Perspectives on health care

Published: Jan 30, 2006 12:22 p.m. ET


Experts discuss risks, benefits of focusing on consumers




SAN FRANCISCO (MarketWatch) -- For many people in the United States, the state of health care leaves a lot to be desired.

As consumers continue to foot more of the bill for their care, their stake in having the nation find lasting solutions to significant cost and access problems is growing more personal.

Employers and the government are seeing scant results in their attempts to fix the complex problems -- and are increasingly asking future patients to do more to prevent or mitigate costly illnesses.

It's an arena plagued by much historical disagreement about how to proceed. The spectrum of proposals often runs from a free-market approach such as that favored by President Bush to one that imposes more government control and new industry regulations.

MarketWatch asked four health-care trackers for their perspectives on how a new focus on high-deductible plans will affect consumers and what changes are most likely to improve the system.

They are Mark Rothstein, director of the Institute of Bioethics, Health Policy and Law at the University of Louisville, in Louisville, Ky.; Michael Thompson, a principal with PricewaterhouseCooper's health care consulting practice in New York; Paul Fronstin, director of health research for the Employee Benefit Research Group in Washington; and Jeanne Lambrew, a senior fellow at the Center for American Progress and an associate professor at George Washington University in Washington.

Mark Rothstein

President Bush is expected to talk about shifting the focus more to the individual with expanded health savings accounts (HSAs) and other measures. What will this mean for consumers, especially the uninsured?

Rothstein: If the government focus is going to be on individuals, there has to be some major government program to help pay for their care. There's a reason why individuals don't have health insurance. They either can't get it and are self-employed and have bad health problems or are unemployed or they work for companies that don't offer health insurance and their wages are so low they can't afford it and so forth. There's a small number of uninsured that represent young healthy people who think they're immortal. But by and large, the uninsured are uninsured for a logical reason: They're too sick or too poor for health care. So giving these people expanded HSAs is not an answer.

Where do you think HSAs will be in five years?

It's a complicated problem that requires education. People would be willing to pay $2,000 out of pocket for health care if they saw that money come back to them in the form of higher wages. Wages have been essentially flat for the last decade with all increases in compensation going to increased health-care costs. If employers think, OK, great, we're going to save all the money we're paying to health care and shift it to an individual mandate for all employees, that's politically a nonstarter.

What has to happen is a reallocation of the dollars, and there's no good reason why employers are in the position of being health-insurance underwriters. A lot of good things could be seen in terms of the economy and the competitiveness of American goods and services if we got health-care costs out of the cost of each auto we produce...

I'm in favor of universal coverage of a single-payer variety or many other varieties. I'm not in favor of the current system, and the more we try to tinker with it the worse it seems to get. It's sort of like a clown car where you screw with the back wheel and the front wheel falls off.

What about the hope that market competition will increase affordability?

This is not a very competitive market in the sense that if you have to have an elective surgery, do you want to have that done by the lowest bidder? If you have to buy expensive medicine and it's $200 at pharmacy A and $150 at pharmacy B, that's one thing. But I'm not seeing consumers willing to price-shop for their medical services.

If you need surgery, are you in a position to be a rational consumer? The market assumes complete information and rational decision-making. Even very savvy people with very severe pain are not going to be the most rational in terms of judgments they make. There are time pressures, emotional pressures; there are convenience factors. You're going to have surgery near where your relatives are so they can take care of you or visit you. There are limits to the market.

Michael Thompson

President Bush wants more tax breaks for HSAs. Who would that help, the uninsured?

Thompson: The issue with the uninsured is huge and frankly I don't think tax breaks with HSAs alone will close that gap enough relative to where we need to be. In terms of HSA legislation and enhancements in flexibility around some of the rules around HSAs, that will be very welcome by employers. One area where HSAs aren't flexible enough is in the classification of prevention, things that could be not subject to the high deductible.

There's significant concern about whether incentives in the HSA may defer necessary care. We need to make sure we're thoughtful to be allowed to [have consumers] maintain skin in the game but not promote barriers to necessary care. There's a balance that needs to be struck.

There's not a magic bullet.'s taking costs out of the system, which is something that has to happen. I think we're in tweaking mode.

We're entering the age of consumerism. What you'll find is a whole flavor of consumerism that's going to span the marketplace... creating more ownership of services people get, creating more consciousness of choices of provider and treatment options as well as greater accountability for the lifestyle and health behavior choices we make.

Are the tools helping people make choices? And what about the shopping-around idea that no patient will want to accept the lowest bid?

If self-care is available or over the counter medicines are available, you don't necessarily have to seek doctor treatment. For that type of decision-making there are good tools available -- self-help books that explain when you should go to the doctor and when you shouldn't. That part of the system is working well.

