New RAND Study of Consumer-Directed Health Plans

The Berkeley Electronic Press has published a major contribution to the literature about consumer-directed health plans (CDHPs). The paper, “How Do Consumer-Directed Health Plans Affect Vulnerable Populations?” by Amelia Haviland, Neeraj Sood, Roland McDevitt, and Susan Marquis is one of the most rigorous I’ve seen on the topic.

It examines claims data from 59 large employers, most of which installed some form of CDHP in the 2003 to 2007 time period. It does some things that are unusual in the universe of CDHP studies. First, it looks at other similar work and explains why other studies may vary from the conclusions in this paper. Next, it breaks the CDHP plans into moderate and high deductibles with a Health Reimbursement Arrangement, Health Savings Account (HSA), or into no account. Thus, it has five different categories of plans to compare. Finally, it looks closely at the use of preventative services, but unlike many other studies it is very specific about what it means by the term, confining it to three cancer screening tests and three tests for diabetes.

The authors were motivated to do the study in the expectation that health reform (ObamaCare) will result in major new enrollment in CDHPs, both in the individual health insurance exchange market and in the employer-based market. They also expect state Medicaid programs to rely on similar designs in expanding their Medicaid programs. They wanted to test whether low-income and high-risk populations would be disadvantaged in such a system.

What they find is fascinating.

First, they confirm that CDHPs have a very large effect on health care costs:

Total spending is reduced in high deductible health plans for both vulnerable and non-vulnerable families. High deductible plans paired with HSAs have significantly lower levels of total spending than other high deductible plans for the general population — almost 30 percent lower spending for families with a high deductible and an HSA…

This holds true for all categories of spending: inpatient, outpatient, and prescription drugs.

They also find that “vulnerable families” (low-income and/or high-risk) are not disadvantaged by the spending reductions:

There are no statistically significant differences between non-vulnerable families and low-income or high-risk families in terms of dollar reductions in total spending that result from benefit designs and few differences in the components of spending. However, since high-risk families have higher levels of spending, the proportional reductions in total annual spending are generally smaller for those at high risk.

The authors were particularly concerned about whether vulnerable families would fail to receive recommended preventive care services. They found:

As with spending, there are few significant differences between low income and non-vulnerable families regarding the effect of plan design on receipt of the cancer screening. However, there are significant differences for those at high risk. For them, a high deductible is not associated with reductions in receipt of two of the three recommended procedures and the reduction for the third is significantly less than for the non-vulnerable population, though this latter is not significant when we adjust for multiple comparisons.

In other words, people at high risk are not deterred by the plan design from getting needed screening.

The authors still have some concerns. They write:

Although health care spending is lower for those in high deductible plans, the evidence suggests that non-vulnerable families, low- income families, and high-risk families are equally affected. However, equal effects with respect to health care spending may have different consequences for these populations.

So it is possible that similar reductions in the use of services may have disproportionate effects on some segments of the population, but the authors say that that issue is beyond the scope of this study.

They go on to acknowledge other limitations of this research. For instance, this study looked only at one year before enrollment and one year after. It is possible (as we have been arguing) that once people are more involved in and educated about their choices, they will become better at choosing appropriate services. The authors say:

…our analysis examined people in the first year of their enrollment in CDHPs, and they may not yet be familiar with the details of coverage. One encouraging finding on this front is that the deductible was less of a deterrent to receipt of preventive care for high-risk patients, who might be more engaged with medical providers and more familiar with the terms of their insurance.

Indeed, the use of patient support services, wellness programs, and employee education are not examined here at all, which is a pity because the 59 employers surely had very different approaches to these services. The authors write:

This highlights the need for additional research to explore whether more aggressive case management, educational approaches, or other programs would help ensure that patients eliminate unnecessary care and continue with appropriate treatment under CDHPs.

They conclude by saying:

In sum, our findings suggest that CDHPs reduce spending without unduly restricting access for lower income and chronically ill populations. However, in all groups, there is evidence of a small reduction in receipt of high value preventive procedures. Further research is needed to address whether these findings also apply after the first year of experience in a CDHP. This additional research should evaluate whether the reductions in health care spending for vulnerable populations have greater health or financial consequences for them than for others.

My Conclusion. This is excellent research. I have long complained that the so-called “research community” was missing an opportunity by ignoring the empirical experiment taking place under their noses. That has left the field open for political hacks who try to exploit the little bit of available data to advance an agenda.

