ConsumerDirected Health Care Presentation Developed for the Academy

Consumer-Directed Health Care Presentation Developed for the Academy of Managed Care Pharmacy Updated: February 2014

What is Consumer-Directed Health Care (CDHC) Patients: • Control their own health care spending • Decide what health plan to join • Decide what treatment to receive • Decide on the provider for their treatment

CDHC Features • CDHC consists of health insurance plans that usually have: – a tax-advantaged health savings account (HSA) or health reimbursement account (HRA); – a high-deductible health plan (HDHP) and lower premium compared to non-CDHC; and, – tools to help make healthcare decisions

How Do CDHC Plans Differ from Traditional Health Plans • In traditional health plans, patients pay a premium for health insurance coverage • It has traditionally been the physician’s job to consider the risks vs. benefits of health care services that the patient needs without a patient’s consideration of costs

Background of CDHC • With health care costs rising faster than inflation, CDHC is being promoted as a way to combat these costs and still provide quality healthcare • Shifting costs to patients may empower them to take charge of their own health care • Patients will likely only use services that they need, as they will be paying more out of pocket (e. g. patients will use a retail clinic for a sore throat vs. a trip to the ER) Blumenthal D. Employer-sponsored insurance – riding the health care tiger. NEJM. 2006; 355(2): 195 -202.

How it works • In CDHC with savings option plans, patients pay for health care services with a tax-advantaged or HRA • After the account runs out, the patient pays out of pocket until reaching the deductible and/or out of pocket max • Deductibles in these plans are often thousands of dollars • Once the deductible is met, patients typically share the cost of medical services with the health plan (by paying co-insurance) • A catastrophic component of the health plan covers major emergencies

Goals of CDHC Plans with savings options • Reduce costs by discouraging the use of inappropriate services • Encourage patients to comparison shop and request quality data for services and providers • Designed to get patients to play a bigger role in keeping costs low • If patients pay more out of pocket for health care, they may be more prudent in seeking health care treatments • Providers must then offer higher quality services in order to compete for business • In theory, this will eventually decrease health care costs Blumenthal D. Employer-sponsored insurance – riding the health care tiger. NEJM. 2006; 355(2): 195 -202.

Health Savings Accounts and Relationship to CDHC plans • Created by the Medicare Modernization Act of 2003 • Accounts allow patients enrolled in a HDHP to contribute and withdraw funds tax-free to cover health care costs • Can be contributed to by employees or employers • Once deposited, the funds belong to the employee, and can travel with them to wherever they work • When the account balance runs out, the patient then pays out of pocket (similar to a regular deductible) • Unused funds can be “rolled over” to the next year Carey M A. HSA Provisions Draw Praise, Scrutiny. The Commonwealth Fund. http: //www. commonwealthfund. org/Content/Newsletters/Washington-Health-Policy-in-Review/2006/Dec/Washington. Health-Policy-Week-in-Review---December-18 --2006/HSA-Provisions-Draw-Praise--Scrutiny. aspx. Accessed January 23, 2011.

HSA stats • Fifteen percent of US firms offered HSAs in 2010 • Nineteen percent of covered workers were enrolled in HSAs in 2012 • Enrollment in CDHD with savings options still makes up a very small segment of the overall insurance market • Larger firms are more likely to offer HSAs than smaller firms Employer health benefits: 2012 summary of findings. Washington D. C. : Kaiser Family Foundation, 2010. http: //ehbs. kff. org. Accessed February 28, 2012.

Health Reimbursement Accounts (HRA) • Similar to HSAs • Employers reimburse all or part of the employee’s out-of-pocket expenses (but do not deposit funds into an account) • Companies offer credit to employees • Employer discretion to allow credit to be “rolled over” to the next year Blumenthal D. Employer-sponsored insurance – riding the health care tiger. NEJM. 2006; 355(2): 195 -202.

Other Features of CDHC Plans • Some CDHC plans cover preventive care, routine checkups, lab tests, vaccines, and health screenings • Some have on-line tools containing medical information for patients (e. g. , information on vaccines, hypertension, etc. ) • Some offer information on both price and quality of the services and physicians • High-deductible component protects patients against catastrophic medical expenses Beeuwkes Buntin M. et al, Consumer-directed health care: early evidence about effects on cost and quality. Health Affairs. 2007; 25(6): 516 -530.

The Health Insurance Experiment • The classic, decades old RAND Health Insurance Experiment confirmed: – patients used fewer services when they paid more for them out of pocket – patients reduced the use of necessary and unnecessary services at the same rate RAND Health. The Health Insurance Experiment: a classic RAND study speaks to the current reform debate. Research Highlights, July 24, 2007. www. rand. org/pubs/research_briefs/RB 9174/index 1. html. Accessed January 23, 2011.

