January 11, 2005
"Consumer-driven" healthcare Check the fine print and your wallet too
Health care access and affordability are primed to be the political "hot buttons" of the legislative session. Be prepared for the phrase "consumer-driven" health care. But the actual meaning of consumer-driven as applied to healthcare today is more ominous than obvious.
Promoting consumer-driven healthcare sounds like it would enable people to make more informed healthcare decisions and receive better quality care. For example, the development of a froogle-type web information source comparing hospital prices for common medical procedures would be useful for consumer choice, as would comparative data on nursing home costs, drug costs, etc.
Consumer-driven healthcare also sounds like it would have a value component to enable judging the quality of the treatment/care being purchased. Information on nurse staffing levels in proportion to hospital patients, the level of successful outcomes, and malpractice awards would help everyone make more informed medical choices.
These would clearly be good things to add to this year's legislative agenda, and hopefully we will see some legislation introduced relating to safe staffing. One step forward, Vermont's Whistle Blower Protection legislation for healthcare workers (passed last session and which just went into effect this month), means those who give care can speak up against unsafe practices and is a step in the right direction.
Unfortunately, in today's political environment, making pricing and quality information on medical care available is not what the term consumer-driven health care means. Stripped to its essence, in today's political lingo consumer-driven health care is designed to increase patient responsibility for health treatment decisions and shift more of the cost to the consumer.
Health Savings Accounts, and their earlier big brother Health Reimbursement Accounts, represent key pushes to consumer-driven healthcare. At the federal level, the Medicare Modification Act of 2003 introduced Health Savings Accounts as a tag line item. Health Savings Accounts allow employers and individuals to make pretax contributions to an account used by an individual to pay out-of-pocket medial expenses (those not covered by insurance, such as under a high deductible plan). If an employee changes jobs, the accounts move with the person. In Health Reimbursement Accounts, the accounts work the same but only the employer makes contributions. So, if a worker leaves his or her employment, the company gets to keep any money not spent.
The only savings come from not having to pay taxes on the money deposited in the Health Savings and Health Reimbursement Accounts. For those at the lowest end of the tax brackets, the "savings" will be minimal, if at all.
Since both products support the trend to higher deductibles and having individuals pay more through higher co-pays, they do not address today's problems with access and affordability. There are also concerns that preventative care practices – immunizations and check-ups, for example – will become less common if Health Savings Accounts and Health Reimbursement Accounts become more prevalent. This would lead to later diagnoses and the need to treat more serious illnesses.
It is also worth noting that Health Savings Accounts and Health Reimbursement Accounts have been compared to 401-Ks. Unfortunately, statistics show that at the current rate 401-Ks are being funded, 401-Ks will fail to provide the retirement savings Americans will need.
Higher deductibles and the uninsured are placing an increasing burden on hospitals through increased bad debt expense – money billed for services provided which can't be collected. Traditionally, most of a hospitals' unrecoverable costs came from treating the uninsured. But more recently, rapidly increasing co-payments required from insured patients are also leading to collection difficulties.
The inability of hospitals to collect fully for services provided is likely to become even more difficult – and costly to the rest of us — as the amount of out-of-pocket costs increase at double digit rates. For example, in the fiscal year which ended Sept. 30, 2004, Central Vermont Medical Center incurred over $3 million in bad debt expense, up 11 percent from the prior fiscal year, and equivalent to $3.50 of every $100 the hospital billed for services. CVMC must then collect that $3.50 from the patients who do pay. This is above and beyond the over $1.3 million CVMC provided in charitable care last fiscal year.
The trend appears a bit worse at Fletcher Allen: At $16.2 million, bad debt expense jumped 51 percent during the first nine months of fiscal 2004, and over ran the budget target by 38 percent.
Our current system proves that higher deductibles and co-pays in and of themselves do not solve the upward trend in medical costs and financing problems. Similarly, cracking down on Medicaid programs to reduce benefits or changing eligibility is also hurting hospitals and medical caregivers. All other things being equal, higher deductibles will result in higher healthcare cost trends, shifting the burden and risk from healthcare insurance companies to individuals and hospitals.
Here's another problem: Fewer employers are providing insurance. In 2003, the proportion of adult Americans under 65 years of age with employer-provided health insurance had fallen to 63 percent. The 2004 data is unavailable but likely worse. Of employers who still provide medical insurance, the relative value of the benefits provided are declining, while the cost of the deductible and other out-of-pocket costs are increasing.
Over time, it seems Medical Savings Accounts may create a larger number of people who are uninsured while jeopardizing our hospitals' financial health. Already, out of a total U.S. population of roughly 295 million, conservative estimates put the number of those with no health insurance at 45 million, with over 60,000 of those being our Vermont neighbors.
"Consumer-driven" health care legislation which provides information on cost, and staffing levels and quality should be welcome. But right now the words only encompass shifting the payment responsibility. Let's make sure our legislators support real consumer-driven healthcare.
Traven Leyshon is the founder of High Road Vermont, a Central Vermont-based non-profit engaged in economic analysis for "those who want to change the world."