Do you think asking patients and families to pay more out-of-pocket for their health care will lower overall health care spending for the good?
That’s what proponents of so-called free market reform think. As you can see below, these folks see the high deductible health plans as the solution. So, if you did not receive any reimbursement until you spent $4,000 on health care for your family, what health care spending would you avoid?
If you needed knee surgery, would you just live with the pain instead? If your doctor ordered a Cat Scan, would you not have it done? If you were prescribed six weeks of physical therapy would you just receive four? What about checking out a growth on your back or if your child had a high fever for several days? Would you avoid the emergency room if your child was having a severe asthma attack or suffered a bang to the head? Back in 2005 the high deductible plan was credited with 14% lower spending.
What you might do is ask for a generic drug, or you might go to the local doc-in-the box rather than first going to the ER. or you might … Whatever it may be, it’s not likely that you will avoid major health care … or will you?
In general, there has been no trend in annual changes in health care spending during the Obama presidency. However, health care spending increases in recent years are definitely lower than they have been in the past. As I have previously reported, today’s low annual increases in health care spending (including their increase relative to GDP) are part of a long run trend stretching back to the early years of the first George W. Bush Administration. Obamacare obviously had nothing to do with that.
What does track the slowdown, however, are three other developments: the growth of Health Savings Accounts (HSAs), the growth of Health Reimbursement Accounts (HRAs) and the general trend toward higher deductibles. All three changes mean that patients are paying more medical bills out of their own pockets. And that has produced profound changes — both on the demand and the supply side of the market.
The opportunity to have an HSA plan was created by legislation in 2003. Participation in HSAs has been growing by double digits every year since then. They grew by 22% in 2012, with total HSA assets soaring to nearly $15.5 billion. There has been parallel growth in HRA plans, a similar arrangement commonly offered by large employers. Today, close to 30 million Americans are covered by one of these two types of consumer-directed health plans.
HSA accounts give people the opportunity to manage some of their own health care dollars. And when people are spending their own money in the medical marketplace, they are usually more careful shoppers than when they are spending money that comes from a third-party payer — an employer, an insurance company or government. That is why a Rand Corporation study [quinnscommentary Note: this is a 2011 study based on health care coverage in 2004 and 2005 when most such plans were offered as an option] found that people in HSA plans spend 14% less on average on health care, with no negative impact on vulnerable populations.
The emergence of so many people paying for care with their own money is also changing the supply side of the market. Nationally, 1,300 walk in clinics post their prices and provide timely care. Free-standing emergency care clinics and Doc-in-the-Box outlets have now arisen to complement them. The first mail-order prescription drug organization, RX.com, was also driven by cash patients saving time and money. Walmart now offers $4 generic drugs financed by cash, not costly insurance. Phone and email consultation services are another development.
QUINNSCOMMENTARY 