:

Aggressive expansion of such plans is not without risks, however. Increasing adoption of high-deductible plans also could reduce use of recommended preventive and other high value health care services, according to findings published in the May edition of the journal Health Affairs.

"Continued pressures to cut costs, combined with incentives in the federal Affordable Care Act, make the 50 percent enrollment level plausible over the coming decade," said study leader Amelia M. Haviland, a statistician at Carnegie Mellon University and RAND, a nonprofit research organization. "But given the limited information available to consumers regarding costs and quality, we need to carefully examine whether additional up-front patient costs will diminish the quality of health care."

The findings come from the most comprehensive study done to date on the impact and influence of consumer-directed and high-deductible health plans, which have grown rapidly over the past decade. Consumer-directed health plans have annual deductibles of at least $1,000 per person and are coupled with either a tax-exempt health reimbursement arrangement or a health savings account to help enrollees pay for out-of-pocket expenses.

Researchers from RAND, Towers Watson and the University of Southern California examined the claims experience of 59 large employers across the United States from 2003 to 2007 to determine how consumer-directed health plans and other high-deductible plans influenced health care spending. The study was funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation.

Researchers estimate that if consumer-directed health plans encompassed 25 percent of the policies selected by people with employer-based insurance, cost savings in the nonelderly population would be in the range of 1 to 2 percent of health care spending. At 75 percent penetration, savings would range from 5 to 9 percent.

"Consumer-directed health plans can clearly have a significant impact on costs, at least in the short term," Haviland said. "What we don't yet know is whether the cutbacks in care they trigger could result in poorer health or health emergencies down the road."

The study found that among families enrolled in consumer-directed health plans, about two-thirds of the savings were the result of fewer encounters with health care providers. The remaining third was caused by lower spending per encounter, suggesting patients were making different choices about tests and treatments. Families in consumer-directed plans used fewer brand-name drugs, had fewer visits to specialists and had fewer elective hospital admissions than families in traditional plans.

"People in consumer-directed plans initiate health care less often and when they do, they receive fewer or less costly health services than individuals in other health plans," said co-author Neeraj Sood, an associate professor at the Schaeffer Center for Health Economics and Policy at USC and a RAND economist. "What we don't yet know is whether the health care that was eliminated was unnecessary."

The study found modest first-year reductions in use of highly recommended care such as cancer screenings and routine testing to monitor patients with diabetes. This was despite the fact some preventive care was offered at no cost.

"There needs to be better education of enrollees about plan features and how to navigate medical decision-making," Haviland said. "The goal is to get patients to think critically about their care, not reduce high-value care that can help keep them healthy."

The study authors also express concern that increased use of consumer-directed plans may increase premiums for those who remain in traditional health insurance plans, since healthier individuals tend to drop traditional coverage in favor of less-costly, high-deductible plans.

"This could pose a challenge for the health plans offered through the new insurance exchanges created by health care reform," said Roland McDevitt, a study co-author and director of health care research at Towers Watson, a global consultancy. "However, the adverse selection we found for traditional plans was not severe, and there are mechanisms in the Affordable Care Act that should address this risk."