What impact do consumer-directed health plans really have?

National Bureau of Economic Research
March 2015
NBER Working Paper 21031
Do "Consumer-Directed" Health Plans Bend the Cost Curve Over Time?
By Amelia M. Haviland, Matthew D. Eisenberg, Ateev Mehrotra, Peter J.
Huckfeldt, and Neeraj Sood

Abstract

"Consumer-Directed" Health Plans (CDHPs) combine high deductibles with
personal medical accounts and are intended to reduce health care
spending through greater patient cost sharing. Prior research shows that
CDHPs reduce spending in the first year. However, there is little
research on the impact of CDHPs over the longer term. We add to this
literature by using data from 13 million individuals in 54 large US
firms to estimate the effects of a firm offering CDHPs on health care
spending up to three years post offer. We use a
difference-in-differences analysis and to further strengthen
identification, we balance observables within firm, over time by
developing weights through a machine learning algorithm. We find that
spending is reduced for those in firms offering CDHPs in all three years
post. The reductions are driven by spending decreases in outpatient care
and pharmaceuticals, with no evidence of increases in emergency
department or inpatient care.

From the Introduction

At the firm level, we find that CDHP offer is associated with an
approximately 5 percent reduction in total health care spending in each
of the three years after CDHPs were introduced relative to cost growth
observed for non-offering employers. The long term decreases in spending
are focused in outpatient care and drugs and there is little impact on
inpatient or emergency department spending. If these effects are due
only to changes in health care spending among those enrolled in CDHPs,
they imply local average treatment effects for those enrolled in CDHPs
of an approximately 15 percent reduction in total spending in each the
first three years. Differences in impacts by CDHP plan structure are not
statistically significant. However, consistent with our hypotheses, the
pattern of the point estimates suggests that the impact of CDHPs is
greater when paired with HSAs (versus HRAs) and when employers make
smaller account contributions.

From the Summary and Discussion

This study substantially adds to our knowledge on the long term cost
impacts of CDHPs. We estimated spending trends for three years across
over 13 million people across the country in an analysis estimating CDHP
impacts without the threat of individual level selection bias. We find
that health care cost growth among firms offering a CDHP is
significantly lower in each of the first three years after offer. This
result suggests that, at least at large employers, the impact of CDHPs
persists and is not just a one-time reduction in spending. However, an
important caveat is that the decrease in spending may be smaller in year
3 compared to year 1 post-offer. Recognizing that the differences are
not statistically significant, these results are suggestive and
consistent with a decreasing impact of CDHPs over time.

The decreases in total spending growth observed are primarily due to
reductions in spending on outpatient care and pharmaceuticals. In
contrast, by the third year there are no differences in either emergency
department or inpatient spending.

The results presented here are limited to large employers and therefore
may not extend to Medicaid beneficiaries, the individual or small group
market, or to the health insurance exchanges where, on average,
deductibles and out of pocket maximums are higher and/or enrollees have
fewer financial resources. While the firms in this study were
specifically selected to have lower income employees, all families had
at least one adult working full time with benefits so they are typically
better off than families not offered employer sponsored insurance.

In summary, in the first large multi-employer study to investigate long
term CDHP spending impacts we find reductions in health care cost growth
in all three years post CDHP offer and do not detect increases in any
component of health care spending. These findings do not support either
the concern that decreases in spending will be a one-time occurrence or
that short-term decreases in spending with a CDHP will result in
increases in spending in the long term due to complications of forgone
care. We cannot rule out either of these concerns developing over an
even longer time frame.

http://www.nber.org/papers/w21031

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Comment by Don McCanne

This study will no doubt be used to claim that high deductible health
plans with health savings accounts (CDHPs - consumer-directed health
plans) are effective in reducing health care spending without causing
any harm. However, the conclusions that can be drawn are far more limited.

The observed reductions of spending by those offered CDHPs by their
employers were in outpatient care and drugs. The nature of these
services may enable shopping for lower prices, but they also are
services that frequently are used for medical problems of lower acuity
which enables patients to make decisions as to whether or not they will
forgo the medical services and/or prescriptions offered. These services
may be for important interventions that could improve quality of life or
even longevity, or they could be for interventions that would have no
significant impact on health, or they could be for interventions in
between these extremes that might have only a modest beneficial impact
such as transient symptom relief. From other studies it is known that
patients decline not only care that they perceive to be of little value,
but when faced with deductibles, they often do decline care that is
clearly beneficial.

Those who would claim that this study shows that no harm was done after
enrolling in a CDHP point to the observation that being in a CDHP did
not increase hospitalizations nor increase the use of emergency
departments during the first three years of enrollment.

The reason this conclusion should be challenged is based on the fact
that the population studied was the relatively healthy workforce and
their healthy families in healthy years of their lives. It is highly
unlikely that a very modest decline in outpatient visits and
prescriptions would have directly resulted in crisis care requiring
emergency department visits or hospitalizations during the first three
years on the program, and thus these outcomes were an insensitive
indicator of harm. The rate of these interventions in the relatively
healthy control group was the same, as would be expected. Also, by
limiting the outcomes studied to only these two, the study remained
insensitive to other potentially beneficial results of obtaining health
care, if nothing more than relief on receiving reassurance over concerns
that patients may have had about their health.

This study has the same limitation of the oft-cited RAND Health
Insurance Experiment which also studied a healthy population for a
limited time in healthy years of their lives. These studies may have
intrinsic validity for the populations studied, but they do not have
extrinsic validity, particularly for an older, sicker population that
also has been shown to forgo care when faced with deductibles.

This study asked if CDHPs bend the cost curve over time (title). The
study showed that spending by employers was reduced 5 percent in each of
the three years following the introduction of CDHPs. Since not all
employees were enrolled in CDHPs, they theorized that the reduction in
spending for those in CDHPs was about 15 percent. Even there, a 15
percent reduction in spending on a population that has minimal need for
hospitalization and emergency department visits - where much of our
total health care spending lies - certainly does not equate to anywhere
near a 15 percent reduction in our total health care spending.

Remember that 80 percent of health care is used by the 20 percent of
people with serious health problems. Almost all of that spending is well
in excess of the deductibles and thus is not sensitive to consumer shopping.

Further, since employers insure the healthiest and least costly sector
of our population, the 5 percent savings that they gained is only a drop
in the bucket of our total national health expenditures. You won't see
much bend in this cost curve, especially if you alter policies so that
patients do receive the beneficial services that they should have, but
might otherwise forgo.

If we are going to bend the cost curve, let's not do it through methods
that reduce beneficial health care services. Let's do it though ways
that eliminate wasteful spending, such as the administrative excesses
imposed on us by the private insurers and public payers operating in a
fragmented, dysfunctional system. Let's enact a single payer national
health program instead.