Editor’s Note: With health insurance prices expected to rise again in 2020, Jane Orient, M.D., executive director of the Association of American Physicians and Surgeons and a policy advisor to The Heartland Institute, which publishes Health Care News, shared her views on consumer-driven health plans (CDHP) and how they reduce costs and lead to better care.
Orient’s views are bolstered by a Health Care Cost Institute study released in May which showed consumers respond to market forces when they have a plan that allows them to do so. The study examined more than 10 million people in CDHP plans with lower premiums but higher deductibles and a health savings or health reimbursement account. It found those consumers spent an average of 13 percent less than those in a traditional plan on inpatient care, 7 percent less on outpatient care, 8 percent less on professional health care services, and 26 percent less on prescription drugs.
Health Care News: How does paying more up-front lead to lower health care costs?
Orient: It’s a whole lot less expensive just to pay directly. A lot of so-called health plans are just a very, very expensive check-writing service. Before we got all of this unaffordable health care, courtesy of the Obama administration, the best thing to do was to have a high-deductible insurance plan that you hoped never to use, much the same as you hope never to use your fire insurance or car insurance.
Over the years, health plans became a far different product. Traditionally, you would pay directly for all services, place receipts in a shoe box, and if receipts approached the deductible you could take them out and send them in.
Now insurance plans require a claim for every expense. Insurers decide whether or not it applies to the deductible. Then they may or may not write a check and/or audit it to see whether the doctor did what they think should have been done. All of these processes add costs—it probably at least triples the cost of routine medical services. What we need is medical insurance that acts like other types of casualty insurance.
Health Care News: Having a third party scrutinize claims seems like a way to control costs. Does it?
Orient: No. Fraud is sort of inevitable when you take a huge amount of money from people up front and dole it out afterward. Everybody’s got the incentive to try to get as much out of it as possible. Whereas if the patient is paying the bill at the time of service, if it isn’t worthwhile, the patient is probably not going to spend the money.
It reminds me of the time I could buy an insurance plan with a $25,000 deductible. It cost me about $250 per year. And I hoped I would never use it, and indeed I never did. I was very sorry to see that they added a requirement that I had to have some basic policy that would be vastly more expensive that would cover day-to-day things that I had been previously paying for myself at a much lower cost.
Patients don’t go to the doctor for a lot of reasons. But knowing that they are going to have to pay up front when they already paid a huge amount for their insurance premiums might be a deterrent.
Health Care News: The antithesis of CDHPs is Medicare and Medicaid, with government administrators determining cost and coverage. What is wrong with that approach?
Orient: I would say CDHPs are a way out of these bankrupt government programs that are placing both patients and doctors in a vise. We need to open all the escape hatches to allow patients to get out of these programs now, because these programs are bankrupt, and they are increasingly becoming stingy and intrusive.
They [Medicare/Medicaid] are going to crash and burn, eventually. The demographics and huge unfunded liabilities already accumulated guarantee that.
Health Care News: It seems that we need an entire paradigm shift in the way we think about health care.
Orient: I don’t know why consumer-directed health plans are a problem, because we have consumer-directed everything else, including grocery shopping, rent, computers, cars, and so on, where customers decide what they want and whether things are valuable and worth it or not.
Medicine is not like that at all. They ask you all kinds of questions about your private life, insurance coverage, and so on. It’s often very difficult to get into the doctor’s office, and they act like they’re doing you a favor just letting you through the door.
William Johnson and Anna Milewski, “Lower Health Care Spending and Use for People with Chronic Conditions in Consumer-Directed Health Plans,” May 2, 2019: https://www.healthcostinstitute.org/research/publications/hcci-research/entry/lower-health-care-spending-and-use-for-people-with-chronic-conditions-in-consumer-directed-health-plans