President's Page

President's Page
October 2007

Consumer-driven Health Care:
A closer look at a healthcare solution

by James T. Norwood, MD
2007 DCMS President

Last month I discussed the impending storm in health care that is coming our way. Using the comparison of an approaching hurricane I described how that if we as physicians are not prepared for this, then our profession, like New Orleans, will be irreparably damaged. Let me be brutally honest, medicine will not be the driving force in healthcare reform. We are not big enough, organized enough, or powerful enough to drive this process but we can be sitting behind the driver giving them directions. The stakes are huge and getting bigger. The system continues to deteriorate. Just before Labor Day the Census Bureau announced the number of uninsured hit a record high of 47 million. Let’s not allow the same mistakes that resulted in our current system repeat themselves. Our government, large insurers, and large employers made our current healthcare decisions. Physicians and their patients were left out of this process. Like I said earlier, we may not be driving healthcare reform but we can give directions. We have to educate ourselves in order to give the right directions to the driver.

Last month I touched on the two competing “solutions” for reform – consumer-driven health care and single payer health care. These next two months I would like to look at each one a little closer. My goal is to give you enough information and knowledge so that when you talk to a “driver” you can give them the right directions. This month I want to discuss consumer driven health care.

Consumer-driven health care extols the control patients have over their care. Actually, patients have control over the money allocated for their health care. The example Regina Herzlinger used in her book Who Killed Healthcare? is that of a fictional patient needing care for his end stage renal disease. This person is given $40,000 tax free by the government each year for his care. The money can only be spent on health care. He analyzes what the different competing healthcare organizations offer him. The government requires that all providers and payers be transparent in revealing their prices and outcomes. This gives the patient the chance to accurately determine the “best fit” and be assured high quality. The government’s role is in assuring the accuracy of this transparency. The government also has a role in “risk adjusting” each person so that sicker individuals are allotted more money for their health needs. This will create a market where entities such as physicians, hospitals, insurers, drug companies, and other suppliers will compete for a healthcare contract with that particular person. Providers are free to package their care as they see fit and price it as they wish. Market forces and government mandated transparency will push quality up and prices down to give the best value for the dollar. The competition stimulates innovation and the drive to improve quality and efficiency. There is another reason for the savings. Consumers who have “first dollar” coverage are insulated from the true cost of the care. When a third party is paying the bill, over-utilization occurs and costs rise. Having patients directly pay or be responsible for the payment for their care makes them more cost conscious.

The transition to this type of system could begin by making all healthcare premiums or expenses tax deductible. Alternatively, a tax credit could be given for these expenses. The tax credit would benefit all consumers, where a deduction would tend to benefit high-income individuals. Employers would offer a single high-deductible health plan and set up health savings accounts (HSA) for their employees. These HSAs would be funded by the employers for the employees to use for their health care. The HSA is where the consumer has control over their healthcare expenses. The high-deductible insurance policy provides protection for catastrophic or excessively expensive health expenses. The federal government would have the role of subsidizing those who do not have access to or could not afford the high-deductible plan and HSAs. The government would continue its other two roles of assuring transparency and providing risk adjustment. Other positives include how the patient/consumer controls where the money is spent. The care is purchased by the patient and more closely matches the patient’s needs.

Let’s talk about some of the negatives for consumer-driven health care. One negative for physicians is that an individual contract between a patient and physician is not likely. The patient or groups of patients would contract with an organization that would provide their care. This organization would include physicians, hospitals, surgery centers, etc. That means the physician would have to be a part of some organization in order to participate in the contract. That organization could be a large physician group, a hospital system with employee physicians, or an insurance company bringing several entities together into one offering. The individual physician’s independence and control would be diminished. It might not be any different than dealing with our current insurance mess. Many of you already struggle with HSA problems. In our office the patient comes in for a visit then doesn’t pay since the claim has to be sent to the HSA administrator to determine if it should be applied to the deductible, count as health maintenance, or come out of the patient’s own pocket. By the time we get the OK to bill the patient, up to 90 days has passed and the fee becomes harder to collect. Another potential negative is the government mandated transparency which includes the reporting of prices and outcomes. The decision as to what outcomes should be reported and what constitutes a good outcome would be just as politically charged as the current pay for performance issues. These are just physician issues. The biggest consumer issue is the potential for fraud. If you buy a defective automobile you take it back and get a new one, or start patronizing a different dealer. What do you do if you get a defective kidney? Understanding the impact of what you are signing up for can be difficult. I see this in my office all of the time as we try to explain the difference between a well-woman exam that has no co-payment and a problem-visit that requires a co-payment; and, that does not even address how much of their deductible is met. Even if no fraud is involved, services could be “oversold” and “underserved.” We already see this with what a patient believes is covered and what her insurance company says is covered. Another potential pitfall for the patient is saving money on a plan because of a history of good health and then something catastrophic occurs that may not be covered.

I have only scratched the surface of this type of healthcare reform. Please read more about it and become familiar with the details. In addition to the book I cited by Regina Herzlinger, there are several websites that can give you more information. One is www.ConsumerDrivenHealthcare.us, and another is the Consumer Driven Healthcare Institute located at www.cdhci.org. Take note these sites are backed by the insurance industry and you will find sponsors like Lumenos, Well Fund, and other insurance companies. By now you probably have determined that consumer-driven health care is favored by business leaders, and the insurance industry. It is also favored by political conservatives like John Goodman, president of the National Center for Policy Analysis who wrote an article about it in February 2006.

Regardless of your political leanings you need to make yourself familiar with the major ideas for health reform that we will be seeing with increasing frequency. I close with a quote from Regina Herzlinger’s book that applies to all of us as physicians.

“Four armies are battling to gain control: the health insurers, hospitals, government, and doctors. Yet you and I, the people who use the healthcare system and who pay for all of it, are not even combatants. And the doctors, the group whose interests are most closely aligned with our welfare, are losing the war.”

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