We who advocate for consumer empowerment in health care have nothing to fear from credible research — quite the opposite. We need to know what works and what doesn’t, so it can be revised and improved. We don’t need to trick politicians into supporting our ideas, if the ideas are flawed. That helps no one. But the only way to reliably test the ideas is in the market place under real world conditions. That is what Haviland and colleagues have done here, and for that I am grateful.

Comments (22)

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  1. Kevin B. O'Reilly says:

    I agree this study is important. See my story on it here:

  2. Ken says:

    Traditional health policy wonks are always going to have problems coming to grips with consumer directed care. It’s counter to there preconception of how health care should be delivered.

  3. Devon Herrick says:

    Public health advocates dislike consumer directed health care for several reasons. They do not believe vulnerable populations should be allowed to make trade-offs between medicine and some other use for their money – fearing that the poor will make bad choices under the influence of money. Advocates dislike cost sharing believing it to be a barrier to access to care. They do not believe reaching for your wallet is an appropriate response when visiting the doctor.

  4. Joe Barnett says:

    This study points to improvements in HSA plan designs that I think Greg has advocated: having zero-deductible coverage those relatively few tests that have been shown to have a significant, positive effects on health, and requiring enrollees to use their HSA/HRA funds for discretionary/elective tests and procedures.

  5. Neil H. says:

    Good post.

  6. RIchard Dougherty says:

    So glad to finally see a post that I can agree with you on John! (smile) This is a really good and important study and this is great news for CDHP because it will advance the debate significantly.

  7. Dan Ross says:

    I love what the AAPS fights for, free choice, quality care and personal responsibility. I’m lost however with this “love affair”surrounding HSAs. A solution to a problem which does not exist! Which patients drive health spending? (1)the poor single mother having an annual doc visit to look at a discolored mole, or (2) the obiese 55 y/o grandfather with diabetes, renal failure, CAD and COPD?

    In reality, commercial plans show expense distributions of: the bottom 70% of members spending under an average $400 per year. $85% spend under $900 annually. The top 1% spends $75,000 annually and the next 4% average $20,000 per member.

    How can a HDHP impact the bottom 70% averaging $400 annually? It only eliminates their participation in the health plan! Forget the mole until it becomes raging melanoma!

    HDHPs, HRAs, HSAs equal “Improvised Disease Bombs! Health care trend isn’t fueled by someone taking their kid to the doc for an ear ache? It runs on uncontrolled chronic disease!

  8. Don McCanne says:

    The closing comment of the abstract of the RAND study states, “However, enrollment in CDHPs also leads to reductions in care that is considered beneficial for all groups, and this may have greater health consequences for lower income and chronically ill people than for others.”

    Public health policies should remove barriers to beneficial care, not create them.

  9. Jim Porterfield says:

    Chronic illness may represent the largest chunk of disease symptom mollification spending, ($465 billion/yr for the top 5% if I interpret Mr. Ross’s numbers correctly). However, that spending never fixes the real causes. Soil erosion, soil compaction, excess chemical farming and food processing are the real root causes of illness and thus, the spending of third party insurance money.

    Stop and think. We are what we eat. And most of what we eat is not very nutritious and is deficient in minerals that our cells need to function. Only two of the 16 fruits and vegetables that I purchased from a Whole Foods store recently were tasty enough to make me want to take a second bite. Erosion has taken millions of tons of minerals that should be in our food out to sea. Glyphosate, the most widely used weed control chemical in the world is good at tying up many key nutrients that are left. It also kills many of the good soil bacteria, leaving the disease causing anaerobes to fill their niche. Soil compaction from big equipment squeezes the air out of the soil, again favoring the anaerobes. Heating, cooking, pasteurizing, microwaving and irradiating our food knocks out many of the hundreds of enzymes and vitamins that we need.

    On the nation’s 814 million acres of cropland, pasture and rangeland we could solve much of the root cause by using less than 20% of the $465 billion to remineralize these soils with a ton per acre of balanced mineral rock dust. The minerals would feed the microbes, which would, in turn, feed the plants, which would then feed us and our livestock. That would be spending money for true health care,and make HSAs an even better deal.

  10. Greg Scandlen says:

    Don McCanne,

    “Beneficial” is a pretty broad term. I think John Goodman did a study once that showed we could exceed our entire GDP on services that are considered “beneficial.” Someone has to decide what is worth the cost and what isn’t. You would have the government make those decisions. I would have the individual in consultation with a doctor decide. In either case there is a “barrier.”

    It is delusional to think there should be no barriers to “beneficial” services.

  11. Greg Scandlen says:

    Dan Ross,

    The poor single mother will become the obese grandmother with diabetes. We are all in this together. The whole point of CDHPs is to get us all more involved in (literally “invested in”) our own health care.

