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Redirecting Health Care Spending: Consumer-Directed Health Care

Posted on: Tuesday, 26 October 2004, 02:00 CDT

Executive Summary

* As employee benefits costs have increased, employers have begun to explore and in some cases favor new insurance products, namely, consumer-driven health plans (CDHPs).

* Since the consumer is at risk for more out-of-pocket expenses due to high deductibles, these products were designed to empower the consumer with education about care risks, benefits, and relative costs to support their decisions.

* The main components of CDHPs are described: employer contribution to a medical account, catastrophic insurance coverage, online access to health information, and provider price and quality data.

* CDHPs present new opportunities for nurses to play a role in educating consumers in their health care choices and guiding them through a different system.

* While the emphasis on utilization review functions may decrease, the emphasis on patient education and disease/case management programs will likely increase.

INCREASED CONSUMER expectations and rising health care costs are exerting enormous pressure on the American health care system. New delivery practices and payment mechanisms introduced over the last decade experienced some initial success in cost reduction but have ultimately failed to control spiraling costs. Many employers, unable or unwilling to fund increasingly expensive employee health plans, have reduced benefits, raised employee contributions, or dropped coverage altogether. Efforts to stem the loss of employee health benefits include development of new products that require increased consumer participation in health care delivery. With the advent of a more consumer-directed health care process, new opportunities for nursing practice will evolve.

History

Prior to the advent of managed care plans most American workers participated in health insurance plans where the participant's percentage of actual cost was dictated by the particular plan selected and reimbursed about 80% of covered expenses. Deductible and coinsurance applied to medical services and prescription drugs up to a preset annual out-of-pocket limit. Once this limit was met, plans would pay 100% of costs up to a lifetime limit.

With the move to managed care, employers enticed plan members into preferred provider networks by offering enriched benefits. Electing services by a preferred provider meant participants were responsible for a $5 or $10 co-pay, in lieu of an annual deductible. Use of preferred pharmacies meant a modest co-pay instead of making drugs subject to either a deductible or co-insurance arrangement. Under these new networks, health plans, which previously paid 60% to 75% of eligible costs, now covered 93% to 95% when members used in- network services (Abbott & Feltman, 2002).

Many employees do not realize what health benefits cost their employer and seriously underestimate their own contribution to their total health care bill. With the cost of health care rising, managed care unable to produce significant savings for employers, and public demand for services increasing, employers are faced with difficult decisions which will affect employee and employer alike. "Increasingly, employers believe that a critical element of future cost control is employee or member involvement and empowerment" (Abbott & Feltman, 2002, p. 6). In this environment defined contribution plans and closely related consumer-directed health plans are emerging as a possible next phase in health plan development.

Understanding the Changes

As noted in the literature (Christianson, Parente, & Taylor, 2002; Gabel, Sasso, & Rice, 2003), the terms "defined-contribution plans" and "consumer driven health plans" (CDHP) are often used interchangeably to describe similar but not identical concepts. Defined contribution refers to a strategy that allows employers to set a fixed contribution for health insurance, allows the employee to decide how to spend those funds, and places the employee at risk for costs beyond that point. Consumerdriven plans generally involve high-deductible catastrophic coverage combined with an employerfunded health care spending account, which employees use to pay for all other health care services. A major goal of these plans is to reduce unnecessary utilization of health care services, thus reducing overall spending. By making plan participants more aware of the actual cost of health care services, it is hoped that they will develop a more "consumerist" mentality.

Offering products with higher deductibles means consumers shoulder a greater portion of the health care bill (Lee & Tollen, 2003). Allowing the consumer to direct where the health care dollar is spent puts the responsibility for election of service options on the individual. It is thought that, with adequate information about actual costs and available service options, participants will take more care in selecting providers and may select less-expensive alternative care options.

There are numerous varieties of CDHPs offered. However, M. Taylor (2002) notes that a basic plan usually contains a number of components including:

* Employer contribution to an employee account (usually a set amount such as $300, $500, or $1,000). Employees pay for all minor care services from this account and some plans encourage careful use of these funds by allowing employees to carry over the unused balance in their accounts from year to year. However, plans generally require forfeiture of unused balances at termination of employment.

* Catastrophic insurance coverage, which provides financial protection against catastrophic expenses caused by the onset of chronic illness, major accidents, or illnesses.

* Online access to health information including information on health risk assessments and disease management. Access to nurses for counseling and coaching may also be provided.

* Provider information including pricing and quality data.