RAND Health Research 2007 Key Findings • Patients with CDHC plans generally spent less on health care and used fewer health care services • CDHC plans had mixed effects on quality of care (Patients used more preventive services but some may have forgone care) • Patients had a lower level of satisfaction • Patients lacked adequate information to make informed medical care choices Beeuwkes Buntin M. et al, Consumer-directed health care: early evidence about effects on cost and quality. Health Affairs. 2007; 25(6): 516 -530.

2007 EBRI/Commonwealth Fund Consumerism in Health Survey • For patients enrolled in CDHC plans: – Enrollment remains low – Patients have higher incomes than in traditional plans – Health status is better – More cost-conscious behavior – More likely to skip on needed medical care due to costs – Lower satisfaction with CDHC plan – Limited information on provider cost and care Finding from the 2007 EBRI/Commonwealth Fund Consumerism in Health Survey. New York: Commonwealth Fund 2007. http: //www. ebri. org. Accessed February 19, 2010.

Pros of CDHC Plans • May lower health care costs • Lowers costs for employers • Patients play a bigger role in managing their health care • May reduce the use of inappropriate health care services Finding from the 2007 EBRI/Commonwealth Fund Consumerism in Health Survey. New York: Commonwealth Fund 2007. http: //www. ebri. org. Accessed January 23, 2011. Beeuwkes Buntin M. et al, Consumer-directed health care: early evidence about effects on cost and quality. Health Affairs. 2007; 25(6): 516 -530.

Cons of CDHC Plans • Lack of information on pricing and quality of services and providers • Overall, low health literacy in US • Sicker patients may need to pay more out of pocket and may not be able to afford it • Potential for patients to skip services/care they need

Cons of CDHC Plans Continued • May disproportionately attract healthy patients (since premiums are lower in these plans than in traditional plans) • If healthier patients leave traditional plans, then sicker patients left in these plans may drive up costs • This concept is known as adverse selection Finding from the 2007 EBRI/Commonwealth Fund Consumerism in Health Survey. New York: Commonwealth Fund 2007. http: //www. ebri. org. Accessed January 23, 2011. Beeuwkes Buntin M. et al, Consumer-directed health care: early evidence about effects on cost and quality. Health Affairs. 2007; 25(6): 516 -530.

Considerations • The challenge of a CDHC plan design is to promote cost-consciousness and discourage the use of inappropriate services without deterring patients from seeking needed care • New studies are underway to determine impact and effectiveness of CDHC plans Beeuwkes Buntin M. et al, Consumer-directed health care: early evidence about effects on cost and quality. Health Affairs. 2007; 25(6): 516 -530.

CDHC Plans and the Marketplace • There are HSA eligible plans available in the marketplace • There is some thought that HDHPs may be an attractive option for some marketplace consumers

Summary • Enrollment in CDHC plans remains low • There is lower patient satisfaction in these plans than in traditional health plans • Patients enrolled in CDHC plans are using more costconscious behavior • More information is needed on quality and cost of care of providers and services in order to make CDHC work more effectively • It remains to be seen if CDHC will have a large impact on lowering costs in the US health care system • More data is needed to determine the effects on cost and quality of care

References • Beeuwkes Buntin M. et al, Consumer-directed health care: early evidence about effects on cost and quality. Health Affairs. 2007; 25(6): 516 -530. • Blumenthal D. Employer-sponsored insurance – riding the health care tiger. NEJM. 2006; 355(2): 195 -202. • Carey M A. HAS Provisions Draw Praise, Scrutiny. The Commonwealth Fund. http: //www. commonwealthfund. org/Content/Newsletters/Washington. Health-Policy-in-Review/2006/Dec/Washington-Health-Policy-Week-in. Review---December-18 --2006/HSA-Provisions-Draw-Praise--Scrutiny. aspx. Accessed January 23, 2011. • Consumer-Directed Health Arrangements: Background Brief. The Henry J Kaiser Family Foundation. http: //www. kaiseredu. org/Issue. Modules/Consumer-Directed-Health-Arrangements/Background. Brief. aspx. Accessed January 23, 2011.

References • Employer health benefits: 2012 summary of findings. Washington D. C. : Kaiser Family Foundation, 2012. http: //ehbs. kff. org. Accessed February 28, 2012. • Finding from the 2007 EBRI/Commonwealth Fund Consumerism in Health Survey. New York: Commonwealth Fund 2007. http: //www. ebri. org. Accessed February 19, 2010. • RAND Health. The Health Insurance Experiment: a classic RAND study speaks to the current reform debate. Research Highlights, July 24, 2007. www. rand. org/pubs/research_briefs/RB 9174/index 1. html. Accessed January 23, 2011.

Thank you to AMCP member Don Klepser for updating this presentation for 2014.