Health care spending is spiraling out of control in part because consumers are becoming “increasingly insulated from the costs of health care,” Heritage Foundation experts Kathryn Nix and Alyene Senger argue in a new report.
Third-party payment for health care means that many Americans are unaware of the full cost of their care, meaning they make decisions with little regard for cost.
Plans that put consumers in control of their health spending, known as consumer-directed health plans or CDHPs, offer a promising solution to bridging this information gap by enabling consumers to make more cost-conscious decisions about their health care. They provide comprehensive coverage by combining a high-deductible health plan with a tax-preferred health savings account (HSA) or an employer health reimbursement arrangement (HRA).
Consumer-directed health plans are becoming more attractive for good reason, Nix and Senger argue:
These types of CDHPs have become an especially attractive option for employers who offer health care coverage to their workers, since they have significantly lower premiums. Employers are able to make contributions to workers’ HSAs or HRAs, which can be used to cover part or all of the employee’s deductible and other medical expenses…CDHPs increase consumer engagement and awareness of the cost of routine health care expenses, meanwhile providing true protection against catastrophic events.
These plans work. In 2006, Indiana introduced plans with health savings accounts as an option for state employees. Enrollment has since increased substantially as a result, while costs have fallen.
Health care decisions can be positively influenced if consumers are empowered with information about provider quality and treatment options. Health care reforms that support this can be a dependable tool for reducing costs without sacrificing quality of care.
Do you think that consumer-directed health plans offer a better way to control health costs than does President Obama’s plan?