While the insurance industry and financial and human resource professionals debate the wisdom of moving to consumer-directed health plans, the topic has yet to acquire consumer attention. A recent national study on consumer awareness of 11 current health care trends by Endresen Research, a Seattle-based health care market research firm, found little knowledge about the term, "defined contribution," among their survey participants. "Fewer than 10% of consumers surveyed ever heard of the concept of consumer directed health care, although one in three reacted positively to the concept..." (Endresen & Wintz, 2002, p. 20).

Pros and Cons

Research has shown that consumers, in increasing numbers, are seeking health information from numerous sources including the Internet (Diaz et al., 2002; Murray et al., 2003) and are seeking a larger role in health care decisions. Advocates of CDHPs argue that educated and empowered consumers will make costconscious decisions and will ultimately drive down the cost of employer-sponsored health benefits (Neuhauser, 2003).

However, some argue that limiting benefits and consumer cost sharing provide only modest influences over the use, price, and quality of health care services selected. Additionally, the greatest percentage of health care expenses is associated with catastrophic or chronic conditions that exceed out-of-pocket payment limits (Robinson, 2003). Thus, reductions in routine health care expenses may have little impact on overall costs. This argument is countered with the assumption that health education and participation in regular health screening will lead to earlier participation in disease management programs, thus reducing losses and costs related to chronic disease processes.

Opponents of CDHPs also argue that more serious implications may follow. Fine (2002) alleges that increased access to health information does not necessarily lead to more informed, selfreliant consumers but can result in potentially dangerous self-diagnosis and self-care by individuals lacking the knowledge to make valid health care decisions. Others (Gabel et al., 2003; H. Taylor, 2002) go further and suggest that giving consumers choices under defined contribution plans, and the information to make purchasing decisions on sound economic grounds, may result in their selection of less- expensive catastrophic coverage. Migrations of large numbers of participants from more expensive comprehensive plans that provide for care and treatment of chronic conditions could price those products beyond the reach of the older and lesshealthy consumer. The fear is that widespread adoption of CDHPs "will destroy the social contract on which health insurance depends: the willingness of those who do not need much health care to pay for those who do" (H. Taylor, 2002, p. 196).

Implications for Nursing Practice

Previously, many nurses employed by insurance companies worked on resource management issues commonly called utilization review. The focus was to limit unnecessary uses and curb perceived abuses. With the advent of CDHPs, new roles emerge for nurses. While some nurses will continue to monitor utilization of services, others will work directly with plan members, informing and educating consumers to make better health care choices. This changes the role of the nurse within these organizations. Instead of reacting to a given situation, the nurse will now be proactively assisting consu\mers to manage their own health care issues and their own health care dollars. While not a return to the bedside, it is a return to direct patient care.

In CDHPs the nurse's role will expand to include responsibility for educating consumers on how to use Web-based tools to gather, analyze, and understand Web-based health information, including hospital and provider quality ratings and health cost data. "Web- based medical information tools are a key element of consumerdriven plans and are viewed as essential for creating more-knowledgeable consumers of health care" (Gabel et al., 2003). Other nurses will assume roles as personal health coaches for plan participants with significant medical conditions, become catastrophic case managers, provide triage coverage for 24-hour health information lines, and serve in wellness programs and as chronic disease managers.

Nurses will be needed to serve as health care educators and guides as the consumer attempts to navigate through a confusing array of health service options. Clinical expertise and an understanding of the economic impact and health care outcomes related to heath care decisions will be needed to serve the needs of the new "consumer." Among the choices available to consumers will bo selecting less-expensive health care services and resources. Nurses will find themselves shouldering much of the responsibility for educating new health care consumers as they face difficult and often confusing choices.

Nurses will continue to play pivotal roles in wellness programs that improve health by implementing certain health-promotion initiatives such as smoking cessation, exercise, dietary counseling, and stress reduction. Nurses working with wellness programs are aware of their positive effect on the health status of participants. Studies now confirm that in addition to the health benefit, wellness programs provide health care savings by decreasing the need for health services when participants health status improve (Goetzel, Juday, & Ozminkowski, 1999).

Nurses will also play increasingly significant roles in disease management programs. These programs target individuals with serious and potentially expensive chronic conditions by focusing on education, prevention, and compliance with well-accepted treatment protocols. Disease management programs have the potential for significant cost saving for the health plan and positive health benefit for the consumer. Chronic conditions such as asthma, diabetes, cardiovascular disease, depression, HIV, pregnancy, and low-back pain are particularly well suited for disease management programs. With a rapidly growing senior population, cost-effective interventions will be needed to deal with the chronic conditions associated with the aging process. Goetzel et al. (1999) showed that, when compared with the results of most health management programs, disease management offers the best return on investment.

