“Consumer directed health plans” were all the rage in the mid 2000s. The big idea was that if patients had ‘skin in the game’ in the form of greater financial participation in the cost of their care, they would use their well honed shopping skills to find the best deals and thereby drive costs down and value up. Employers embraced the idea, since it could reduce their costs and keep employees happy.
There was a general acknowledgment that patients would need better information and tools to transform into consumers, and there was plenty of optimism that these would be made available.
But now as Kaiser Health News reports (High-Deductible Health Pans Fall From Grace In Employer-Sponsored Coverage) employers are going back to more traditional plans. There are a few interesting things to note:
- No one uses the term “consumer directed” anymore. There’s an acknowledgment that this term became a euphemism for cost-shifting
- Employers tweaking health insurance offerings is not going to solve the healthcare cost problem in this country
- Employees don’t like the plans and in a tight labor market employers have to abandon them
Kaiser reports that:
Because lots of medical treatment is unplanned, hospitals and doctors proved to be much less “shoppable” than experts predicted. Workers found price-comparison tools hard to use.
Not all “experts” jumped on the consumer directed bandwagon. Back in 2007 I attended the World Health Care Congress where I heard people gushing about the benefits of consumer directed plans. They used employer sponsored 401(k) plans as a model of how employees would take responsibility once offered compelling products, information and customer service from companies like Fidelity and Vanguard.
But as I pointed out at the time in “What if the consumer can’t hack it?” employees had actually done poorly with 401(k)’s, investing too little, choosing low return investments, concentrating their holdings in their own company’s stock, etc. As I wrote:
In my view, 401(k)s are a lot simpler for employees to understand than health care. In a 401(k) you can make one or two decisions and then be on auto-pilot. For example, just contributing the maximum amount and picking a target-date retirement fund is about all that’s really needed. Results can be easily and objectively measured over time and compared with benchmarks. We’ll never be able to do that in health care.
I don’t totally discount the 401(K) analogy but we should at least acknowledge that the 401(k) experience has been far from perfect and that health care is going to be a harder nut to crack.
Looks like I was right.
October 8, 2018