Dueling Statistics on High Deductible Health Plans

Today’s Managing Health Care Cost Indicator is $21.8 million.  

Or maybe it’s 40%

Click image to enlarge.  

I’ve been reviewing two related but contradictory documents over the past day. 

Aetna has released its eighth annual report on its high deductible health plan (HDHP).   Here’s a link to the press release, and here’s a link to the powerpoint slides.  Aetna says that its high deductible health plan product

o       Lowers costs by 11% (or $21.8 million per 10,000 members)

o       These savings increase year over year

o       Members

o       use more primary care and preventive services but fewer nonroutine services

o       Have fewer inpatient admissions

o       Are more engaged

o       Have fewer “gaps in care”

o       Almost three quarters of members with associated health care savings accounts do not exhaust these accounts each year.

This is an upbeat document – although the underlying data has not been subject to peer review. I've only reviewed the press release and the glossy powerpoint.  It’s likely that the high deductible plan had younger, healthier, lower risk members, and this alone could explain some of these findings. 

Click image to enlarge. 

The Journal of General Internal Medicine e-published an evaluation of foregone care in those with chronic illnesses, surveying Massachusetts families in HDHPs and traditional health plan by phone and mail. Harvard Link   This study showed that families in high deductible health plans had over three times greater likelihood of delaying or foregoing care.   This was true among low income families (<400% of federal poverty level) and higher income families, although there was far more care delayed or foregone for those with lower income and families with parents who had no college degree.  40% of those with HDHPs and income below 400% of FPL reported delayed or foregone care, compared to 15.1% of those with traditional health insurance plans.

The proof is in that HDHPs save money, and the dollar savings don’t seem to be limited to the first year or two (although there are still potential selection bias issues). It’s also clear despite the happy faces and fluorescent green graphics that members of HDHPs are less happy with their health plans, and they self-edit care. Sometimes HDHP members forego care that would have been a waste anyway –but sometimes they forego care that could help them live better quality and more productive lives.

The danger of having no health insurance at all is far greater than the danger of delayed or foregone care in a high deductible health plan.  I’ll have more on that in the next day or two.  Health care reform and the rising cost of health care has driven more and more employers to health plans that have high deductibles, and many of the future health insurance exchange programs are also likely to have high deductibles.  

We have to work harder to lower the underlying cost of health care so that we don’t have to cost-shift as much to patients, who are at serious risk of being underinsured now. That risk will continue to increase in the near future.  

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Provider Payment Reform is Key to Encourage Disruptive Innovation in Health Care

There is a lot of great innovation in health care – but not nearly as much disruptive innovation as we’d expect in an industry that represents a sixth of the American economy.  Disruptive innovation can bring huge social benefit – in terms of better good or services at lower prices available to more and more people.  However, disruptive innovation can be terrible for incumbents – and it’s only nurtured in environments where those making purchasing decisions are intensely price conscious. 

So – if we want more disruptive innovation, we need more price-consciousness in health care.

And we’re getting it, too.  As Drew Altman notes in his most recent Kaiser Family Foundation column, high deductible health plans are growing rapidly in the US – and it’s been almost under the radar.  Those with high deductible health plans use far less resources – sometimes skipping valuable care as well as discretionary care. 

Higher patient exposure to health care costs is likely to lead to more fertile territory for disruptive innovation.  For instance, if all office visits cost a $15 copayment at the point of service, patients would not flock to retail clinics, with their limited menu of services.  When patients are paying the first $2,000 or more for their care, and then 20% for care beyond the deductible, they’re much more likely to “shop” for better bargains – which is great for disruptive innovation.  Hospital emergency departments offer many services that most people with earaches don’t need, and higher member cost-share discourages overuse of expensive sites of care.

But patient cost share only works to encourage more prudent purchasing behavior if

-        The health care service is elective, where the patient has a choice. 

o       It’s pretty hard to convince an ambulance driver to take you to the most cost-effective hospital if you feel an elephant sitting on your chest, are out of breath, and are drenched with sweat!

