Consumer Driven Healthcare

What comes first...?

  ...or rather, the high deductible health plan or CDH?

People keep debating the merits and weaknesses of Consumer Driven Healthcare, or CDH, and its flashy centerpiece, the Health Savings Account, or HSA.  The HSA is the best tax savings vehicle and the most flexible short or long term benefit there has ever been... who can complain about that?  Well, see, it's that pesky required High Deductible Health Plan (HDHP) that is the sticky point, and the basis of the argument that only the rich and healthy win. Valid arguments abound. But that is not the point of CDH.

Let's back up and talk about this high deductible health plan itself, out of the context of CDH, because whether people want to realize it or not, high deductible health plans along with other cost-sharing plans are and will continue to be on the rise.  According a recent (September 2008) Mercer study, "Well over half (59 percent) of employers taking action to reduce their 2009 cost increase will raise deductibles, copayments, coinsurance or employee out-of-pocket spending limits... Between 2003 and 2007, the median family deductible for in-network services... rose from $1,000 to $1,500"   

The fact is, whether we typical citizens want to be "consumers" of healthcare or not, we are going to have to be under any administration.  We're paying more of the bills, like it or not. This happens not because our employers think it would be a great socially conscious gesture to promote consumerism, but because they simply have to reduce benefits to contain costs.

So let's, regardless of party affiliation, focus on solutions that bridge that inevitable gap, including education, cost transparency, supplemental support options such as HSA or HRA (or whatever the powers that be dream up as the next best solution). That, I believe, is called CDH... at least for now.

Heather Andrews (handrews@lighthouse1.com) is a Product Consultant at Lighthouse1, LLC

Impact of Unemployment and the Economy on Single Payer System

The Healthcare Blog posted an interesting article on the impact of unemployment rates on the push toward a single payer / universal healthcare system. 

Hit the jump here: [The Healthcare Blog]

“Perfect Storm” to “Disruptive Innovation”: The CDHC Summit

Jackie Dornfeld

These are tumultuous times in healthcare today. A ‘perfect storm’ is what speakers told us at the October National Consumer Driven Healthcare Summit in Washington DC. They described the situation as a grim culmination of various disturbing trends:

• Uncoordinated care -- 20% of tests are duplicative

• Poor quality -- 100,000 die each year due to medical errors and hospital infections 

• Aging population -- 40-80 million seniors are living beyond 65, and most with chronic diseases

• Unhealthy behaviors -- $500 billion spent annually (25% of total medical expenditures) due to ‘behavioral habits’ including obesity, smoking, alcohol and non-adherence 

• Skyrocketing health care costs – over 9% premium increases for 5 consecutive years. $370 billion in unfunded medical liabilities among state governments alone. 

• Poor access – 40% of employers unable to afford offering health coverage. 47 million uninsured.

Indeed, an alarming situation. And worse yet, many ‘perfect storms’ often result in even further harmful disruption. This would be quite typical.

But, the consumer driven health space is not typical. Here, disruption is taking-on a different and much more positive form. What we’re seeing is “disruptive innovation” – the kind of new solutions that cause true change in how providers, insurers, consumers and the entire system behave.

Summit speakers talked about many examples of “disruptive innovation” happening in the marketplace today. For instance, we are seeing:

• Personal Health Records (PHRs) – web sites such as HealthVault and Google Health intended to help consumers store, manage and share their personal health information. 

• Medical Tourism – cost conscious consumers drawn to global destinations for health care services at an average cost of 20% less than in the U.S. 

• Value-Based Benefit Design (VBBD) – steerage of consumers to high performing providers applying evidence-based medicine techniques. 

• Online Individual Insurance – web sites such as eInsurance.com providing an end-to-end consumer experience from comparing insurance options, to underwriting approval, to immediate coverage.

• Wellness Programs – encouraging healthy behaviors such as weight loss, smoking cessation and preventive care through various incentive programs. 

• Voluntary Benefit Employee Associations (VEBA) – establishing tax-advantaged trust arrangements to cover future health care expenses for active and retired employees. 

• Consumer Activation – engaging consumers in their health decision-making with targeted messaging and innovative media/tactics such as text reminders, blogs, videos, and default enrollment.

So, how can each of us help move health care from the “perfect storm” to “disruptive innovation”? It all starts with identifying and investing in promising ideas that upset the status quo. And by aggressively transforming ideas into new and improved solutions. Only then will we have the kind of disruption impactful enough to change health care for the better.

Jackie Dornfeld (jdornfeld@lighthouse1.com) Director of Product Management at Lighthouse1

Healthcare Debit Cards…the Pay at The Pump of CDH

Brett Gens

As I recently used my Healthcare Debit Card at a Target store for some allergy medication I was struck by where we’ve come. I use a card to get Cash, I use a card to pump gas (more on this later), I use a card for Internet Shopping, and now I use a card to purchase medication and health care related services.