The issue of which hospitals are higher quality and better value, that's an area where information is inadequate at this point. We need to have more standardization and collaboration to drive better information for people to understand what their choices are and who's performing better.

Might we run the risk of consumer backlash by putting so much emphasis on healthy lifestyles? You can get sick even if you're a marathon runner.

This is not about blaming the sick. It's about understanding the root cause issues in the health system today and taking an active role in addressing those root-cause issues. If you look at the obesity epidemic and the persistence of other poor health habits ... we did a survey and half of employers believe people should be accountable for the health behaviors they have. That's not to say we're mandating one health behavior versus another but some level of reasonable.

Paul Fronstin

You have said that HSAs are a mixed bag, but that a lower consumer satisfaction rate among consumer-driven plans compared with comprehensive plans so far doesn't spell HSAs' doom.

Fronstin: I think of it as a 401k plan with a loan provision but you don't have to pay the loan back. You have the benefit of building it up tax free and taking it out tax free for something you know you're going to have to do when you retire.

But is it enough?

No. We've already had other savings vehicles people could use that they haven't. People don't take full advantage of their 401ks. They don't take advantage of an IRA if they're eligible for it. It's not like we need something new to save for retirement. It gets confusing as to where you should be putting your money. You need to look at an overall saving strategy as opposed to savings strategies in silos that don't talk to each other.

How much more room do employers have to continue cost-shifting?

I think there's still a lot of room. The cost-shifting we've seen so far has been modest, modest increases in co-pays and deductibles....As costs go up, people report saving less for retirement. They have more trouble paying for basic living expenses, but employers will continue to shift costs because that's what they know how to do.

We're going to see more of what we've been seeing. We're going to see a slow erosion of coverage, fewer people with coverage and when you do have coverage it will be with less-comprehensive benefits. Definitely more people with consumer-driven plans.

I'd say we've put people into consumer-driven-light plans. Most people are put in light plans because they're not given a whole lot of choice and don't have much responsibility. They're still in plans with networks where prices are predetermined with physicians in the network and the insurer or employer.

They still have formularies to give people incentives to use certain drugs. And there's not a lot of information about cost and I'm not sure people care because they can't do anything because rates are negotiated. And there's not a lot of information about quality.

For the people who use a lot of health care, they're going to have the least incentive to change behavior if they're in a high-deductible plan. Once you reach your deductible and you're back to comprehensive coverage, what incentive do you have?

Are we overstating how much HSAs and the like can do?

I think we are. Everyone is now saying behavior change is going to come from people in the middle, people who use a modest amount of health care. But that's not where you get your savings.

People may not care about cost information, but they will care about quality information. You don't have to have a high-deductible plan to be interested in quality information.

Jeanne Lambrew

You have said that there are similarities between the early Medicare drug benefit and the evolution of health savings accounts.

Lambrew: There needs to be a delineation between problems that are transitional and problems that are design problems. When seniors go to the pharmacy, there's no predictability about what drugs are going to be covered. That's a design problem, not a transitional problem. The first step, informed choice, isn't working and potentially cannot work... We see the parallels in terms of the types of choices people want are not necessarily being afforded by so-called consumer-driven health care.

It will in turn cause seniors to ask why can't Medicare negotiate on our behalf? Why can't we pull together rather than hoping that individuals shopping... can get the best prices? It may lead to a model that's the opposite of consumer-driven health care.

What do we know about HSAs and the concern about segregating risk pools that could end up hurting sick people?

Any time new federal subsidies are put on the table, some people will be helped. The question is, which people and are they the ones who need the most help? The bulk of the tax proposals will not go to low-income people... but potentially to already insured people, higher-income people or healthy people who don't really need the tax subsidies to begin with. If it really does break up health insurance in the employer system, people who could only get insurance through the employer system will be left out. And to the extent we continue to spend on tax policies that do little to increase coverage, we'll cut Medicaid more, which will lead to more uninsured.

Is there something to be said for having consumers shop around? Isn't there a dent consumers can make?

Certainly consumers at the front end can do better at healthy lifestyle, using preventive services, taking those kind of drugs or services that can maintain their health. Some cost-sharing makes sense. We should have cost-sharing for Lasik surgery, cosmetic surgery and lifestyle drugs.

A high deductible is fairly arbitrary. It doesn't distinguish between a truly necessary service and one that's not; 70% of our costs are with that 10% of most expensive people. People in the emergency rooms are not trying around.

Health care is different. At the end of the day it's about life and death. The areas with high use are not necessarily areas with high coverage. To take on this issue, we have to look at the supply side of the equation, not just demand.

Kristen Gerencher writes about health care for MarketWatch.

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