"Bending the Curve" of Health Care Costs

This guy could have been John Torinus.

President Obama says that we must lower health care costs, and Budget Director Peter Orszag argues we can “bend the curve” of health care spending and save $700 billion a year by cutting out waste and unnecessary care. But the methods Orszag and others recommended are unproven, and some have been shown to cost more money than they save. Worse yet, these “experts” repeatedly ignore the only approach that has been proven to work: consumer-driven health care.

CDHP's include HSA (Health Savings Accounts) and HRAs (Health Reimbursement Arrangements). They differ, but the idea is the same. The money in those accounts pays for routine and/or small healthcare expenses--for example, co-pays on doctor visits or prescriptions.

And there's a large extant group of people covered under these plans--7++ million--so the statistics are reasonably valid.

...a study in the Journal of the American Medical Association found that people in consumer-driven plans have 10% fewer emergency room visits overall and 25% fewer repeat visits, almost entirely for nonsevere conditions. Regence Blue Shield found that people decreased their use of hospital emergency services by 32% when they switched from a traditional insurance plan to a consumer-driven plan compatible with a Health Savings Account (HSA).

A survey of employer plans conducted by the Kaiser Family Foundation in 2008 found that the average annual premium for a family plan totaled $13,100 for HMO coverage, $11,600 for a PPO, and $9,100 for an HSA. The average premium for single people totaled $4,800 for HMOs and PPOs, $4,500 for a Health Reimbursement Arrangement (HRA), and $3,500 for an HSA

Those numbers are significant. Mercer arrived at similar numbers in its own survey, also detailed at the linked page.

But that's hardly the only advantage--in fact, it's nowhere near as significant as this one:

...The Mercer Company found that the annual rate of increase for consumer-driven health plans was about half of that for PPOs and HMOs. WellPoint looked at the experience of 8,000 of its group accounts in 2008, and found that PPO and HMO rates rose between 7% and 10% from the previous year, while costs for its consumer-driven plans actually dropped from 2007 to 2008. Cigna reported similar results in a study of 440,000 enrollees. The Academy of Actuaries reviewed several of these studies and validated these conclusions

Let's head off the Union-Labeling/Smearing right now.

Consumer-driven health care has often been criticized as being good for the “healthy and the wealthy” but of little value to anyone else. But recent experience and new research have found that not to be true. One analysis determined that HSAs would reduce health care costs for people with high medical expenses because the out-of-pocket exposure is limited and people reach 100% coverage faster than they do in other forms of coverage. A study in Health Affairs by Dahlia Remler and Sherry Glied confirmed that, finding that both the healthy and the unhealthy benefit from HSA programs.

Numerous studies have found that people with chronic conditions in consumer-driven plans were more likely to comply with treatment programs than people in traditional plans. For example, analysis by Cigna has confirmed that medical costs among those with hypertension or diabetes are substantially less when enrolled in CDHPs, “while their treatment regimens were the same or better than those in traditional HMOs and PPOs.”

The short story: when you have an HRA or HSA, you pay a lot more attention to both your doctor's recommendations AND to your expenses.

In other words, it works!

By the way, ObamaCare would eliminate HRA and HSA plans. The big-player unions absolutely HATE these things, so they are among the casualties of Statist/Fascist HR3200.