In the late 70’s and early 80’s, when ATM’s were new, was there ever a single person who didn’t think, “Why didn’t we have these devices a long tome ago?” Fast forward to the 90’s when Pay at the Pump was becoming increasingly popular.  Personally this saves me about 20 minutes a week (plus $$ in spur of the moment purchases but that’s a different topic), money saved not writing checks, or ATM fees, since the convenience stores I frequent are NEVER in my banks’ network. Roughly 50% of people Pay at the Pump and the other half walk inside to pay.  I see many of these folks buying only gas: no energy drinks, cigarettes, coffee, etc.

I see this analogy similar to a debit card claim versus a paper reimbursement claim.  Why anyone would bother with the hassle of using a “normal” credit card, cash, or a check for a valid medical expense is beyond me. Filing a manual paper claim for something I could have used a Medical Debit Card for is probably number 4 or 5 on my list of 100 things I’d rather not be doing at any time…ever.

With the advent of IIAS (Point of Sale Substantiation) in 2007 (by the end of 2008, most chain pharmacies must have an IIAS as well), there’s really no valid reason to NOT have a Healthcare Debit Card for Consumer Directed Healthcare Plans. Some Industry stats indicate that there are about four million to five million HSAs and four million to six million active HRA accounts, and around 20 million FSAs. With the pending HSA explosion Healthcare Debit Cards will be like cell phones…you won’t find many who DON’T have one…well except my grandparents.

With skyrocketing health care costs, a CDH Debit Card has to be one of the easiest ways for an Administrator to save costs:  money saved in labor, printing checks, postage, etc.  Checks are roughly $1.00 each; direct deposit 9-12 cents each. A Debit Card Swipe costs nothing.

I love my Healthcare Benefits Provider.  They are always very prompt and helpful I enjoy talking to them when the need arises.  However, I figure they have many better things to do then substantiate, adjudicate, file and process my claim, generate a letter or two, and send me a check… all for my $6.59 purchase of Aleve.

Brett Gens (bgens@lighthouse1.com) is a Debit Card expert and Business Analyst at Lighthouse1

The 8% Tax Increase You Didn't Even Know You Got

If you pay taxes, you're going to love [this]. 

Let's put this all into perspective.  We all know that every company in the U.S. has been dealing with rising healthcare costs.  Every employer has had to make tough choices to be profitable, attract talented workers, and compete. 

Federal employees - there are 8 million of them - and their employers (arguably you and I) were recently dinged for an 8% increase in their health insurance costs.  60% of federal employees are enrolled in Blue plans which rose a whopping 13%.  Any of you get a 13% pay raise this year?  Was there a vote to increase the principle cost of government (government employees) by 8%?  Maybe I missed it.  The article reads, "...those [employee-paid] amounts represent about 30 percent of the plan's total cost. The government picks up the remaining 70 percent."  By "government" they of course mean you and I.

Interestingly, the reasons cited by the Office of Personnel Management (basically HR for federal workers) were exactly why CDH plans work better. 

"Jena Estes [VP of FEP for BCBSA] blamed a relatively slow shift to generic drugs by enrollees as one reason its increases are higher than average."  I am quite certain that if federal employees had an HDHP with an HSA that shift would have happened in the first month of the plan.  There is just not enough incentive for these 8 million federal workers to get healthy and spend wisely, and here's your proof.  [Washington Post]

How will HSAs fare in today's economy?

Given the recent stock market contraction and the “state of emergency” in several financial services firms, one has to wonder what impact this might have on the adoption of HSA accounts.  Let’s look at it from the stakeholders’ perspective:

Consumers
With tighter times it makes sense that “spenders” will increase and “savers” will decline and that elections will be reduced to pay for food and fuel at home.  It is also likely that some consumers who have invested their HSA dollars in the stock market will lose enough to create the unplanned gap in coverage that many employers have feared in the past. 

Employers
With budgets tight they will seek solutions like HSAs to reduce their overall healthcare costs and/or shift these costs to employees.  On the other hand it is possible that employers and consumers may be concerned about putting these healthcare dollars at risk in the stock market or with the financial health of the banks that hold these assets.

Health Plans
If you believe like I do that even after the election there will be little change in the overall “format” for healthcare in the U.S., it is likely that costs will rise and covered lives will decline, making low-premium plans and thus HSAs a more sought-after offering.

Banks
There is a fairly consistent need for deposits, and HSAs are a natural way of boosting balance sheets.  On the other hand, capital-strapped banks are in no position of pushing out new healthcare products.

To summarize, poor economic conditions and reduced confidence in our financial institutions will increase the number of HSA accounts but reduce contributions, balances, and the overall satisfaction of CDHPs.

The Information Gap

  We really do have a long way to close the information gap in healthcare.  I was struck the other day by all the discussions around gas prices and the energy (ba dum pum) a group of friends were putting into finding the best price for a gallon of gas.  They new the cost to the penny, where to buy it, and how to find out when it changed.

Contrast that with our perceptions and lack of real knowledge about the cost of healthcare.  Those of you that are healthy probably calculate the cost by what gets deducted from your check every month for insurance premiums.  Others believe the cost of healthcare is reflected by a prescription paid for on a regular basis.  Neither of these ultimately comes close.

