In summary:
- The offer of a consumer-directed health plan is associated with an approximately 5 percent reduction in total health care spending in each of the three years after CDHPs were introduced relative to cost growth observed for non-offering employers.
- The long term decreases in spending are focused in outpatient care and drugs and there is little impact on inpatient or emergency department spending.
- The impact of CDHPs is greater when paired with HSAs (versus HRAs) and when employers make smaller account contributions.
This is from the National Bureau of Economic Research's working paper entitled, "
Do 'Consumer-Directed' Health Plans Bend the Cost Curve Over Time?"
“Consumer-Directed” Health Plans (CDHPs) combine high deductibles with personal medical accounts and are intended to reduce health care spending through greater patient cost sharing. Prior research shows that CDHPs reduce spending in the first year. However, there is little research on the impact of CDHPs over the longer term. We add to this literature by using data from 13 million individuals in 54 large US firms to estimate the effects of a firm offering CDHPs on health care spending up to three years post offer. We use a difference-in-differences analysis and to further strengthen identification, we balance observables within firm, over time by developing weights through a machine learning algorithm. We find that spending is reduced for those in firms offering CDHPs in all three years post. The reductions are driven by spending decreases in outpatient care and pharmaceuticals, with no evidence of increases in emergency department or inpatient care. ...
With health care costs continuing to grow faster than GDP (CMS 2014; BEA 2014) it is critical to understand the effectiveness of cost-reduction strategies. Prior literature has established that CDHPs reduce spending in the short term. However, the longer term impacts are less clear. There has been concern that CDHP enrollees will decrease their use of necessary care and this will result in increased spending in the long term due to greater complications.
This study substantially adds to our knowledge on the long term cost impacts of CDHPs. We estimated spending trends for three years across over 13 million people across the country in an analysis estimating CDHP impacts without the threat of individual level selection bias. We find that health care cost growth among firms offering a CDHP is significantly lower in each of the first three years after offer. This result suggests that, at least at large employers, the impact of CDHPs persists and is not just a one-time reduction in spending. However, an important caveat is that the decrease in spending may be smaller in year 3 compared to year 1 post-offer. Recognizing that the differences are not statistically significant, these results are suggestive and consistent with a decreasing impact of CDHPs over time.
The decreases in total spending growth observed are primarily due to reductions in spending on outpatient care and pharmaceuticals. In contrast, by the third year there are no differences in either emergency department or inpatient spending. There are several potential explanations for this differential impact depending on whether reductions in costs are achieved through price shopping, switching to higher-value treatment options, or blanket reductions in care.
Pharmaceutical spending is ideally suited for learning over time as chronic medications are purchased regularly and price information is fairly accessible (Huckfeldt et al. 2015). Also, generic drugs, where available, provide a clearer signal regarding value than most treatment options. Some patients may also believe that taking their medications less regularly has little health consequence, although research has shown that cost-sharing induced reductions in pharmaceutical use can lead to increased hospitalizations (Chandra et al. 2010). In contrast, emergency department care and inpatient care may be less amenable to any of the three mechanisms for reducing costs. It is difficult to obtain price information and in many instances the care is emergent making it impossible to shop for care. In addition, the incentives to reduce spending might be limited as the cost of one inpatient episode will typically be greater than the deductible. Outpatient care is intermediate between these two extremes. Outpatient physician visits tend to be repeated more than inpatient care but less than pharmaceutical purchases, perceptions of the harms of reducing care are likely to be similarly intermediate, and price and quality information is difficult to obtain. ...
In summary, in the first large multi-employer study to investigate long term CDHP spending impacts we find reductions in health care cost growth in all three years post CDHP offer and do not detect increases in any component of health care spending. These findings do not support either the concern that decreases in spending will be a one-time occurrence or that short-term decreases in spending with a CDHP will result in increases in spending in the long term due to complications of forgone care. We cannot rule out either of these concerns developing over an even longer time frame. ...
