NCPA - National Center for Policy Analysis

How Consumer-Directed Plans Affect the Cost and Use of Health Care

January 8, 2013

Consumer-directed health plans seem to be a viable solution to curb rising health care costs. These health plans combine a high deductible with a tax-advantaged health account whose funds roll over from year to year, says the RAND Corporation.

In exchange for higher deductibles, the costs of premiums are lowered. The hope is that making consumers more responsible for their health will encourage them to shop around and find the best plan.

Critics contend that consumers won't know how best to lower health related costs without reducing the quality of care. However, empirical analysis suggests that people with consumer-driven health plans are able to achieve cuts in health spending while retaining quality care.

  • In 2011, about 17 percent of Americans that were covered by their employers were enrolled in a consumer-directed health plan.
  • Families that switched to a consumer-directed health plan spent an average of 21 percent less on health care.
  • Two-thirds of savings came from the fact that there were fewer episodes of care; the other one-third came from less spending per episode.
  • If enrollment in consumer-directed plans increased to 50 percent, there would be an annual savings of $57 billion.

Enrollees in these health plans used less expensive goods and services, like fewer visits to specialists or using fewer brand-name drugs. Furthermore, these enrollees cut back on high-value preventive care, despite the fact that most preventative testing is fully covered by consumer-directed health plans.

It should be noted that the study used to illustrate the reductions in health costs as a result of switching to consumer-directed health plans only looks at the first year effects of such a switch. It is possible that over the long term there are more reductions in health costs. It is also possible that the reduction in preventative testing could create costly problems later.

Source: "Skin in the Game: How Consumer-Directed Plans Affect the Cost and Use of Health Care," RAND Corporation, 2012.


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