-        The patient has some idea of the cost. 

o       Most physicians have no idea what various health care services cost, and even  health plans often aren’t sure of the actual cost of a service.  This is even worse because services are not bundled in ways patients find intuitive.  Even if I knew that my physician would charge $150 for a level 4 office visit, I’m not sure that she would bill that level of office visit, and she might order laboratory tests that would increase the cost dramatically

-        There is some signal available about quality

o       No one would recommend going for the cheapest angioplasty if the cardiologist had a history of bad outcomes.

-        There is choice

o       In many rural areas, there is a single hospital and often a single group in each specialty.

The biggest problem is that a small portion of patients represent the vast majority of health care costs (10% of patients represent about 60% of all costs). I recently saw data where those in the top 50% represented 93% of total costs (averaging over $3000 per person).  These patients will almost always exceed the annual deductible, so all this extra “skin in the game” might dishearten those with severe illness, but it’s not so likely to change their behavior.  If the extra member cost-share decreased utilization among this half of the population by a factor of half, it would only lower overall health care costs by 3.5% - less than the inflation rate for a single year! Much of the care received by the low cost half of the population is preventive, so we really don’t want to decrease that anyway!

In many instances, the purchaser of health care services is frankly not the patient – but is the health care provider. For example, patients are not generally shopping for the highest value hip prosthesis.  They “shop” for an orthopedist, and the orthopedist recommends what artificial hip should be implanted.  

That’s why I believe that bundled payments and provider risk are the real keys to increasing disruptive innovation in health care. 

Bundled payments have been very effective at increasing disruptive innovation in the provider community in the past.  For instance, when Medicare switched to the diagnosis related group (DRG) payment methodology, hospital stays got dramatically shorter, and total days in the hospital plummeted.  Essentially, the physicians who demanded longer hospital stays under a “cost plus” payment system figured out how to cut hospital stays when they were asked to be prudent purchasers of hospital services.  Independent practice associations and other provider organizations taking “risk” or capitation have put in place innovative programs to diminish hospital admissions and readmissions, and dramatically increase use of generic medications. 

Disruptive innovation is nourished by value-based purchasing, and government can do two things to increase value-based purchasing.

The first is to help us know what really works, and what doesn’t.  That’s why it’s critical to increase our investment in comparative effectiveness research – whatever we want to call it. We’re not talking about rationing or death panels – we’re talking about collecting the data we need to know what’s worth paying for.   

The second thing is, can we please allow the FDA to make determinations about approvals based on value rather than just effectiveness?  As long as we approve a new medication or medical device that is ten times as expensive as existing medicines, and is merely “noninferior,” pharmaceutical and medical device companies will focus their research efforts on innovations that will increase the cost of care, rather than those that could substantially increase value, and sometimes even lower costs.  

The Managing Health Care Costs Indicator will return next week

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High Deductible Health Plans Lower Cost AND Lower Preventive Care

Today’s Managing Health Care Costs Indicator is 14%

This month's American Journal of Managed Care has a review of a year of experience for a huge diverse population with high deductible health plans.  The report is from Rand Corporation, and my Towers Watson colleague Roland McDevitt is a coauthor.

The researchers looked at change in health care costs for those who enrolled in HDHPs in 2005 – and compared this with change in health care costs of families who did not have the opportunity to enroll in HDHPs (as their employers did not offer these plans). The result: HDHPs were associated with a 14% lower cost than non-HDHPs.  They evaluated different ranges of deductible, and found that $1000 deductibles changed cost substantially, while lower deductibles (or plans that had a large company payment to a health savings account that offset the deductible) did not have this impact. The impact was large enough that total cost increases were down overall in companies that offered HDHPs compared to those which did not offer such plans.

The unexpected and unsettling finding is that those on high deductible health plans, which offered cost-free preventive care without first meeting the deductible, received substantially less preventive care.   They had fewer mammograms, colonoscopies and pap smears, and their children had fewer immunizations.  It’s incongruous, but those on high deductible plans had more hemoglobin A1C tests (for diabetic control).

