Consumer-directed health plans reduce utilization of essential drugs

National Bureau of Economic Research
NBER Working Paper No. 20927
February 2015
Patient Responses to Incentives in Consumer-Directed Health Plans:
Evidence from Pharmaceuticals
By Peter J. Huckfeldt, Amelia Haviland Ateev, Mehrotra Zachary Wagner,
and Neeraj Sood

Abstract

Prior studies suggest that consumer-directed health plans (CDHPs) -
characterized by high deductibles and health care accounts - reduce
health costs, but there is concern that enrollees indiscriminately
reduce use of low-value services (e.g., unnecessary emergency department
use) and high-value services (e.g., preventive care). We investigate how
CDHP enrollees change use of pharmaceuticals for chronic diseases. We
compare two large firms where nearly all employees were switched to
CDHPs to firms with conventional health insurance plans. In the first
firm's CDHP, pharmaceuticals were subject to the deductible, while in
the second firm pharmaceuticals were exempt. Employees in the first firm
shifted the timing of drug purchases to periods with lower cost sharing
and were more likely to use lower-cost drugs, but the largest effect of
the CDHP was to reduce utilization. Employees in the second firm also
reduced utilization, but did not shift the timing or use of low cost drugs

From the Introduction

Overall, we find evidence that employees in the CDHP with
pharmaceuticals subject to the deductible use more low cost drugs and
shift the timing of drug purchases to periods with lower cost sharing.
The majority of the response, however, is to reduce overall drug
utilization. These results imply that enrollees possess some awareness
of benefit design and availability of low cost drugs, but also suggest
that enrollees either discount or are not cognizant of the adverse
consequences of poor adherence. Employees in the CDHP with
pharmaceuticals exempt from the deductible also exhibit decreased
utilization relative to firms with conventional coverage. The presence
of a utilization response may suggest a lack of understanding of plan
design or reflect secondary effects where increased cost sharing leads
to fewer physician visits where drugs are prescribed. The persistence of
the response into the second year of the plan (presumably a sufficient
time period for enrollees to understand plan design) may suggest this
response is due to cost sharing for physician visits.

From the Conclusion

We investigate the effects of CDHPs on use of pharmaceuticals that treat
and prevent chronic diseases including high cholesterol, hypertension,
and type 2 diabetes. We compare changes in utilization among employees
in two firms that shift all of their employees to CDHPs relative to
employees in firms that offered no CDHP; in one firm (CDHP firm 1)
pharmaceuticals are subject to the deductible and in the other
pharmaceuticals are exempt from the deductible (CDHP firm 2). We find
that enrollees in CDHP firm 1 change utilization of pharmaceuticals
along each hypothesized margin: enrollees shift the timing of purchase
to periods with lower cost sharing, increase the use of lower cost drugs
(but only when such drugs were equally or more effective), and reduce
overall pharmaceutical utilization. The majority of the response,
however, is focused on the reduction in overall utilization. In
addition, most of these effects persist into the second year of the
CDHP. In CDHP firm 2, we observe insignificant changes in utilization
for statins, but statically significant or marginally significant
reductions in utilization of antihypertensive drugs and diabetes drugs.
We observe no effect, however, on the percentage of days supply
purchased or used that were low cost. The utilization effects for CDHP
firm 2 are larger and statistically significant for all drug categories
in the second year of the CDHP. We interpret the persistence of these
effects, combined with the absence of a change in use of low cost drugs,
as suggestive evidence of a "gatekeeper" effect, where higher cost
sharing for physician visits result in reductions in pharmaceutical use.
Moreover, some of the reduction in utilization in CDHP firm 1 could also
be driven by a reduction in access to physician visits, a phenomenon
observed in the RAND Health Insurance Experiment (Leibowitz, Manning,
and Newhouse 1985).

http://www.nber.org/papers/w20927?utm_campaign=ntw&utm_medium=email&utm_source=ntw

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Comment by Don McCanne

One of the most important changes taking place in the financing of
health care is the widespread adoption of high-deductible health plans,
not only with the plans offered in the ACA insurance exchanges, but also
with employer-sponsored health plans. When high-deductible plans are
combined with a personal health account (health reimbursement
arrangement or health savings account) then they are referred to as
consumer-directed health plans (CDHPs). This study further informs us on
the perverse consequences of this model of health care financing.

Three different paragraphs, each describing this study, were selected
for today's quote to help the reader get through the fog of this fairly
complex, technical study. Basically, patient utilization rates for drugs
in three chronic conditions (hypercholesterolemia, hypertension, and
Type 2 diabetes) were measured under three different scenarios: a large
employer with a CDHP in which pharmaceuticals applied to the deductible,
requiring full payment until the deductible was reached, a large
employer with a CDHP in which pharmaceuticals were exempt from the
deductibles, requiring only copayments, and a third group of 19 other
firms that offered only traditional coverage and no CDHP.

The primary finding was that patients in CDHP plans decreased
utilization of pharmaceuticals for these disorders compared to patients
in traditional health plans. This was true whether or not drug purchases
applied to the deductible. It is crucial to note that having a personal
health account from which funds could be drawn to pay for these drugs
did not prevent patients from decreasing utilization of these important
drugs.

It is easy to understand why patients declined to purchase drugs for
which they had to pay the full cost, even though those drugs were
important in their medical management. We have innumerable studies that
show that patients will decline care that they should have when they are
faced with significant out-of-pocket expenses, demonstrating why
high-deductible plans are a such a perverse method of controlling health
care spending.

But why would patients with high-deductible plans reduce their use of
beneficial drugs if they were exempt from the deductible, requiring them
to pay only the copayments? One reason may be that the intrusions and
complexities of private insurer cost-shifting arrangements, such as
through CDHPs, may be training patients to decline care except in the
most dire of circumstances. Another reason may be that the physician
visit required to obtain the prescription must be paid in full until the
deductible is met, causing patients to drop off of their therapeutic
program. Again, the availability of an employer-funded health
reimbursement arrangement did not prevent patients from declining to
fill their prescriptions (although an empty personal health account is
not very helpful).

The bottom line is that too many patients are not receiving drugs and
other care that they should have merely because of the increasing
transition to CDHPs, with their high-deductible barriers to care. We
should abandon CHDPs and shift to first dollar coverage in a program
that controls spending through patient-friendly efficiencies - a single
payer national health program.