CDHP: tools and attitude: studies show the consumer-driven approach provides mutual benefits to companies and workers

Health Management Technology,  June, 2008  by Kerry Winkle

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According to the 13th Annual National Business Group on Health/Watson Wyatt Employer Survey on Purchasing Value in Health Care, a company's average healthcare expenditure per employee was $7,211 in 2007 and expected to rise to $7,620 in 2008. In all, 453 large U.S. employers participated in the survey which also stated that in 2007, the average annual cost increase for healthcare was 6 percent, a reduction from the 8 percent increase in 2006. However, costs are predicted to again increase by 9 percent in 2008 and again (although at a slightly-lower rate) by 8 percent in 2009. With this double whammy of high healthcare costs and a slowing economy, healthcare stakeholders are examining the potential of consumer-directed healthcare plans (CDHP) to reduce their overall healthcare costs, given CDHP's cost transparency and provider-related quality measurements.

The federal government has expressed its support of healthcare programs that encourage transparency in pricing and an open exchange of quality information. In August 2006, President Bush signed Executive Order 13410, which instructed federal agencies that administer or sponsor federal health insurance programs to improve transparency in pricing and quality, promote the adoption of health IT standards, and support overall efforts to increase quality and efficiency.

Later that year, the Department of Health and Human Services (HHS) took an important step towards the implementation of the executive order by calling on employers throughout the nation to commit to supporting its "Four Cornerstone goals" of value-driven healthcare. These four cornerstones are health IT standards, quality standards, price standards, and incentives. During a March 14, 2006 presentation to the Commonwealth Club of California, HHS Secretary Michael Leavitt stated his intention to initiate policies designed to encourage healthcare payer support of increased quality and price transparency. "People need to know what they pay for healthcare and what quality they get for their money," Leavitt said.

With the growing adoption of CDHPs and their tools to support cost transparency and consumer empowerment, one would expect that most, if not all, payers would offer these options to their members. In fact, although 41 percent of employers who responded to the National Association of Health Underwriters 2006 survey chose CDHPs as the most effective way to reduce medical costs, only 29 percent expected to offer the plans in 2007, which represents zero growth from the prior year. However, 85 percent of respondents identified "enrollment communication and support" as the largest barrier to CDHP adoption, which tends to explain the contradiction. The same percentage stated that many CDHPs did not include necessary functionalities such as online tools, a single access point and provider cost comparisons, echoed by 84 percent of consumers surveyed by the Council for Affordable Health Insurance in 2006.

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Lifting the Veil

Although various methods exist to estimate and gather healthcare costs, payers can most easily provide consumers with the data through CDHP portals, which interface with providers, contracts and benefits plans. By leveraging the data within providers' electronic claims systems, payers can deliver real-time electronic data exchange to consumers. Members can manage their accounts, examine explanations of benefits and review real-time financial summaries of their individual account cards, which are typically linked to their health reimbursement accounts (HRA) and health spending accounts (HSA).

Equally as important, individuals benefit from a CDHP portal's cost comparison tools that allow them to view account details and summary information on physician visits, prescription drug purchases and treatment costs. These tools may also offer information on: a drug's primary use, risk and benefits; alternative drugs and therapies; drug comparisons; over-the-counter options; as well as, a prescription calculator to compare brands versus generics.

This aggregated information provides the patient with an overview of costs associated with given providers or pharmacies. Moreover, this data can be integrated into electronic medical records (EMR) and personal health records (PHR), allowing payers, providers and individuals to work from a shared platform of information. Once healthcare stakeholders fully utilize this real-time data exchange platform, one could expect reduced adverse drug events, decreased misdiagnoses and elimination of duplicate testing, as well as enhanced patient care and satisfaction, and increased provider productivity.

Cost and Quality Comparisons

Although the initial lure of CDHP was cost reduction, the healthcare industry is now realizing that a substantial benefit will also result from sharing data on provider quality. Yet, only about one-quarter of executives believe that their organization supplies easily understood, accessible and usable healthcare quality data to employees, according to an April 2006 study by PricewaterhouseCoopers. Similar views were reported by 24 percent of respondents at 35 large, U.S.-based multinational companies.