Consumer driven health care
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Defined narrowly, consumer driven health care (CDHC) refers to health insurance plans that allow members to use personal Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), or similar medical payment products to pay medical expenses directly, while they enjoy the protection of a high-deductible health insurance policy. High-deductible policies cost less per month than low-deductible policies, but the user needs to pay more upfront for medical procedures. This system of healthcare is also often referred to as "consumer directed health care" because proponents believe it gives patients greater control over their health.
Proponents argue that most Americans will pay less money for healthcare in the long haul under CDHC not only because their monthly premiums will be lower, but the use of HSAs and similar products will bring back free-market variables into the healthcare system that will encourage competition, lower prices and improve service.
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[edit] Government encouragement of CDHC
In December of 2003, President George W. Bush signed into law the Medicare Modernization Act, which expanded medical savings accounts (renaming them Health Savings Accounts) and creating tax incentives to encourage the adoption of high-deductible health plans. Banks were empowered to create Health Savings Accounts (HSAs) that will deliver tax-free interest to the holders, who can then withdraw money tax free to pay for healthcare expenditures. The one catch is that in order to qualify for an HSA, someone has to also hold a qualifying high-deductible health insurance plan.
[edit] Research of CDHC
Academic peer-reviewed research investigating the actual cost and quality impact of this new form of health care has been growing. Researchers at the Carlson School of Management at the University of Minnesota (Stephen T. Parente), Harvard University (Meredith Rosenthal), University of Illinois at Chicago (Anthony LoSasso) and RAND have examined early results of these plans. Health insurers, Aetna, Wellpoint, Humana and UnitedHealth Group have all provided their own independent analyses as well. Other countries with experience in this type of health insurance include: China, Taiwan, Singapore and South Africa. Research conducted by the Galen Institute has found that consumers around the globe who operate under CDHC plans are value conscious when it came to healthcare and more focused on preventive care.
[edit] The Internet and CDHC
Critics of CDHC argue that the system will only saddle consumers with more expenses because free-market variables can never exist in healthcare due to lack of pricing transparency. "Despite the theory (as expressed in the Economic Report of the President) that health insurance with higher deductibles will lead to consumers shopping around for health services (based on price and quality), the reality of … inadequate information in the marketplace about health care quality and prices precludes the workability of a 'consumer-choice' type of model," Gail Shearer, director of health policy analysis for Consumers Union, told the Joint Economic Committee of the U.S. Congress in February of 2004. [1]
But proponents of CDHC, like former House Speaker Newt Gingrich, have pointed to the rise of the Internet and online comparative shopping health services as one reason they believe the CDHC model is viable. Key to CDHC's success will be the dissemination of information about health products and services. [2]
In 2006, a number of technology firms emerged to take advantage of what they believe will be a new market for comparative healthcare shopping with the rise of CDHC plans and with the goal of leveraging the Internet to increase price transparency in the healthcare market. [3]
One of the earliest players in the online CDHC market, Vimo Inc., became the first to allow patients to compare costs for surgeries at all major hospitals the same way they compared airline prices, while enabling them to compare low-deductible insurance plans and health savings accounts. [4]
[edit] Consumer satisfaction with CDHC
Despite criticism leveled at the new system in 2004, a survey by the Blue Cross and Blue Shield Association found widespread satisfaction among HSA customers. "The survey found that HSA products are on par with non consumer-directed health plans (CDHPs) with 85 percent of respondents saying the product meets or exceeds expectations for controlling healthcare expenditures. The survey also revealed that 47 percent of those consumers with HSAs experienced an increase in satisfaction over the previous year, while only 27 percent of consumers with traditional health plans showed an increase in satisfaction."[5]
