RAND on Consumer-Directed Health Care

Analyzing data related to first-year effects from all five study years (2003–2007), the study team found that enrollees who switched to consumer-directed plans spent 21 percent less on health care in their first year; furthermore, in contrast with the HIE’s results, approximately one-third of the savings resulted from lower spending per episode of care (Figure 2).

Costs per episode of care fell because enrollees used fewer or less expensive services in a given episode of care. For example, enrollees used 4.9 percent fewer name-brand drugs, made 6.5 percent fewer visits to specialists, and had 17.7 percent fewer hospital stays in the first year after switching to a consumer-directed plan (Figure 3).

Source: RAND Health.

Comments (10)

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  1. Ken says:

    Good to have RAND confirming what many of us knew 20 years ago.

  2. Jeff says:

    With the RAND study out, HSAs are no longer controversial.

  3. Devon Herrick says:

    One of the great failures of our generation was overlooking the results of the RAND Health Insurance Experiment. We’ve now known for 30 years that patients will act like consumers when they are exposed to cost sharing and control some of their own health care dollars. Rejecting personal responsibility in favor of collective pay-as-you-go financing schemes for Medicare, Medicaid, Social Security (and employer health coverage) will probably do more to undermine our economic future than any other collective decision made in the 20th Century.

  4. Linda Gorman says:

    This is very nice. It reports basically the same results as all of the earlier studies on the topic.

    Multiple studies from different perspectives with similar results suggest robust effects. Voila, a policy that may actually be working as advertised with effect sizes large enough to show up even in academic data.

  5. Sadat says:

    This further underscores the point that if consumers are given the power to choose with their own resources, then they become more economical consumers.

  6. ColoComment says:

    Too bad, then, that HSAs are so severely limited under Obamacare, yah?
    Before I went on Medicare, I had a $10k deductible policy with an HSA to which I contributed the maximum. My money, rolled over from year to year & so could accumulate. My well-considered health care spending choices. My insurance for catastrophic medical events covered.
    With Medicare’s traditional structure, I feel as though I’ve gone backwards.

  7. Andrew O says:

    I agree that HSAs make sense and promote a more responsible patient-consumer dynamic in our society. However, I am still wrestling with uncontrollable expensive and unforeseen medical issues some people face. I am still not convinced of any pragmatic solution to having a “responsible” culture while assuring service when such a circumstance occurs. Nobody in the middle class can save enough and account for expenses related to long-term cancer, for example, and insurance companies cap at certain levels — what happens next? Let the patient die?

  8. Linda Gorman says:

    Andrew O,

    HSAs come with health insurance policies that, typically, pay for all costs over a given deductible. Many have no copays so the financial risk is zero once one meets the deductible. The insurance covers the long-term cancer.

  9. Gabriel Odom says:

    Wait, you mean to tell me that I spend my own money more responsibly than I spend someone else’s? Shocking!

  10. John Fembup says:

    Have not yet read the actual study but intend to. From the article above, it appears that the study compared the expenditures of specific HSA cohorts before and after they entered the HSA arrangement.

    That seems logical to me and makes the result all the more compelling.