Short Take on Consumer-Driven Care

What - Consumer-Driven Health Care (CDHC), as usually defined, refers to health plans using HSAs, HRAs, and similar plans to pay directly for routine health expenses with minimal interference with patient-physician relationships. These plans feature low premiums, high deductibles, free preventive testing, and catastrophic coverage. Although premiums are significantly less than with PPOs and HMOs, patients pay more upfront.

Why – Proponents say CDHC offers consumers greater choice and freedom, relies on consumers making more intelligent choices when spending their own money, discourages overuse of services for minor problems, allows consumers to interact directly with physicians, minimizes administrative costs, and offers incentives to use tax-free money, to carry over unspent money to following year, and has the benefits of free preventive care. Critics say HSAs are simply cost-shifting and are unaffordable for people with chronic disease or low incomes.

When – CDHC has been evolving since late 1990s. It is designed to engage health consumers more directly and to provide cost and quality information through the Internet. CDHC was articulated in detail in Professor Regina Herzingler’s groundbreaking 892 book Consumer-Driven Health Care: Implications for Providers, Payers, and Policymakers (Jossey-Bass, 2004). CDHCs are works in progress. By April 2007, about 4.5 million Americans were HSA holders, about 5% of covered workers.

How – HSAs were made widely available in December 2003 as part of Medicare Prescription Drug and Modernization Act. The new law renamed Medical Savings Accounts as Health Savings Accounts and encouraged HSA adoption in high deductible plans. Banks may sell HSAs and hold money in escrow until spent for health reasons.

Where - Brokers are vigorously marketing high deductible plans with HSAs to small and medium sized businesses as complete replacement for PPOs and HMOs and as alternatives to HMOs, PPOs, and self-funded plans in large firms. Employers seek to save money for themselves and to offer lower premium plans to previously uninsured workers.One fourth of current HSA holders were previously uninsured.

Who – Thought leaders are John Goodman of National Center for Policy Analysis, Regina Herzlinger of Harvard Business School, Greg Scandlen of the Center of Health Consumer Choice, Grace Marie Turner of the Galen Institute, and President Bush and members of his administration.