On the heels of America's Health Insurance Plans, the health insurance industry's national association, recent announcement that 4.5 million Americans are enrolled in Health Savings Account-qualified High-Deductible Health Plans (HSA/HDHPs), a new article from Harvard Medical School researchers (Kaiser News Network, AP by way of the Houston Chronicle) is being reported as finding that that women, on average, pay more per year than men for medical treatment and so are unfairly impacted by high-deductible plans. I think a bit more needs to be said about the survey, but first some (oversimplified) background.
I'm sure many are aware that the cost of health care has increased enormously over the last decade as Health Maintenance Organizations (HMOs), which had successfully controlled costs in some markets for years, and Preferred Provider Organizations (PPOs) ran into a serious problem. To wit: health care consumers had no incentive to make use of preventive care services, to take medication as directed, or to otherwise be proactive about their health, leading in some cases to expensive inpatient hospital visits that otherwise could have been avoided. One school of thought is that well-functioning markets require well-informed, accountable (read: financially) consumers. Apply that same reasoning to health care while ignoring the fact that no one is capable of being a "well-informed consumer" in today's health care market and we have Consumer-Driven Health Care (CDHC): the idea that consumers with some "skin in the game" (i.e. they have to spend more than a $15 co-pay to access services beyond preventive care) are more likely to use preventive care services and avoid unnecessary care.
The first incarnation of CDHC (Health Reimbursement Arrangements or HRAs) is not particularly relevant here. HSA/HDHPs themselves are a product of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. Known as MMA in the industry, this piece of legislation allowed individuals enrolled in qualified high-deductible health plans to put up to $4,500, tax-free, into a Health Savings Account; qualified plans were required to have a deductible of $1,050 or higher.
Back to the article. Its main point is as reported: women are disproportionately impacted by high-deductible plans because they require care that men do not.
Not only do [women] suffer the pain of childbirth, but it is also expensive. Additionally, we are more diligent in seeking care for chronic illnesses like diabetes and hypertension. While only one third of insured men under 45 hit $1,050 each year in medical costs, 55.6% of insured young women reached this figure. Similar cost disparities disadvantage insured women between 45 and 65, 74.2% of whom [as compared to 62.4% of men in the same age range] “consume” $1,050 or more in medical care annually. Overall, insured women’s median health expenditure is $997 higher than men’s. Even subtracting a few hundred dollars for the cost of mammograms and Pap smears (exempted from the deductible in a few CDHC plans), women are still big losers.
The authors go on to assert, by turns, that "CDHC will penalize [women], as well as men whose major sin is chronic illness, and many of us who are turning grey"; that CDHC will attract the young and the healthy, causing premiums to skyrocket for the rest; that CDHC will be ineffective at reducing costs; that CDHC adds layers of bureaucracy; and that CDH plans (CDHPs) are too complex. Let's take this one idea at a time.
Impact on Women
It's good that the authors acknowledge that preventive care can be covered outside the deductible in HSA/HDHPs The IRS talks about this issue in detail in bulletin 2004-15 on pages 725-727 (PDF 13-15).
Generally, an HDHP may not provide benefits for any year until the deductible for that year is satisfied. However, section 223(c)(2)(C) provides a safe harbor for the absence of a preventive care deductible. That section states, “[a] plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for preventive care."
The question then becomes whether many individuals in CDH plans have access to preventive care before satisfying their deductible. A December 2006 Employee Benefits Research Institute (EBRI) Issue Brief (#200) reported that 57% of surveyed individuals in CDHPs did not have coverage outside their deductible for preventive care. The obvious implication is that the authors of the new Harvard article are, broadly speaking, correct in their concern. I think the issue is more complex, however. The Harvard study fails to take into account the fact that many non-CDHPs exclude maternity coverage. In other words, while it may be true that CDHPs do end up costing women more, the greater concern is the ongoing trend of shifting the burden of health care costs onto the consumer; the dichotomy is not between traditional comprehensive health coverage and CDHPs but between high-deductible plans (which are coming no matter what happens) and CDHPs.
Impact on Those With Chronic Conditions and Pre-Retirees
Not much, I think, needs to be said on this topic. Given that the central tenet of CDHC is that consumers need to be at risk for a portion of their health care expenses, it goes without saying that individuals with higher health care expenses will be more likely to pay more out of pocket.
CDH and Increased Premiums
The industry has a term for the idea that healthier individuals will move to the cheaper plan option: "adverse selection," and it's been a concern for health insurers since CDH was first discussed. One obvious problem with the authors' claim is that they assume a) that comprehensive health coverage will continue to exist as health costs continue to increase and b) that women will remain in these plans. In any event, there is currently little data to suggest that adverse selection is occurring as a result of CDHPs. For example, Figure 7 of the EBRI Issue Brief shows that the populations enrolled in each category of plan are quite similar. Further, the GAO report cited in the Harvard study as evidence that "[CDHPs] are segregating young, higher-income men from the costlier female and older workers" actually found that, excluding retirees, the average Federal CDHP enrollee was only two years younger than the average Federal PPO enrollee. Also note that the Federal CDHP is not an HSA/HDHP; the government funds the first $1,200 of the deductible which means that single enrollees are only liable for $600 of their total health care costs.
Impact on Total Health Care Expenditures
This assertion relies on the 80:20 rule, the idea that 20% of the population is responsible for 80% of the costs. Again, it goes without saying that individuals who require very expensive care will not be able to, and should not, reduce their health care spending significantly. I think the authors largely miss the point, however. CDHP is about behavior modification. In the absence of external motivation, medication compliance, as an example, is atrocious in general. A diabetic (insulin-dependent or not) who fails to take his or her medication as directed will often end up hospitalized, often at a greater overall cost than a 365-day supply of the medication in question. The point is not to make individuals with serious chronic conditions suffer, but to address the corner cases where good decision-making can have a significant impact.
Increased Bureaucracy?
It's interesting that the authors conflated HSAs with their associated HDHPs in this section. Yes, insurers are chartering their own banks so they can collect account fees, but they charge no more than a financial institution would for the same service. I don't really understand how this trend represents "additional layers of expensive health care bureaucracy" and more than 401Ks represent "additional layers of expensive retirement bureaucracy."
To be blunt, there is no additional health care bureaucracy inherent in a HSA/HDHP than there is in a typical PPO plan with a deductible. The idea that "patients must assiduously document their out-of-pocket payments" is an odd one; the largest insurers, particularly UnitedHealth, have gone out of their way to make the collection of that information automatic. It's also difficult to understand why the authors would on one hand claim that CDHPs increase the cost of reimbursement by making doctors collect from patients while on the other hand criticizing UnitedHealth and the Blue Cross Blue Shield Association for offering to consumers lines of credit that allow doctors to immediately collect what they're due.
Complexity
While they make a good point (the necessity of a procedure is generally best determined by a doctor), I think that to object to CDHPs as they have, i.e. by first claiming that "few [CDHPs]" cover preventive care and later complaining that covering preventive care would "add complexity to our already Byzantine reimbursement system," is simply inconsistent.
In the end, no one can say quite yet what the effects of CDHP will be. Will it deliver its promised mitigation of medical cost trends? Will it destroy the health insurance industry due to adverse selection issues? Will there be provider (i.e. doctor and medical group) backlash? In my own opinion, CDH does disproportionately impact the poor and those with chronic conditions. From my perspective, however, CDHPs are significantly better than the catastrophic health plans with no provision for preventive care that I see as the only likely alternative to CDHP in the five to ten years.
Related links - Terminology
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