Conclusion

Much has been written with regard to coordination of our disjointed and compartmentalized medical system. Efforts to bridge the gaps within the system and to create a navigable continuum of health services, while reigning in costs, has been largely unsuccessful. Managed care organization's early attempts to focus on preventative services faded quickly as cost-containment issues rose. Insurers and managed care organizations experimented with a variety of "cost saving" programs but ultimately could not stem the continuing spiral of health care spending. As long as consumers "remain isolated from the financial consequences of their lifestyle choices and their demands for unlimited services" (Klepper, Hayes, & Brown, 2002, p. 34), cost will continue to rise.

Moving the responsibility for health care decision making to the consumer by implementing consumer-directed health plans will not solve the problem. However, an educated health care consumer may be motivated to make more cost-effective decisions and, faced with funding a greater share of his own health care, may be motivated to help manage chronic conditions though healthier lifestyle choices and participation in disease management programs. Consumers will need help in solving these logistical issues and navigating a complicated and confusing medical system. Nurses who are prepared to handle the clinical education component and demonstrate understanding of data-based information and assessment programs will play critical roles in helping consumers understand and access needed health care services under these new programs.

REFERENCES

Abbott, R.K., & Feltman, K.E. (2002). Consumer driven Healthcare and the birth oi health reimbursement arrangements. Managed Care Quarterly, 10(4), 4-7.

Christianson, J.B., Parente, S.T., & Taylor, R. (2002). Defined- contribution health insurance products: Development and prospects, Health Affairs, 2J(I), 49-64.

Diaz, J.A., Griffith, R.A., Ng, J.J., Reinert, S.E., Friedmann, P.D., & Moulton, A.W. (2002). Patients' use of the Internet for medical information. Journal of General Internal Medicine, 27(3), 180-185.

Endresen, K.W., & Wintz, J.C. (2002). Inside the mind of today's consumer. Marketing Health Services, 22(4), 19-24.

Fine, A. (2002). Think before reacting to the lures of consumerism. Managed Care Quarterly, 10(1), 51-55.

Gabel, J.R., Sasso, A.T.L., & Rice, T. (2003). Consumer-driven health plans: Are they more than talk now? Health Affairs. Retrieved August 18, 2003, from http://content.healthaffairs.org/ cgi/content/ full/hlthaff.w2.395vl/DCl

Goetzel, R.Z., Juday, T.R., & Ozminkowski, RJ. (1999). What the ROI?: A systematic review of return-on-investment studies of corporate health and productivity management initiatives. Association for Worksite Health Promotion (AWHP's) Worksite Health, 6(2), 12-21.

Klepper, B. R., Hayes, P. G., & Brown, J. B. (2002). Saving American health care. Journal of Ambulatory Care Management, 25(3), 34-40.

Lee, J.S., & Tollen, L. (2003). How low can you go? The impact of reduced benefits and increased cost sharing. Health Affairs. Retrieved June 10, 2003, from http://content.healthaffairs.org/cgi/ content/full/hlthaff.w2.229vl/DCl

Murray, E., Lo, B., Pollack, L., Donelan, K., Catania, J., White, M., et al. (2003). The impact of health information on the Internet on the physician-patient relationship: Patient perceptions. Archives of Internal Medicine, 363(14), 1727-1734.

Ncuhauser, D. (2003). The coming third health care revolution: Personal empowerment. Quality Management in Health Care, 12(3), 171- 186.

Robinson, J.C. (2003). Renewed emphasis on consumer cost sharing in health insurance benefit design. Health Affairs. Retrieved June 10, 2003, from http://content.healthaffairs.org/cgi/ content/full/ hlthaff.w2.139vl/DCl

Taylor, H. (2002). How and why the health insurance system will collapse. Health Affairs, 22(6), 195-197.

Taylor, M. (2002). Towers Perrin's outlook: What employers (and providers) need to know about defined contribution health plans. Managed Care Quarterly, 10(2), 9-12.

JOANN NOUN, JD, RN, is an Assistant Professor, Director, Health Administration Programs, University of North Florida, Department of Public Health, Jacksonville, FL.

JANETKILLACKEY, MHA, RN, is a Product Development Manager, BlueCross BlueShield, Jacksonville, FL.

Copyright Anthony J. Jannetti, Inc. Sep/Oct 2004

Source: Nursing Economics

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