PLEASE READ THE ARTICLE BELOW TO ANSWER THESE TWO QUESTIONS:
– PLEASE GIVE A DETAILED EXPLANATION
1. How are enrollees in ConsumerDirected Health Plans EXPECTED TO ACT by using different kinds ofprovider price and quality of care information, and being aware oftheir cost sharing responsibilities, when they purchase health caregoods and services?
2. What is the evidencethat health plan members in Consumer Directed Health Plans do NOTact as the literature predicts they will when they purchase healthcare goods and services? Briefly describe TWO (2) KEY FINDINGS.
This study is forcing economists to rethinkhigh-deductible health insurance
In 2006, about one in 10 employees had a health insurancedeductible over $1,000. Today? About half do.
To health economists, this sounded like good news; they’ve longtheorized that higher deductibles would force down health-carecosts. The idea was that higher deductibles would make patientsbecome smarter shoppers: If they had to pay more of the cost,they’d likely choose something closer to the $1,529 appendectomythan the $186,955 appendectomy (yes, some hospitals really docharge that much). This would push the really expensive doctors tolower their prices so cheaper physicians didn’t steal theirbusiness.
This was, however, just a theory. And a massive new studysuggests it might have been all wrong.
Economists Zarek Brot-Goldberg, Amitabh Chandra, BenjaminHandel, and Jonathan Kolstad studied a firm that, in 2013, shiftedtens of thousands of workers into high-deductible insurance plans.This was a perfect moment to look at how their patterns of carechanged — whether they did, in fact, use the new shopping toolstheir employer gave them to compare prices.
Turns out they didn’t. The new paper shows that when faced witha higher deductible, patients did not price shop for a better deal.Instead, both healthy and sick patients simply used way less healthcare.
“I am a little bit surprised at just how poorly patients wereable to do when looking at very similar products, like MRI scans,and with a shopping tool,” says Kolstad, an economist at Universityof California Berkeley and one of the study’s co-author. “Two yearsin, and there’s still no evidence they’re price shopping.”
This raises a scary possibility: Perhaps higher deductiblesdon’t lead to smarter shoppers but rather, in the long run, sickerpatients.
Higher deductibles mean sick people use less health care
Kolstad and his co-authors looked at the case of a large,unnamed company that shifted more than 75,000 workers and theirdependents from a plan with no deductible to one with a $3,750deductible. When the change happened, workers received a $3,750subsidy to a health savings account — money they could spend freelyon whatever health costs they incurred. The company also gaveworkers online tools to look up prices for doctor visits, tests,and other services they might need.
Workers’ health spending dropped, and did so quickly. Averageper-patient spending fell from $5,222.60 in 2012 to $4,446.08 in2013. That’s about a 15 percent decline in a single year — and itheld true across all types of health services. Between 2012 and2014, there was a 25 percent drop in emergency room spending, an 18percent decline in physician office visits, and a 6 percentdecrease in mental health services.
WITH A HIGH-DEDUCTIBLE PLAN, SPENDING DROPPED 15 PERCENT IN ONEYEAR
In one sense, then, the high-deductible plan did accomplish akey goal: lower health spending. But when the researchers looked atwhy spending dropped, they found it had nothing to do withsmarter shopping. The average price of a doctor visit wasn’tdropping.
Instead, under the high-deductible plan, workers just went tothe doctor way less. The paper finds that “spending reductions areentirely due to outright reductions in quantity.” Workers did useless “potentially wasteful care,” like imaging services, but theyalso cut back on “potentially valuable care,” like preventivevisits.
Even more striking: The sickest workers were those who were mostlikely to reduce their use of care while still under the deductible— even though this is the group that needs lots of care and is mostlikely to blow through the deductible by the end of the year. Oncethese sick workers actually exceeded their deductible, though, useof medical services rebounded.
“People who are the most likely to go past the deductible alsocut back by the most, and they did that entirely under thedeductible,” Kolstad says. “They respond to the spot pricing [theprice of receiving care right then], and that leads to a very largereduction in care. We don’t find any evidence they look for a lowercost. They just don’t go.”
Why does a deductible cause sick patients to forgo care?
This was the point, to me, that was most baffling in this newpaper. Sick patients would likely have some sense that they neededa lot of medical care — and that they were probably going to hittheir deductible. So why did they reduce the care they received inthe start of the year instead of ponying up the costs, hitting thedeductible early, and getting the care they thought theyneeded?
In some cases, you could chalk this up to a liquidity issue: Aworker might not have enough money in her checking account to payfor all the care below the $3,750 deductible. But that explanationdoesn’t work here: In this case, the employer put a $3,750 subsidyin workers’ health savings accounts.
Why wouldn’t this group get the care they wanted, pay for itwith the HSA, and just run through the out-of-pocket spendingearlier in the year? Or, if they do want to reduce spending, whywouldn’t they at least shop for a lower-cost provider instead offorgoing care altogether?
Kolstad doesn’t have a definitive answer to this question, buthe thinks it might have a lot to do with the difficulty all of ushave, as patients, guessing how much we’ll spend on health care ina certain year. This leads us to be more averse to upfrontspending.
It’s possible that even when we’re sick, we tend to beoptimistic. We might hope that our care costs less this year, andthat maybe we’ll even be able to roll some of our HSA account fundsover to the next year.
“This is a difficult task for consumers to take on, and we nowhave very detailed data to show that’s the case,” he says. “Whenwe’ve thought about the economics, we’ve generally thought thistype of price change wouldn’t be problematic, that sicker peoplewould just spend their deductible and get the care they need. Thisresearch suggests that’s not the case.”
Americans aren’t used to shopping for health care — and maybe wedon’t want to start
One study a few years ago, from the Altarum Institute, showedthat Americans tend to spend more time shopping for dishwashersthan for doctors — despite the latter being a rather moreconsequential decision.
For one thing, most of us don’t have access to tools that wouldlet us shop for doctors. I can go on Amazon and pull up prices fordozens of different dishwashers. But there’s no website I can hopon, right now, to find out what different radiologists aroundWashington, DC, would charge me for an X-ray.
This study tried giving workers both the tools to compare costsand a financial incentive to go with the less expensive option.And, at least in this instance, those nudges weren’t enough toencourage patients to choose cheaper doctors. Instead of lookingfor a lower-cost option, workers simply decided not to go to thedoctor at all.
For Kolstad, this makes him skeptical of “demand-side”interventions in health care — those that rely on consumer demandsfor lower health prices to ultimately lead to less medicalspending.
What’s more, interventions that reduce demand could have theunintended consequence of actually raising long-term health-carecosts. Think of the sick worker in a high-deductible plan whoforgoes care in the early part of the year. It’s possible thatskipping preventive care or not filling some prescriptions couldworsen health conditions that necessitate costly interventions afew years down the line.
This study only looks at two years of a high-deductible plan,and in that time period it doesn’t show this theory bearing out.Still, Kolstad says it could be a long-term possibility that wejust don’t have enough data to know about yet.
“It’s certainly plausible you’ll see the cost changes later,” hesays. “That could manifest in lower productivity on the part of theworker, if you have people with worse health status. Those arelong-run changes, but they are definitely a possibility.”