    Public health people have been bemoaning the lack of patient knowledge and involvement for decades. They have tried lecturing, hectoring, and bossing people around — all to no avail. The ONLY thing that has worked has been consumer directed health care, and it has worked better than any of us expected.

    Well-informed and involved patients on the low-dollar side do not cease being well-informed and involved once their spending gets higher — quite the opposite.

  12. Dan Ross says:

    Yes–we need involvement at the onset of problems. Again, the first $2,000 of medical expense is peanuts. Why have a strategy which keeps medical services away from patients in the early stages of disease?

    The genius national consulting firms are now saying consumer driven plans are trending higher than co-pay, low deductible PPOs! If this scheme is so effective why are employers establishing on-site medical clinics featuring no co-pays for visits and generic drugs? This clinic concept is the future of employer sponsored health care! High Deductible plans were designed as a last gasp for the MCO industry which takes a huge slice of care dollars while delivering no care in return. It isn’t working.

  13. Beverly Gossage says:

    Only very large companies like Cerner have on-site medical clinics. What percentage of growth have we seen in these this year? Compare that to HSA growth of 14% with the highest growth in large firms. FYI: Regarding small businesses
    An owner that I met with yesterday is experiencing an 8.4% growth in premium this year with his HSA plan. But since the premiums are kept low, the cost to employer: $9 increase per employee per month. Lower rates have given employer funds to put in employees’ accounts, which are added to the employees
    own dollars. The longer that they have this plan, the more funds are accumulating to pay for later claims. By the way, only 2 of the 15 employees met the deductible. 82% of the employees used 0% to 50% of deductible.Employer and employees like the plan.
    The HR director told me that this year her husband’s company, a large firm, dropped their traditional PPOs but have kept the HDHP/HSA options due to their popularity.
    HSAs are working.

  14. Dan Ross says:

    HSAs may work for small employers, as small deductibles would. The premium levels are set by MCOs still trying to validate a failed product. (Some believe a dark side exists with MCOs hoping the populations get sicker) The question is do HSAs mitigate chronic disease? I can’t see how!

  15. Greg Scandlen says:


    You say it is a “failed product” but that is just your opinion, supported by zero evidence. I keep close track of all the literature on this and all of the evidence shows just the opposite.

  16. Dan Ross says:

    Literature is available to support any possible strategy. Many want a system in which care is spooned out by our idiot politicians. Both sides are wrong: The left dreaming of a Hugo Chavez style statist system and the right with their emphasis on personal consumerism to the extent all elements of risk/quality management are lost.

    Both sides are wrong. Your side somehow invents the concept of price checking by members with multiple chronic diseases. The problem is the true cost driving member populations blast through the $2 – 4K deductible in early Febuary are are quickly in the
    100% paid segment .

  17. Mike Bond says:

    Dan Ross is falling into the trap that the skew in annual medical claims is constant over longer periods. There are simulations from the National Bureau of Economic Research that show a 10/80 skew on annual claims flattens to around 50-60% of indivuals accounting for 80% of expenses over a 35 year period. In other words there may not be nearly as many chronic cost, multiple condition folks folks as the annual figures might imply.

  18. Dan Ross says:

    Great discussion. I think we are looking at different sides of the problem. I work for large(er) self-funded plan sponsors helping lower cost by (1) reallocating funds being wasted to member care (2) bringing an independent data focus to prevention/wellness, Rx therapy compliance, DM and critical care. It’s really not as difficult as one may think.

    The macro system, cradle-to-grave care, is a whole different thing. I’m fortunate I don’t have Medicaid, Medicare and other government programs on my plate. I do believe a better focus on employer sponsored care will transfer into better outcomes in retirement. By better outcomes, I’m referring to compressed morbidity.

  19. Bob Geist says:

    Dan Ross has brought an interesting perspective and I would love to know the source of the stats he quotes–quite believable. Remember that while CDHPs control costs and most (if I remeber correctly)use the HDHP major med insurance to pay for preventive services (no co-pay), the important thing is that major med insurance pays for the catstrophic expenses. These would be there no matter the insurance plan and tend not to be the same folks each year. Further no insurance “prevents disease”, but proper insurance takes the risk out of financial catastrophe from inllness. Thanks to all, Bob

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  21. Tharique says:

    I and others exepct more from the self-described premier health advocacy group in Massachusetts on this very worrisome and harmful health reform trend.It’s not enough to blithly state: Looks pretty darn unimpressive to us. Hope the folks at the Connector pay attention. That’s not advocacy. More, please.

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