The dynamic Consumer Directed Health Care(CDHC) Conference, held May 8-10 in San Francisco, showcased the creativity and energy being invested in CDHC options and opportunities.
About 1,200 people registered, representing large and small employers, information-technology experts, bankers, and entrepreneurs offering a wide array of new products and services.
Regina Herzlinger, a Harvard University professor and Manhattan Institute senior fellow, delivered the keynote address. She said the health sector is out of sync with the rest of the economy, and she made a solid case for the inevitable rise of CDHC.
Throughout U.S. history, Herzlinger explained, corporate entrepreneurs who have offered better products have been rewarded financially. But the U.S. health care industry works under a different set of rules, which allow payers to dictate prices and which punish providers who try to create better, cheaper goods and services. The result has been missed opportunities for innovation in the health sector.
“But the largest service industry in the United States is undergoing a massive transformation that will provide a wealth of new options and create the efficiencies that have been missing in the health sector,” Herzlinger said.
Consumer-directed health care, Herzlinger said, offers individuals the opportunity to seek out value and provide rewards for entrepreneurs who succeed in offering innovative health services and products.
CDHC might be inevitable, but it has yet to catch on like wildfire. But benefits managers from several companies who described their experiences in implementing CDHC plans indicated the movement is making steady progress among their employees.
Microsoft Corp., for instance, said less than 1 percent of its 41,000 employees signed up for the health savings account (HSA) plan that went into effect in January. But Senior Benefits Manager Julie Sheehy said she considers this a success, given that Microsoft’s regular health benefit program is so generous–with no deductibles, co-insurance, co-payments, or premium contributions.
The Microsoft HSA plan has a $1,200 deductible for individuals and $3,000 for families, and the company makes a $700/$1,800 HSA contribution. Because only 170 people signed up, the benefits department is able to offer personalized education and outreach to the HSA enrollees.
The Seattle law firm Preston Gates & Ellis announced that 11 percent of its 1,000 employees now have HSA plans, with enrollment nearly doubling between 2005 and 2006. The firm, which began offering HSAs two years ago, recently boosted its HSA contributions from $500 to $750 per employee and offered an added deposit for employees who complete a health-risk assessment.
In addition to reducing its soaring health care costs, the firm was seeking a way to give employees incentives to improve their health. It appears to be working: The number of employees in the lowest health-risk category increased by 30 percent after the first year, and the number of people in the highest-risk category dropped significantly, with the number of sick days per person dropping from an average of five to three days a year.
Another panel of major company benefit managers–including Dr. John T. Kelly, vice president and chief health and medical officer of the Union Pacific railroad; Fred Williams, director of benefits and strategic alliances at the lab-test company Quest Diagnostics; and Linda Dillman, executive vice president of Wal-Mart–reported on their innovations in health benefits.
Dillman is handling two of Wal-Mart’s biggest challenges: health benefits and strategic planning. She described the company’s new health offering for employees, which includes an HSA and a low-cost, high-deductible health policy, and reported Wal-Mart is working to give both its employees and its customers added incentives to get healthy. These include installing new retail health clinics in stores across the country, introducing incentives for wellness and for illness prevention in the company’s health plans, and even offering discounts on fresh foods.
Focus-group testing shows this is a particular challenge because many of Wal-Mart’s employees think a “healthy lifestyle” is something only for the rich people who can afford personal trainers and expensive food. This is an important insight and clearly a challenge to be overcome, Dillman said.
Debating the Future
Pacific Research Institute President Sally Pipes and I also waged a “debate” of sorts over why a consumer-driven health care system will succeed and a government-run, single-payer system will fail. While there was not much difference of opinion between us, our remarks sparked lively comments from the audience about the future of a free-market health system in an environment dominated by government programs, insurance mandates and regulations, and private-sector bureaucracies.
In the exhibit hall, vendors offered faster-better-cheaper ways to perform financial transactions, manage data, and provide wellness and prevention solutions. Others were there to help employees compare plan options, learn more about diseases and treatments, and even get a doctor on the phone to answer a patient’s call in person within a few hours.
The next Consumer Directed Health Care Conference will be held in Washington, DC on December 11-13.
Grace-Marie Turner ([email protected]) is president of the Galen Institute, a nonprofit, free-market organization in Alexandria, Virginia devoted to researching health policy.