Most consumers have no idea.  TriZetto's recent Cross-Constituent Survey found that while most consumers were concerned about the cost of healthcare, nearly two-thirds admitted that they didn't know what it cost them.  I am pretty sure that if I asked 10 adults in my neighborhood what the price of gas was, all of them could get within 10%.

How much does my family's healthcare cost in one year?  Go ahead and guess. 

Then consider...

• The health plan premiums deducted from your payroll.  Despite the fact that this is written right on your payroll stub I bet you don't know it by heart.
• The health plan premiums paid by your employer.  Only 1 in 10 knew that this was annually higher than $1,000 individual / $5,000 family - in actuality this is $3,600 individual/$7,400-$9,400 family (Kaiser)  While there's plenty of talk about provider transparency, the fact that most people will never know the true cost of their insurance unless they go on COBRA ("$1,300 a month?!") is actually the fault of employers.
• Don't forget your Medicare insurance.  While this is probably just a tax you'll never benefit from, its intention is to presumably fund your future healthcare needs.
• The actual cost of care and your responsibility for that care (copays, deductibles, co-insurance).
• Prevention and wellness programs (healthclub memberships, weightloss programs, etc.)

Another intersting finding from the survey was that while provider accounts receivables were climbing rapidly and healthcare costs are supposedly on everyone's mind, 68 percent of providers said infrequently or never esimated the amounts patience owed prior to providing care.

Picture this in your mind this the next time you fill up your tank:  Many consumers are pulling into the gas station not knowing the price or how big their gas tank is, and they won't know how much it costs until after they've filed the tank.  (Oh, and you won't get your bill for a few weeks.)

Until the right incentives are in place for payers, providers, and employer benefit managers, much more data and access to data is needed before consumers are going to "get it".

Treasury's New HSA Guidelines

It has been a long time coming but the IRS just published its new Health Savings Account guidance. 

Despite the fact that this stuff is not surprisingly written in bureaucrat-ese, there are some very good questions and answers as well as some illustrative examples.

[Treasury Department Guidelines for Health Savings Accounts]

NCPA White Paper: Everything You Think You Know About Health Care Is Wrong

This white paper from Linda Gorman and R. Allen Jensen at the National Center for Policy Analysis does a nice job of assessing some of the myths and stereotypes about the healthcare system in the U.S. 

If you are in the heatlhcare space, I will bet that you have heard (or even proclaimed) at least a few of these.  Consumers as well as "the Industry" both need more information, more review of that information by experts, and more visibility of it, to make good decisions about which solutions will ultimately reduce / flatten cost and increase / maintain standard of care.

All of these claims are refuted:

• People without health insurance have no access to care. 
• Insuring people will eliminate uncompensated care. 
• Health insurance is unaffordable for individuals.
• Medicare has lower admin costs than private insurers, whose costs are as much as 30 percent of revenue.
• Electronic Medical Records reduce cost and increase quality. 
• Evidence-based medicine reduces cost and increases quality.
• Care coordination and case management lower costs.
• Because the U.S. spends the most per capita on healthcare, it "spends too much."
• The U.S. spends more money and has poorer outcomes than health systems in other countries.
• More spending on the indigent will improve health outcomes.
• Integrated health care systems will lower costs.
• People are better off if their health insurance policies have lower deductibles and pay for routine care.
• The uninsured get their care at the emergency room, driving up costs for everyone.
• Centralizing administration will lower costs.
• Insurance company profits increase the cost of care.
• More peventative care for individuals will save money.

The authors prescribe three components for successful reform:

1. A vibrant and competitive free market for private health care, with wide choices for treatment and various ways to pay for them, and a wide choice of private health plans.
2. Consumer-directed health care initiatives are superior to first-dollar coverage, especially under insurance programs designed and controlled by government.
3. A review of government control of medical practices is needed to substantially reform government programs, introduce incentives that eliminate waste, and reduce costly and unneeded administrative and regulatory burdens.

An interesting read with solid analysis behind it.  [State Health Care Reform:  Key Questions and Answers via NCPA]

Google Health in Beta. Verdict: Thin But Promising

The long awaited Google Health site has finally launched in beta.  It took me about 5 minutes to get logged in and registered using my existing Google credentials, link up my Walgreen's account, identify a bunch of conditions, medications, allergies, procedures, etc.

I would have told you that my health was pretty good until I realized I had filled up an entire web page full of health related information.  Yikes.

There is a fairly short list of partner organizations from which you can import medical records, but two of them (Minute Clinic and Walgreens) I frequent fairly regularly.  I tried to get Minute Clinic to "link up" but apparently I was unable to track down the right combination of receipts and e-mails to authenticate properly.  Walgreens however was a snap - I simply entered my userID and password, e-signed a release, and I was in business.

Within minutes, all of the prescriptions I have filled at Walgreens in the last several years were automatically added to my health record.  What was even more impressive is that Google Health identified a potential drug interaction issue between certain drug combinations that I had taken together in the past - something my doctor had never mentioned.

There is also a small list of online service providers (including several PHR providers - who the heck needs more than one online medical record?) which I suspect will grow as more and more users provide data and a need for additional analysis tools, recommendations, etc. becomes realized.

Net-net, a pretty good launch for Google and I have a feeling this solution will be around for a long time to come.