One result of the Republican victories last November may be an acceleration of consumer-driven healthcare as an alternative to Obamacare. A basic premise behind this approach is an alignment of payment for health care services and health care decision-making. This model involves patients exercising greater autonomy and responsibility in the purchase of healthcare insurance and the selection of health care providers and services. It may also involve a redesign of employer-provided insurance to provide greater choice and premium responsibility for the typical worker.
Consumer-driven healthcare involves patients or consumers paying a greater percentage of their healthcare expenditures out of pocket or from health savings accounts such as health savings accounts, flexible spending accounts or health reimbursement accounts where consumers may roll over balances in their health savings accounts from year to year and from job to job. In most cases, these accounts are coupled with lower-premium and high-deductible health plans which may only cover catastrophic medical expenses but provide patients with the advantage of discounted pricing and negotiated rates. In many variations, employers are contributing a fixed amount to employee healthcare and providing more alternatives to employees in plan selection. Consumers or employers are also able to select health plans based on premiums, deductibles and coverage.
To be successful, consumer-driven healthcare requires the free exchange of pricing and quality information in a form that the average patient can understand. If a patient cannot obtain advance pricing and quality comparisons when he or she is making healthcare decisions, patient behavior may not change significantly. Several smart phone applications have been created recently that allow consumers or patients to compare pricing and outcome measures among healthcare providers. Of course, the long-term usefulness of these types of comparisons depends entirely on the accuracy and utility of the underlying data.
Employer or insurer initiatives may accelerate the move to employee responsibility and the free flow of pricing and quality information. Economist John Goodman, one of the leading experts in consumer-driven healthcare, cites the experience with the California Public Employees Retirement System (calPERS), in collaboration with WellPoint, Inc., for reference pricing for hip replacement and knee surgery. Under this initiative, calPERS paid a fixed fee for the various operations at pre-selected “high-quality, low-priced facilities.” Employees who wanted to go to other facilities with higher charges paid the difference. Thereafter, Goodman demonstrated that the “high-priced facilities cut their rates by one-third” in order to stay competitive.
Greater insurance pricing transparency in a system with multiple plans may also accelerate change. Employees or health insurance consumers may sign up for cheaper plans with more limited networks if they are paying a greater portion of the health care premium. Recent experience in Chicago shows remarkable market share growth under the exchange for low cost insurance plans that require patients to utilize lesser known hospitals and their affiliated physicians with no coverage for out-of-network facilities or physicians.
In the event that consumer-driven healthcare becomes prevalent, providers may see a number of changes in patient behavior. Patients may be much less willing to pay higher co-payments or deductibles to have procedures in hospital-based settings. Unless hospitals can convince the typical patient that routine diagnostic and other non-emergency procedures are higher quality or achieve better outcomes in hospital settings, patients are going to opt for procedures in less expensive physician offices or ambulatory surgery centers. Furthermore, patients and their family members may be more likely to question multiple diagnostic procedures or frequent office visits. Telemedicine offered at a lower cost or with lower out-of-pocket charges may prove to be more palatable. Patients may also be more likely to accept capitated arrangements or limited provider networks in order to achieve savings. Likewise, they may be willing to travel in order to obtain cheaper pricing for elective procedures.
Consumer-driven healthcare must be approached carefully. Obviously, making healthcare decisions is much more complicated than purchasing a new set of tires. Physicians and health care professionals must be available to advise patients about their healthcare choices because cost and quality data may not tell the entire story. Healthcare frequently requires an individually-focused approach that depends on a long-term patient/physician relationship for success. Certainly, consumers and patients may make short-term decisions for money-savings reasons to forego tests or procedures that may be necessary for their long-term health. However, consumer-driven healthcare may be part of the answer to stop or slow down efforts to create a single-payor bureaucratic system.
Colin Luke is a partner practicing health care law with Waller.