No. 125 Ten Ways Consumer-Driven Health Care Is a Proven Success

Published January 25, 2010

A revolution is underway in American health care, but you won’t read about it in newspapers or see it on TV.

The revolution involves a growing number of Americans who are reclaiming their right to buy health care goods and services that they decide are beneficial. They are shrugging off the heavy hand of regulation by Washington politicians, insurance companies, pharmaceutical firms, hospitals, medical organizations, federal agencies, and giant employers, all of whom are fighting over who gets what part of the trillions of dollars Americans spend each year on health care.

This is the consumer-driven health care (CDHC) revolution.

The CDHC revolution got underway seven ago, when the 2003 Medicare Modernization Act allowed consumers to deposit some of the health care money they earned into health savings accounts (HSAs), health reimbursement arrangements (HRAs), and flexible spending accounts, while choosing insurance policies with low premiums and high deductibles.

Empowered by control over their own money, consumers increasingly demanded the information needed to make good decisions about their health care. Once they possessed both the money and information, consumers forced changes in the delivery of services to make health care more efficient, more accountable, more convenient, and certainly more affordable.

Instead of paying an insurance company for maximum coverage they were unlikely to use, increasing numbers of consumers decided to buy less-expensive insurance for costly services and products while banking the monetary difference to pay for services only when they needed them. Employers liked the revolution, too, because it left them more money with which to raise wages or fund a savings account.

Consumer-driven health care plans are being used by 22.7 percent of the privately insured population. This is an astonishing market share for an approach that began just six years ago.

But these insurance plans are only the beginning. The important thing is what happens after consumers have more control. Already, consumer-driven plans are having a profound effect on the health care system. The growing use of generic drugs, retail clinics, medical tourism, concierge medicine, physician-owned specialty hospitals, and the reduction in the use of hospital emergency rooms may all be attributed to the growth of consumer-driven health care.

Even the current recession is highlighting a new era of consumerism in health care. Health care spending usually grows in times of recession because workers who fear losing their jobs–and their insurance coverage–try to maximize their use of services before they get laid off. But during this recession, consumers are deciding how best to spend their own money, and they are choosing to preserve their funds instead of spending them on unnecessary health care services. As a result, spending on prescription drugs dropped by 2 percent in the year ended September 30, 2008, physician office visits are down 1.5 percent, and hospital admissions are down by 2 percent.

The consumer-driven health care revolution has only just begun. This study offers 10 reasons why consumer-driven health care is a proven success. Each of these reasons helps explain why the movement will continue to grow.