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March 08, 2016 12:00 AM

Blog: Why consumerism is no panacea for our healthcare problems

Harris Meyer
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    American politicians and policymakers often tout consumer-based approaches, such as price transparency, comparison shopping, retail clinics, and high-deductible health plans featuring health savings accounts as answers to the nation's pressing healthcare cost and access problems. But recent evidence suggests that these types of market-based solutions have severe limits.

    Earlier this month, the Health Care Cost Institute reported that less than 7% of total U.S. healthcare spending in 2011 was paid by consumers for “shoppable” services, meaning those that can be scheduled in a market with some competition.

    “While knowledge about price and quality is important,” the authors said (PDF), “we should be realistic about the ability of this information in the hands of consumers to drive changes in the market. Overall, we come to the conclusion that the potential gains from the consumer price shopping aspect of price transparency efforts are modest.”

    A secret-shopper style survey released last month by the Pioneer Institute found that getting the price of a standard MRI test for the knee posed a major challenge. The survey of 54 hospitals in six states found that about 25% of the hospitals did not provide price information despite as many as 11 calls. Patients “can't shop for price, even if they wanted to,” said Barbara Anthony, a senior fellow at the institute who wrote the report.

    This week, a study published in Health Affairs found that retail clinics in drugstores and other convenient settings have led to slightly higher per-capita spending because consumers used them for minor conditions that they typically would have treated on their own. Advocates of retail clinics have argued that the option offers lower costs and greater convenience.

    But the researchers concluded that 58% of retail clinic visits represented new use of medical services rather than a replacement of traditional visits to physicians' offices. “This challenges the conventional wisdom that retail clinics save the health care system money,” Dr. Ateev Mehrotra, an associate professor at Harvard Medical School and a co-author of the study, told Kaiser Health News.

    In another market-oriented proposal, Donald Trump, the leading Republican presidential candidate, last week released a brief seven-point health plan that promoted use of tax-free health savings accounts—even though HSAs have been available to consumers under federal law for many years.

    All Republican healthcare reform plans emphasize expanded use of HSAs, which advocates say would drive a more cost-efficient system by prodding consumers, using their own money, to shop, compare, and negotiate with healthcare providers. A congressional Republican bill last year would have expanded HSAs by allowing people to use these tax-sheltered funds to pay premiums for high-deductible plans, which currently is not allowed under federal law.

    Other conservatives propose letting workers receive the full amount (PDF) they and their employer spend on their employer health plan as a tax-free cash contribution to the workers' health savings account.

    Another conservative idea is to provide a one-time federal payment of $1,000 to help people establish and fund HSAs, while doubling the contribution limits to the accounts.

    While Republicans clamor for broader use of HSAs, corporate America has steadily increased its offerings to employees of high-deductible health plans paired with health savings accounts. Among employers offering health benefits, 20% offered a high-deductible plan with an HSA, and 15% of covered workers were enrolled in such plans last year, according to the 2015 Kaiser Family Foundation/Health Research & Educational Trust annual survey of employer health benefits.

    A big problem, however, is that many employers make modest or no contributions to their employees' HSAs, and lots of Americans don't have spare cash to deposit in these accounts. Workers enrolled in HSA plans on average received an annual employer contribution of $568 for single coverage and $991 for family coverage in 2015, according to the Kaiser survey. Those are about the same amounts as employers contributed in 2010.

    Those employer contributions covered only a small part of the deductible, leaving workers on their own for the remaining out-of-pocket exposure. The average annual deductible for HSA plans was $2,196 for single coverage and $4,347 for family coverage. Indeed, Aetna has recommended that employers design HSA plans in ways so that employees have significant “skin in the game.”

    Beyond that, more than 40% of employers offering HSA plans made no contribution at all in 2015, and 30% of workers enrolled in HSA plans did not receive any employer contribution to their account, according to the Kaiser survey. That compares with 24% of workers in HSAs who did not receive any employer contribution in 2014.

    “If you don't have much cash, then the fact that you can make your $1,500 deductible pre-tax doesn't make much of a difference,” Gary Claxton, a vice president with the Kaiser Family Foundation, told Modern Healthcare.

    Not surprisingly, more affluent Americans are much more likely to take advantage of HSAs. A 2015 study in Health Affairs found that high-income and older people established and fully funded their accounts at least four times as often as did low-income and younger people.

    The researchers found that one out of every two account holders ages 55-64 in the highest-income quintile fully funded their accounts, compared with one in 30 account holders ages 25-34 in the lowest-income quintile. That's even though disease prevalence is higher among lower-income people, who are more likely to need those HSA funds to pay for care, the authors noted.

    Both supporters and critics say a key way to convince employees to choose an HSA plan is for the employer to chip in a significant contribution to the account.

    “An employers' contribution to employees' accounts is the single most effective way to get employees to save,” according to an advisory on designing HSA plans from UMB Healthcare Services, which administers HSA plans for employers.

    Even some HSA advocates acknowledge the limits of this approach. Conservative health policy expert James Capretta, a senior fellow at the Ethics and Public Policy Center, recently wrote that relying solely on expanded HSAs won't work because it could lead to employers dropping coverage and more lower-income people becoming uninsured because they lack the money to fund HSAs on their own. He favors a broader reform approach including refundable tax credits to help lower-income people buy coverage.

    “Increasing the size of HSAs, by itself, does not come close to constituting a credible plan to replace Obamacare, much less one that will move the U.S. toward a fully functioning marketplace,” Capretta wrote.

    All of this suggests that traditional consumer market mechanisms won't suffice in healthcare, and that the government, insurers, employers, and providers themselves have a major role to play in controlling costs and ensuring access to care, Chapin White, a senior policy researcher at the RAND Corp., recently told Modern Healthcare. “We can't expect patients to be in the driver's seat, driving the healthcare system to higher quality and better value,” he said.

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