• High-deductible plans and preventive care

    There’s some chatter about a new study out, Healthcare Spending and Preventive Care in High-Deductible and Consumer-Directed Health Plan. From the abstract:

    Objective: To investigate the effects of highdeductible health plans (HDHPs) and consumerdirected health plans (CDHPs) on healthcare spending and on the use of recommended preventive care.Study Design: Retrospective study.

    Methods: We analyzed claims and enrollment data for 808,707 households from 53 large US employers, 28 of which offered HDHPs or CDHPs. We estimated the effects of HDHP or CDHP enrollment on healthcare cost growth between 2004 and 2005 using a difference-in-difference method that compared cost growth for families who were enrolled in HDHPs or CDHPs for the first time in2005 with cost growth for families who were not offered HDHPs or CDHPs. Control families were weighted using propensity score weights to match the treatment families. Using similar methods, we examined the effects of HDHP or CDHP enrollment on the use of preventive care and the effects of HDHP or CDHP offering by employers on the mean cost growth.

    The researchers wanted to see how the use of high deductible health plans and consumer directed health plans affected spending on health care. As we’ve discussed before, some people believe that is you have more “skin in the game”, or have to pay more for health care out of pocket, you will spend less. This will then drive health care costs down.

    So these researchers looked at data on more than 800,000 households who were getting insurance from their jobs. They looked at how health care spending changed for families who joined these plans versus those who did not.  What did they find?

    Those families who enrolled in HDHPs or CDHPs for the first time spent 14% less than similar families enrolled in conventional plans. They found that plans needed to have deductibles of at least $1000 to achieve significant savings; they also found that savings went down if employers were making significant contributions to the health savings accounts.

    So far so good. The use of these plans brings down health care spending.  That’s good right?  But there’s more.

    The researchers also found that families who enrolled in HDHPs or CDHPs had moderate reductions in the use of preventive care. That’s not good.

    See, the whole point of the use of HDHPs or CDHPs is to get people to spend less on unnecessary care. It’s not to get them to spend less on necessary, or recommended care. But that’s what happens. This isn’t a shock, though. It’s also the finding of the RAND health insurance experiment:

    But here’s the gist of that they found: People in the high deductible plans – those most exposed to health care costs – did spend significantly less and consumed less health care.  And, yes, much of that care was unnecessary, as healthy people did not suffer negative consequences  from forgoing care.  BUT, and this is important, poorer participants with hypertension avoidednecessary care, and saw their mortality rates rise significantly.

    Removing the moral hazard did no harm in the majority of patients (which is touted often as the result of the study) because they were healthy.  And, of course, getting less care when you’re healthy leads to few short term negative results.  But for those who were unhealthy, who comprised a minority of patients in the study, removing the moral hazard led to significant and dangerous consequences.

    And that’s the most important lesson from all of this.  Removing the moral hazard as it relates to health insurance is fine for most people.  Yes, if we make it more expensive to seek care, if we demand more “skin in the game”, if we remove the moral hazard, people will seek less care.  That’s fine for healthy people; it’s terrible for those who are ill.  But for whom is the health care system intended?

    All of that still holds. People will avoid care they need as well as care they don’t. HDHPs and CDHPs are blunt instruments, and they do harm as well as good. As I’ve also said before, there’s likely a place in the health care system for the use of cost-sharing as an economic incentive, but I don’t think it should be the overall philosophy.

    Here’s the full article.

    UPDATE: Added a sentence or two in the final paragraph that got lost in a draft.

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    • The researchers also found that families who enrolled in HDHPs or CDHPs had moderate reductions in the use of preventive care. That’s not good.

      That is not necessarily bad. If people choose to take a risk. It is like choosing to ride a motorcycle. BTW banning motorcycles would be much better for health than paying for people hypertension Meds but we choose to not do it.

      Further you should debate Robin Hanson on the e RAND health insurance experiment:. It seems to me bad practice to go back after the study and search out a group, poorer participants with hypertension, who did what you wanted and say see there.

      But having said that we could work out a high deductible plan that would work even if your interpretation of Rand is correct. E.g. I outlined a plan is based on the idea that the poorer you are more you need a low deductible for 2 reasons. 1. You have less money to spend and so could get caught short. 2. You are probably less knowledgeable.

      My plan is here: http://un-thought.blogspot.com/2009/09/healthcare-compromise.html

      Perhaps we can agree based on the Rand study and the studies you outline today that we need to try to get capable people, say College grads to opt for very high deductible (over 10k deductibles) health insurance.

    • Perhaps, if we are wedded to incentives (I admit to being engaged to them), we could work out a plan that would encourage the use of preventive care. Of course, it is possible that, as the study notes, some of the decrease in preventive care spending could be the result of enrollees not realizing it was covered.

      To Aaron’s point about the big spenders, I wonder what incentives we could craft for health care providers to avoid providing unnecessary care? (Can ACO’s provide the sort of cost control that managed care has not quite been able to secure? ) I despair that much of what needs to change is our society/culture and its inability to cope with illness and death.

      • Most high deductible health plans already cover preventive services and the ACA makes this mandatory so this should not be an issue in the future.
        As stated by many above, financial incentives only work for healthy people. If you are chronically ill, financial incentives only serve to impoverish you.
        It would be nice to reverse the current incentives which reward more and more expensive care. Perhaps ACOs can do this but I just don’t see how they are going to work.

    • Richard,

      I still think it won’t work, for reasons I’ve posted on before. But here’s the gist: something like 85% of health care spending comes from 15% of people. You can’t incentivize them to spend less. They are already WAY over the deductible.

      The incentives work on people who don’t spend as much. Healthy people don’t spend as much anyway, It’s focusing on the wrong set of people.

      HDHPs are a great way to make insurance cost less for healthy people. Again – I’m not sure that’s where the focus needs to be.

    • But here’s the gist: something like 85% of health care spending comes from 15% of people.

      At a s high enough deductible things like using Apollo Healthcare, and home self care by family members come into play.