Consumer-Driven Healthcare: Are Health Savings Accounts the Answer?

by Del Meyer, MD

Uwe Reinhardt, PhD, professor of political economy at Princeton, stated in his address at the 8th Annual Health Care Leadership Academy at La Quinta on November 20, 2004, that consumer-directed health care -- as in Health Savings Accounts and high-deductible health insurance -- did not eliminate managed care as many patients and physicians had hoped. He maintained that once a patient has achieved the larger deductible, e.g. $5,000, and hopes that his insurance resumes payment of claims, the carrier will have to review the $5,000 that was paid to see if it met its criteria for valid health care claims. If not, the insured may be faced with further out-of-pocket payments until the insured payments reach a valid deductible. From that point on, Reinhardt contends, the carrier will have to re-implement managed care, as we have come to know it, to control costs.

What was lacking in the discussion was an alternative marketplace strategy where the insured seeks the lowest cost throughout the claims-payment process. Fixed deductibles of $5 to $50 have not controlled costs because this is not a market-based strategy. A percentage deductible and co-payment system graduated to the type of claim (e.g. hospital, surgicenter, office, lab or pharmacy) would keep the patient cognizant of health care costs and, therefore, more willing to obtain the most cost-effective treatment. This would keep insurance claims at the lowest possible costs.

Health Care Credit Card
To address the aspect of keeping records of the deductibles, WellChoice and American Express have recently offered a Healthcare Credit Card – the American Express HealthPay Plus Card. The card provides two payment options. It is tied to both a HSA and a line of credit to help cover costs that may exceed the balance of the HSA. The card provides WellChoice's 40,000 members in the Empire Total Blue consumer-directed health plan with a single payment option at a health care provider, physician, pharmacy or hospital.

The card allows consumers, providers and insurers a secure and easy way to manage health care costs and payments and delivers real value to both consumer and health care providers because of the integrated claim processing, asserts Jason Gorevic, senior vice president of sales and marketing officer of WellChoice. "Matching up an explanation of benefits with a bill from a provider, accessing the funds and deciding where the funds are going to come from concerned the consumer," explains Gorevic. Furthermore, providers, who are used to receiving co-pays, expressed concern about collection. "We identified that a single-source solution addressed these barriers to consumer-directed health care," notes Gorevic. (source:

HealthPay is Not Market-Based
Does the Amex HealthPay Plus Card return health care to a market environment? The solving of some of the recordkeeping challenges and the addition of a credit line parallel to the insurance payment line is a major and unique advancement. But it won’t place health insurance in the marketplace if the same $5 to $50 deductibles and co-payments still apply. It will just make it easier for the health care provider to obtain the deductible and co-payment at time of service rather than through a convoluted billing process.

What kind of graduated deductible and type of co-payment should an insurance plan have that would restore the medical marketplace?

Hard data is difficult to obtain. Fixed co-payments have been tried without success. We have experienced increases in the co-payments over the years of managed care from $5 to $7 to $9 to $10 and larger. Although each increase has a small effect, it has not made the patient aware of health care costs incurred.

From the Consultation Room
Mrs. Ruth, a patient with hypertension, measured her blood pressure last week Saturday at 4:00 p.m and found it elevated. Although she was due for her medications at 5:00 p.m., she went to the emergency room to get treated. The nurse had her take her pills and put her in an emergency bed for two hours. At that time, her BP was totally normal without any intervention or treatment from the ER.

When we saw her in the office the next week, we asked her why she didn’t take her pills (just like the ER had her do) earlier at home. She said she didn’t know she was allowed to do so. When asked if she had to pay 20% of the $600 ER cost, would she have gone? She stated that she probably would have taken her pills earlier. She also expressed surprise that the ER basic charge was six times as high as the $100 office call. She asked, “How was I supposed to know?”

The Marketplace Answer
A percentage rather than a fixed-dollar co-payment would have apprised her of the total health care cost and she probably would have saved at least 500 health care dollars. In actuarial terms, she increased her health care costs by 600%. This is why many actuaries estimate that returning health care to the medical marketplace would trim 30 to 50% of our health care costs.

Can the insurance marketplace return health care to the medical marketplace? These are some of the issues we will discuss in future columns.