The study is huge – over 800,000 households, and 53 employers.  They researchers didn’t compare families who accepted HDHPs with those that declined them, figuring that there would be substantial selection bias.   The researchers also did propensity matching to adjust for potential confounding variables. 

One potential reason for such large changes is that members switching to a high deductible health plan  “stockpiled” health care in the months leading up to the transition.  For instance, women might have made an appointment to get their mammogram and pap smear in December of 2004, just before switching plans. Elective procedures, such as knee arthroscopies or hernia repairs could also be “stockpiled.”    However, the ‘baseline” (2004) costs for those who switched to HDHPs was no higher than the cost of controls.

It’s also likely that preventive care is suggested during office visits that are not preventive in nature, so that children who see their pediatrician are flagged to get any lagging immunizations, and those over 50 seeing their primary care physician are sometimes scheduled for colonoscopies, even if their reason for an office visit is a sore throat.   The line between preventive and non-preventive care is also sometimes blurry.  In our company, women discovered that the HDHP insurance plan held them financially responsible for the increased cost of digital mammography. A ‘preventive’ colonoscopy can become a ‘diagnostic’ colonoscopy when a biopsy is performed.  This would lead to a patient believing that her procedure was covered fully, and discovering instead that she was responsible $1000 or more in “member cost share.”

It’s clear that greater patient cost exposure leads to less use of care.  This can substantially lower cost of care.  This research reminds us that patients subject to a high deductible forego both discretionary, low-value care, as well as recommended high-value care.  Even offering the high-value care free of the deductible didn’t overcome this problem.  

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When You Have Skin in the Game, it Can Pinch

Just in time for Thanksgiving, the New York Times  has served up a half dozen personal stories of bankruptcies brought on by medical expenses.   This article brings faces to statistics published earlier this year – showing that 61% of personal bankruptcies are associated with medical debt.

What’s the underlying problem here?

For starters, the costs of health care have more than doubled in 7 years – and a routine hospitalization of just a few days is often billed at well over $10,000 – a quarter of all annual income for a family of four at the federal poverty level.   Few can afford to pay medical bills if they are uninsured.

Further, the nature of employer-sponsored health insurance has changed. To cope with the large increases in cost, many employers have shifted substantial costs to their employees. Everyone sees this in higher copayments for office visits and medications – but in addition there is a move toward higher deductibles and more coinsurance. Copayments are fixed fees – whereas coinsurance means that the patient is responsible for a percentage of the allowed bills.   The average amount of hospital coinsurance is 18%.  Even when plans have an out of pocket maximum, certain costs (like out of network costs) do not count toward this maximum. 

For the “average” employee this works out fine, and health savings or health reimbursement accounts can be a great boon for those who are healthy, and those who can afford to put their own funds in tax-advantaged accounts.  But for those with serious illness, coinsurance can be ruinous.   Most of the stories told in the Times today were of those who had insurance – but were startled to find that having insurance did not offer them financial security. 

"Skin in the game" is the phrase used to describe individuals' bearing a substantial share of the cost of health care  - and there is evidence that this helps keep people from consuming too much 'low value' health care.  All insurance creates 'moral hazard,' where people make different demands than they would make if they were paying their own dollars.

On the other hand, we do consume health care differently than other goods and services, and none of the bankruptcies in the NYT article involved discretionary, 'low value' care.  There are many academicians and policymakers who doubt that "moral hazard" is the driving issue in health care inflation. Here's a link to a Malcolm Gladwell 2005 New Yorker article on this topic.

Ironically, the NYT report comes from Tennessee, a state that tried to dramatically expand insurance to its residents in the 1990s through TennCare – a public-private program that included large expansions of Medicaid.  The program was shelved when the state ran short of cash – a cautionary tale of expanding health insurance without adequate funding and appropriate cost control.  

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