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Stanford University School of Medicine

A primer on consumer-driven health care plans

4122171512_74712e688d_oI'm a college student, and until very recently health-insurance jargon was all Greek to me. A basic understanding of health care is necessary to make informed political decisions, though -- and in anticipation of the upcoming presidential election, I recently signed up for a crash course with Stanford policy expert Kate Bundorf, PhD.

I had been hearing a lot about consumer-driven health care plans (CDHPs), a type of plan with a high deductible and low premium that increased in popularity after the passage of the Affordable Care Act (ACA), and that was the focus when I sat down with Bundorf.

What distinguishes a CDHP from a traditional health-care plan? 

There are basically three features that distinguish a CDHP from other types of plans. One is the high deductible. The objective of the deductible is to make consumers more price sensitive when deciding what type of medical care to use. A high deductible, however, exposes patients to greater financial risk. That brings me to the second characteristic: CDHPs often, but not always, have an associated spending account. The spending account is intended to provide some protection against financial risk. These accounts allow individuals or families to put away money pre-tax they can use on health care expenses. And then the third feature is access to information. People often don’t have the information they need about the relative effectiveness and cost of possible treatments to make informed decisions.

What was the push to transition towards CDHPs?

I think there were two pushes, and both things happened in the mid 1990s and early 2000s. One issue was, prior to CDHPs, in the mid 1990s, there had been a big push towards health maintenance organizations, or HMOs, which have restrictive provider networks. Consumers had some concerns about whether they would be able to access the kinds of physicians they wanted and to get the kind of care that they needed from these plans. The resulting HMO backlash paved the way for CDHPs which were intended to take health care decision-making out of the hands of health plans and put it into the hands of consumers. The second factor was clarification of tax rules and new legislation that created favorable tax treatment for the spending accounts associated with CDHPs. CDHPs really took off after these changes.

Who tends to enroll in CDHPs?

One of the reasons for enrolling in CDHPs is that you get the favorable tax treatment of the health savings accounts associated with the plans. Middle or higher income people have more to gain from this, so that makes the plans more attractive to them.

CDHPs also have some benefits for lower income families. Especially prior to the ACA, lower income folks were less likely to have private health insurance at all. One of the big advantages of a CDHP is that the premium is lower, making coverage more affordable. The downside, obviously, is that you're going to have to pay more out-of-pocket. The implications of this trade-off for quality of care is one place where we don’t have much evidence. Do people reduce their use of very low value services, ultimately making health care delivery more productive? Or are they foregoing beneficial care?

Have CDHPs changed the kind of care that patients pursue?

The studies in the literature suggest that CDHPs reduce health care use about 10-20 percent. So we can say with confidence that they are reducing health-care spending. We have less evidence on exactly what types of care folks are not using, but the evidence so far indicates that they use fewer pharmaceuticals and fewer outpatient services. CDHPs don’t seem to have a consistent effect on inpatient care, though.

Lastly, what are your thoughts on these plans?

I think CDHPs are an important part of the health-care system, but I think that they're not really right for everyone. I think there is a lot to be learned about how cost sharing has affected patient health-care use and then trying to design cost sharing in ways that work for many people. Ultimately, we should be encouraging CDHP enrollment among people with who feel comfortable and are able to make these types of medical care decisions.

Previously: Networking to save lives: A Q&A on ovarian cancer, From memories to addiction: A Q&A with Stanford neuroscientist Robert Malenka and Acne treatments: A Q&A with Stanford dermatologist Justin Ko
Image by Alan Cleaver

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