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Rand on CDHP

By July 18, 2012Commentary

The basic features of consumer-directed health plans are benefits that are the same as traditional coverage, but with a deductible, usually several thousand dollars, higher copayments for some care or the use of coinsurance, and often a health savings account that can be used to help cover the higher cost-sharing amounts.  These plans typically have lower premiums.  About 17% of people in employer-sponsored plans are in these high-deductible coverages and most large employers offer one.  Rand has conducted a variety of studies to examine at least the short-term effect of being in such a plan.   (Rand Brief)   The data is from 2003 to 2007 and looks at use and cost of health care in the first year of coverage.  Experience from later years than 2007 would be interesting given the general effects on health care use of the recession and experience after the first year of coverage would be helpful to see if consumers begin to understand and adjust to the incentives in the plan.

Overall, families in CDHP spent 14% less in the first year than similar families in traditional plans.  The most significant reductions were for plans with at least a $1000 deductible.  The reduction in spending occurred even when employers made contributions to an HSA.  About one-third of the savings were reduced costs within an episode of care; the rest was from fewer episodes of care.  CDHP enrollees used more generic drugs, fewer specialist visits and fewer hospital stays.  These people also cut back on preventive care, which is usually fully covered in these plans.  This is likely due to misunderstandings about the coverage or maybe just a general more restrictive approach to using care.  Wider enrollment in the plans could cut spending a lot–$57 billion a year if 50% of the eligible population were enrolled.

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