Opinion: Unintended Outcomes for Consumer-Drive Insurance

Apr 01, 2006

So-called "consumer-driven" health insurance is designed to help informed consumers make better decisions about their medical treatment. But the high deductibles associated with these plans are affecting the end goal.


Humphrey Taylor
The current silver bullet for fixing the nation's healthcare system is so-called "consumer-driven" health insurance, with much larger deductibles and Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs) to help pay part of the deductible.

These plans are designed to help informed consumers make better decisions. Bringing market forces to bear will improve quality and service, increase efficiency and reduce prices. At least that is the rhetoric of many consultants and insurers. Unfortunately, the reality appears to be somewhat different. Making people pay more for their drugs has a number of unintended and undesirable consequences.

Words can be misleading. Health Maintenance Organizations (HMOs), traditionally, have done little to maintain their members' health. The term "consumer-driven" is designed to promote a new kind of plan.

But when I polled the audience at the 2005 World Health Congress, no one believed that these plans are actually driven by consumers. They all said employers, insurers or consultants control the plans. In reality, "HMO managed care" and "consumer-driven health plans" are marketing euphemisms for cost containment plans.

Consumer-directed health plans are high-deductible plans that also have an HSA or HRA to reduce members' out-of-pocket costs. However, according to Harris Interactive data, high-deductible plans are growing rapidly, yet the overwhelming majority are not actually consumer-driven, because their members do not have HSAs. Further, people in consumer-directed plans (i.e., ones with HSAs or HRAs) behave much like people in other high-deductible plans when it comes to treatment decisions, compliance and adherence. The deductible, rather than the HRA or HSA, seems to drive behavior. And the behavior of the first generation of members of high-deductible plans, including consumer-directed plans, does not bode well for the future.

Members of high-deductible plans are about twice as likely as members of other employer-provided plans to avoid seeing a doctor when they are sick. They're also twice as likely to avoid taking their medication as prescribed, not fill a prescription, and not receive a doctor's treatment recommendation. Furthermore, non-compliance because of cost is far higher in high-deductible plans among patients diagnosed with diabetes, depression, arthritis, hypertension, asthma, and high cholesterol.

These results aren't surprising. Patients are economic animals. In the 1980s, the RAND Health Insurance Experiment showed that increased cost-sharing reduced the number of patients who sought "highly effective care for acute conditions," and was associated with worse blood-pressure control and less use of reliable preventive care measures. Patients did not differentiate necessary from unnecessary careā€”and, it appears, they still do not.

A recent paper (September 22, 2005) in the New England Journal of Medicine reported that "early experience with high deductible health plans indicates that members are confused about what they have to pay for; as a result, they cut back on preventive care even when it is fully covered." The paper's authors conclude that "if the rates of mammograms and Pap smears decline and if prescriptions go unfilled, it seems clear that the results will include increases in preventable deaths from cancer, heart disease, diabetes, and other conditions."

What's worse, high-deductible health plans may not even reduce costs, except in the short term. If, as the data show, high-deductible plans reduce necessary care, bad things will happen that may cost employers more than the money they saved.

On the other hand, increased coverage for necessary care appears to save employers money. The best-known example is from Pitney Bowes, which reduced the out-of-pocket cost of drugs for diabetes, asthma and hypertension. This increased the company's spending on drugs, but also increased compliance, thereby reducing total healthcare costs. The cost of treating a diabetic fell by 10 percent, and the use of rescue drugs for asthma fell by 23 percent.

A similar experiment involved five employers in Manitowoc, Wisconsin. Reducing the cost of necessary maintenance drugs led to improved compliance, decreased ER visits and hospitalizations, and improved clinical outcomes. Medication costs increased by 36 percent, but other medical costs fell sharply. Overall, net savings were estimated at 12.9 percent.

In light of these data, it seems that employers, the pharma industry, and the public have a common interest in reducing the out-of-pocket costs of drugs. This is the exact opposite of what is happening as high-deductible health plans grow rapidly. Some silver bullet!

Humphrey Taylor is chairman of the Harris Poll, Harris Interactive. He can be reached at