Consumer-driven healthcare. Sounds great doesn’t it? Knowing what it really is and how it will affect you personally, and if you run a business, professionally is important.
What IS Consumer-Driven Healthcare? It is the label being used by benefit consultants and insurers to mean the laws, products and services designed decrease health care benefit liabilities of companies and provide customers the “opportunity” to choose and pay for their own health expenditures.
Since healthcare costs have risen 4 times faster than inflation over the past 20 years and rises continue year after year, many healthcare consultants believe that consumers do not understand the real cost of the services they consume, so they believe that, when consumers have to pay more up front costs, they will become wiser medical consumers.
Most people with health issues are pretty savvy about treatment options, due to the Internet. However, medical pricing is been complex, tied to diagnostic and treatment codes, and tiered with discounts as complex as airline discounts, so it is not surprising that we not totally understand these costs. What is hoped is that consumer-driven healthcare will drive providers to educate their patients about this.
Laws allowing tax deduction for monies placed in a Health Savings Account or HSAs (and their predecessor Medical Savings Accounts) are the driver of adoption of these plans. Several million accounts have been opened in the past two years, but 2006 is expected to have major expansion of these accounts and more employers offer more options. The accounts work like your retirement IRA’s or 401Ks, with the exception, that it is expected that some monies will be withdrawn for medical expenses. These accounts need to be paired with a high deductible major medical type plan, which kicks in after the deductible, which is typically $2,000 to $5,000 of eligible expenses per year. Over time, companies will tend to pay for the high deductible coverage, with the funding of the HSAs tending to become more and more a personal responsibility.
The consumer-driven part of the consumer-driven healthcare is that consumers now will control which medical services they choose to spend their money on. HSAs plus high deductible policy results in individuals and families, SELF INSURING the majority of their medical costs. With deductibles this high, statistically, 80-90% of consumers annually will have less than $5,000 in expenses to meet the deductible.
This puts HSA participants in complete control of their healthcare consumption nine years out of ten. This is GREAT NEWS for the following types of medical consumers, all of whom will tend to be attracted to HSAs and high deductible insurance.
HSAs plus High Deductible Medical Plans tend to be a good fit for:
- Healthy consumers and young families with no chronic diseases, who may have a check up or well baby visit, or an occasional scrape or accidental injury, a mammogram or prostate exam.
- People with high paying jobs or businesses, will find the tax benefits attractive. Medical costs will be a smaller percentage of their income, than medical costs are of lower income people. They may choose the approach for the tax benefits alone.
- Very high income individuals, who when they do see medical professionals, plan to see the best of the best, regardless of who or what is covered by their plan. They pay out of pocket and THEY control, what medical services they choose.
- Chronically ill individuals, who still struggle with their health, for whom conventional approaches have NOT been successful, may find the freedom to choose liberating.
- People who are dissatisfied with the way their healthcare has been provided in the past. It will include people with negative health outcomes.
- People who prefer “alternative” , complimentary, holistic, preventative care to conventional US medical approaches will also have a framework, where as consumers, they can indeed direct their healthcare expenditures to those modalities which match their philosophy the best. This is consumer-driven at its best. For recent immigrants and those who believe in a more holistic approach, this is very good news.
With over half the population having made at least one visit to an “alternative” practitioner in the past calendar year, and with expenditures for alternative care equaling expenditures for primary care, internists, pediatricians and OB-gyn practitioners (New England Journal of Medicine Studies 1993, …) it is clear than many US consumers trust these holistic alternatives. This makes the decision about approach cleaner. It will not be about what is or is not covered by insurance; the decision will be about what is the best choice, given your own perspective and healthcare experience and beliefs.
However HSAs and high deductible medical plans are not for everyone. They tend NOT to be a good fit for the following:
- People with chronic diseases, who spend more than $2,000 a year in health costs, year after year.
- People with a family history of major illness or disease.
- Families who are planning a family and expect multiple trips to birthing center or delivery rooms.
- Lower income individuals and families, who do not qualify for government provided health insurance such as Medicaid. Health insurance can be as much as 30% of their take home pay. The RISK for these people is inappropriately high, to self insure.
- People who have already had a major illness, and while they may be healthy now, will never again qualify for NEW insurance with low deductibles and co-pays, should usually keep what they currently have.
- People who are covered by COBRA, may choose to keep their coverage to protect insurability as well.
Regardless, it will be offered by many employers and it will mean doctors and other healthcare providers will have to be more aware of customer satisfaction, or risk, lost patients.