I just finished reading two very interesting articles on Forbes. The first, by Rick Ungar, is called “Consumer Driven Healthcare Proponents Finally Proven Wrong“. The second is a rebuttal to that article, written by Todd Hixon. Both articles are well worth reading. Rick Ungar’s position – that consumer driven healthcare is not the best idea – is based largely on the healthcare model in Grand Junction, Colorado. For three decades the Independent Physicians Association in Grand Junction has partnered with Rocky Mountain Health Plans (a non-profit Colorado health insurance carrier) to provide outstanding healthcare to the people of Grand Junction while minimizing costs. And they have done an excellent job. Annual Medicare spending per capita in Grand Juntion is $5,873 as opposed to the national average of $8,304. Atul Gawande’s 2009 article featuring Grand Junction’s healthcare model became an internet sensation during the contentious national healthcare reform debate. There’s no doubt that whatever they’re doing in Grand Junction is working. And it appears that the driving force for that success comes from the physicians and Rocky Mountain Health Plans, rather than relying on the individual patients to keep costs down.
As an aside, prior to reading Ungar’s article I wasn’t aware of the agreement between the Independent Physicians Association and Rocky Mountain Health Plans with regard to Medicare and Medicaid reimbursement. The doctors in the IPA were so determined to treat every patient equally that they worked out an arrangement with RMHP to have the insurance carrier accept payment directly from Medicare and Medicaid and then pool that money together with premiums collected from RMHP insureds. Then the carrier pays the doctors the same amount for every patient, regardless of whether the patient is privately insured or covered by Medicare or Medicaid. This is an excellent way to level the field and an idea that could help to solve some of our healthcare inequity problems.
But back to the debate between Ungar and Hixon. Ungar’s position is that healthcare costs have to be reigned in from the supply (ie, provider) side, and that it isn’t effective to expect patients to drive down costs from their side. Hixon argues that patients with more financial responsibility for their own care do indeed make better decisions regarding efficient use of healthcare dollars. Furthermore, he cites a study that found that patients with high deductible health insurance policies (eg, HSA qualified plans) had more preventive care, lower rates of hospitalization, and were more compliant in terms of following their doctors’ recommendations. They were also more likely to question their medical bills and had overall lower medical costs than people with traditional low-deductible policies.
That may very well be. But I think we have to take into consideration the demographic that tends to be drawn to HSA qualified, high deductible health insurance policies. I’d say that overall, it’s a relatively savvy group in terms of financial knowledge. People with money love HSAs and high deductible health insurance policies. They are aware that an HSA is a good way to set aside pre-tax dollars to cover medical bills, and also that HSA funds can be used in retirement much like a traditional IRA. Establishing an HSA is a great step towards financial security, but it’s not a step that everyone can make – a lot of people have no extra money to put into an HSA even if they wanted one. I would say that HDHPs are probably much less appealing to people with less financial knowledge and people with less money in general.
In addition to probably being above average in terms of financial savvy, I would assume that the demographic that opts for high deductible health insurance is also probably healthier than average. It makes sense that the more health problems a person has, the more likely he’ll be to choose a lower-deductible policy, since he knows he’s likely to be using the policy at least somewhat regularly. On the other hand, a person with no health conditions at all is probably making a good gamble to select a high deductible policy, since there’s a decent chance he’ll be able to go for several years without having a major claim. So the fact that people with HDHPs have lower medical costs isn’t really surprising. It’s largely a self-selected group (employers who offer an HDHP usually offer another plan as well, and everyone shopping for individual health insurance who picks an HDHP has other options from which to choose). I’m not sure that medical costs would still be lower for people with HDHPs if they policy designs were assigned randomly across the entire population.
Overall, I have to say that I agree with Ungar on this one. I love high deductible health insurance plans. Our family has had a high deductible plan for years, and we love it. But we’ve been very lucky too. We’re healthy, which means our insurance hasn’t been used for much of anything beyond preventive care. We’ve managed to set aside some money in our HSA to cover the cost of our deductible if we have a claim, and we have an accident supplement in case one of us gets injured (with two little boys, there’s a good chance we’ll be using that…). But we also know how hard it is to really “shop around” when it comes to healthcare. And how easy it is for the patient to be tripped up by the fine print, even when he thinks he’s thought of everything. Although we love our HDHP, we know that we’re lucky to be in a position to have it work for us, and we know that it definitely wouldn’t work for everyone.
Controlling health insurance costs from the supply side just seems like a much more efficient way to go about it. And it seems more fair too, since it benefits not only the patients who are financially savvy and healthy, but also those who don’t know a lot about money and/or have chronic health conditions.
What do you think? Read both articles and let us know which one you think makes more sense.