CONSUMER DRIVEN HEALTH PLANS 2006 Families USA Conference

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CONSUMER DRIVEN HEALTH PLANS 2006 Families
USA Conference

• Mila Kofman, J.D.,
• Associate Research Professor
• Health Policy Institute, Georgetown University
• 202-784-4580 direct mk262_at_georgetown.edu
  hpi.georgetown.edu
• www.healthinsuranceinfo.net

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BACKGROUND

• Double-digit annual premium increases
• For-profit marketplace Pricing is a function of
  medical cost administrative cost PROFIT
  base rate (emphasis added) President/CEO,
  Coventry Health Care of Louisiana, Inc.
• No legislation to address reasons for price hikes
  
• Conservatives Ideology
• From risk-sharing to personal responsibility
• Auto insurance model for health care
• Conservatives solution pass premium increases
  to workers, cut benefits, and shift cost of
  medical care to patients

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Consumer-Driven Health Plans

• Market trend (new products CDHP, mini-med and
  med-light) less is more
• Legislation to promote trend HSAs, AHPs, Enzi
  compromise

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Consumer-driven health care

• a.k.a.
• consumer-directed health plans,
• health savings accounts (HSAs) with
  high-deductible health plans (catastrophic
  coverage),
• health reimbursement accounts/arrangements (HRAs)
  with high-deductible plans

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Consumer-Driven Health Plans cost shifting from
health plans to patients

• Reduce costs for employers and insurers
• Raise out-of-pocket costs for patients

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Health Savings Accounts

• Tax free in/tax free out -
• Above the line tax deduction 2650 individual/
  5250 families (only with plan annual
  deductible of 1000/2000 minimum and max
  out-of-pocket 5100/10,200) for 2005
• Account used to pay for medical expenses, annual
  deductibles, COBRA health insurance while
  unemployed, Medicare-related expenses
• 10 penalty if used for other purposes (over 65
  no penalty)

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HSAs are not proposals for uninsured (except
healthy wealthy uninsured)

• HSAs and HRAs tax deductions and non-taxable
  benefits (to soften the blow of cost-shifting)
• 0 help to working poor and moderate income wage
  earners
• No help to uninsurable people
• Sales pitch consumer empowerment, choice,
  consumer in the drivers seat, cost-sharing
  etc.

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Flawed Assumptions about Consumer Behavior

• Patients can make difficult decisions (MRI v.
  x-ray)
• Information gap
• 90 million Americans are health illiterate (IOM
  2004)
• Choose cheapest option (cheapest heart surgeon)
• skin in the game
• Name brand only drugs, no generics
• Catastrophic conditions (even small co-pays
  1000s/month)
• Personal bankruptcy
• Rational decisions
• Prescription drug ads on marketing
• Lack of information

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Secrets revealed

• Health coverage is expensive because medical care
  is expensive
• Cost drivers provider costs, hospital costs,
  higher utilization, prescription drugs, etc.
• Chronic illness 125 million Americans
• 80-20 rule

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Consumer Driven Health Plans

• Do NOT address real cost (medical inflation)
• Hurts people who need medical care and moderate
  and low income people and families
• Have adverse long term implications for all
• CDHPs are a way to divert attention
• from real reforms

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• Implications for people
• Access to medical care less care/delays in
  necessary care (RAND 2004)
• No financial security bankruptcy (Warren 2004)
• For others higher premiums (family premiums
  included 922 to pay for uncompensated care)
  (Families USA 2005)
• Implications for system
• Higher long-term spending
• Cost shifting to people with comprehensive
  coverage uncompensated care paid for by
  privately insured people (43 billion in 2005)

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Recent research 2005 California HealthCare
Foundation survey

• Employers
• 75 (surveyed in CA) believe cost-sharing
  causes consumers to forgo needed medical care and
  has a negative impact on people with chronic
  conditions
• 40 believe that it reduced workers
  productivity
• Consumers
• 1 in 7 adults forgo medical care
• especially a problem among low income and people
  with fair/poor health (skipping check-ups, tests
  or procedures, not going to a doctor for a
  problem, etc.)

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Recent research 2005 EBRI/Commonwealth Fund
Survey

• Less satisfied with Consumer Driven Health Plans
  than comprehensive coverage
• Higher out-of-pocket (OOP) costs

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Cost Shifting

• Ensure continued high profits for insurers
• Short reprieve for employers from double-digit
  cost increases 73 in the last 5 years
• Just because its good for Wall Street doesnt
  make it good for working families, for people
  with medical needs, and for our communities

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Consumer-Driven Health Plans(high deductible
plans, HSAs, etc)

• Erode job-based health care financing
• Erode comprehensive health insurance
• Move us to a model of self-financing our medical
  care (from community sharing risk and helping
  each other to personal responsibility)

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Back to the basics

• Why do we care about health insurance?
• Access to medical care and services
• Financial security

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• VALUES moral and ethical
• Its un-American to let 18,000 people die/year
• ECONOMIC INTERESTS
• Productive communities and society
• Healthy people productive (economically,
  socially, politically)
• Uninsured 65 to 130 billion/year is cost to
  economy (Inst. Of Medicine)
• U.S. companies in a global economy (GM 1500/car
  to pay for health care)
• Public policy goals
• Consumer-driven health plans and HSAs do not help
  us achieve